Year-End Review: F.A.T.C.A.

Read Publication

Implementation of F.A.T.C.A., first enacted in 2010, took great strides in 2013.

On January 17, 2013, the I.R.S. issued the final F.A.T.C.A. regulations. In more than 500 pages, the I.R.S. laid out a roadmap for determining who is covered by F.A.T.C.A., who is exempt, and the burdens imposed on foreign financial institutions (“F.F.I.'s"), other foreign investors, and U.S. withholding agents to comply with its rules.

On July 12, 2013, the I.R.S. released Notice 2013-43, which revised the timelines included in the final F.A.T.C.A. regulations for withholding agents and F.F.I.'s to begin their due diligence, withholding, and information reporting requirements. Specifically, it delayed implementation of F.A.T.C.A. withholding on investment income (but not gross proceeds from sale) by six months so that withholding will first start on July 1, 2014. It also adopted a six-month extension for the F.A.T.C.A. registration portal (the “Portal”). Also deferred were rules applicable to grandfathered obligations, new account opening procedures, new qualified intermediaries (“Q.I.'s"), withholding foreign partnerships (“W.P.'s"), and withholding foreign trusts (“W.T.'s") agreements. Withholding on gross proceeds from sales of stocks and securities is still scheduled to come into effect on January 1, 2017.

Year-End Review: Net Investment Income Tax

Read Publication

The Net Investment Income Tax (“N.I.I.T.”) was added to the Code on March 30, 2010. It is imposed at a rate of 3.8% of certain net investment income (“Net Investment Income”) of individuals, estates and trusts having income above specified triggering amounts. For individuals who are calendar year taxpayers, the tax first became effective in 2013. Thus, the current tax return filing season will be the first time taxpayers feel the effect of the tax. In late 2013, the I.R.S. released final and proposed regulations for the N.I.I.T. These regulations clarify proposals that were issued on December 5, 2012. This article provides a summary of the N.I.I.T. and explains how the new regulations will affect taxpayers.

IN GENERAL

Applicable Thresholds

Individuals will owe the tax if they have Net Investment Income and also have modified adjusted gross income over the following thresholds:

Filing Status	Threshold Amount
Married Taxpayers (Joint Filing)	$250,000
Married Taxpayers (Separate Filing)	$125,000
Single	$200,000
Head of household (with qualifying person)	$200,000
Qualifying widow(er) with dependent child	$250,000

These amounts are not indexed for inflation.

Understanding Your Neighbour→

Read Publication

As with most international tax planning, the key to cross-border Canada/US tax and estate tax planning is to synchronize the timing of the tax events and the taxpayer in order to minimize, and even eliminate, double taxation. Avoidance of tax in one jurisdiction may not be a satisfactory solution if it is merely a deferral or a shifting of a tax burden to a different taxpayer who or which may be subject ot tax at a lower rate (as well as a later time).

Canadian personal tax overview

Federal income tax is imposed on resident individuals, estates, trusts and companies based upon residency or domicile in Canada. Canada has an extensive array of dual tax treaties, so in many cases tax residency may be overidden by a treaty. If a resident, tax may be imposed on one's worldwide income, which, of course, is determined under specific definitions.