Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Marginal note:Due diligence – new individual accounts

• 274 (1) Upon opening a new individual account, the reporting financial institution must obtain a self-certification (which may be a part of the account opening documentation) that allows the reporting financial institution to

  • (a) determine the account holder’s residence for tax purposes; and

  • (b) confirm the reasonableness of the self-certification taking into account information obtained by the reporting financial institution in connection with the opening of the account, including any documentation collected in accordance with the AML/KYC procedures.

• Marginal note:Determination of reportable account

  (2) If the self-certification for a new individual account establishes that the account holder is resident for tax purposes in a reportable jurisdiction, then

  • (a) the reporting financial institution must treat the account as a reportable account; and

  • (b) the self-certification must also include the account holder’s TIN with respect to the reportable jurisdiction (subject to subsection 271(4)) and the account holder’s date of birth.

• Marginal note:Requirement to obtain new self-certification

  (3) If there is a change in circumstances with respect to a new individual account that causes the reporting financial institution to know, or have reason to know, that the original self-certification is incorrect or unreliable, then the reporting financial institution

  • (a) cannot rely on the original self-certification; and

  • (b) must obtain a valid self-certification that establishes the residence for tax purposes of the account holder.

Marginal note:Due diligence – preexisting entity accounts

• 275 (1) Unless the reporting financial institution elects otherwise — either with respect to all preexisting entity accounts or, separately, with respect to any clearly identified group of those accounts — a preexisting entity account with an aggregate account balance or value that does not exceed 250,000 USD on June 30, 2017 is not required to be reviewed, identified or reported as a reportable account until the aggregate account balance or value exceeds 250,000 USD on the last day of any subsequent calendar year.

• Marginal note:Application of subsection (4)

  (2) The review procedures set forth in subsection (4) apply to a preexisting entity account if it has an aggregate account balance or value that exceeds 250,000 USD on

  • (a) June 30, 2017; or

  • (b) the last day of any subsequent calendar year.

• Marginal note:Determination of reportable accounts

  (3) With respect to preexisting entity accounts described in subsection (2), the only accounts that shall be treated as reportable accounts are accounts that are held by

  • (a) one or more entities that are reportable persons; or

  • (b) passive NFEs with one or more controlling persons who are reportable persons.

• Marginal note:Review procedures — preexisting entity account

  (4) If this subsection applies to a preexisting entity account, a reporting financial institution must apply the following review procedures to determine whether the account is held by one or more reportable persons or by passive NFEs with one or more controlling persons who are reportable persons:

  • (a) review information maintained for regulatory or customer relationship purposes (including information collected in accordance with AML/KYC procedures) to determine whether the information indicates that the account holder is resident in a reportable jurisdiction and, if so, the reporting financial institution must treat the account as a reportable account unless it

    • (i) obtains a self-certification from the account holder to establish that the account holder is not a reportable person, or

    • (ii) reasonably determines, based on information in its possession or that is publicly available, that the account holder is not a reportable person; and

  • (b) with respect to an account holder of a preexisting account (including an entity that is a reportable person), the reporting financial institution must determine whether the account holder is a passive NFE with one or more controlling persons who are reportable persons and for the purposes of

    • (i) determining whether the account holder is a passive NFE, the reporting financial institution must obtain a self-certification from the account holder to establish its status, unless it has information in its possession or information is publicly available, based on which it can reasonably determine that the account holder is

      • (A) an active NFE, or

      • (B) a financial institution other than an entity described in paragraph (b) of the definition investment entity that is not a participating jurisdiction financial institution,

    • (ii) determining the controlling persons of an account holder, a reporting financial institution may rely on information collected and maintained in accordance with AML/KYC procedures, and

    • (iii) determining whether a controlling person of a passive NFE is a reportable person, a reporting financial institution may rely on

      • (A) information collected and maintained in accordance with AML/KYC procedures in the case of a preexisting entity account held by one or more NFEs with an aggregate account balance or value that does not exceed 1 million USD, or

      • (B) a self-certification from the account holder or the controlling person indicating the jurisdiction in which the controlling person is resident for tax purposes.

• Marginal note:Timing of review

  (5) Each preexisting entity account must be reviewed in accordance with subsection (4) before

  • (a) 2020, if the account has an aggregate account balance or value that exceeds 250,000 USD on June 30, 2017; or

  • (b) the end of the calendar year following the year in which the aggregate account balance or value exceeds 250,000 USD on December 31, if paragraph (a) does not apply.

• Marginal note:Change of circumstances

  (6) If there is a change of circumstances with respect to a preexisting entity account that causes the reporting financial institution to know, or have reason to know, that the self-certification or other documentation associated with the account is incorrect or unreliable, the reporting financial institution must redetermine the status of the account in accordance with subsection (4).

Marginal note:Due diligence for new entity accounts

276 For new entity accounts, a reporting financial institution must apply the following review procedures to determine whether the account is held by one or more reportable persons or by passive NFEs with one or more controlling persons who are reportable persons:

• (a) the reporting financial institution must

  • (i) obtain a self-certification (which may be part of the account opening documentation) that allows the reporting financial institution to determine the account holder’s residence for tax purposes and confirm the reasonableness of the self-certification based on the information obtained by the reporting financial institution in connection with the opening of the account, including any documentation collected in accordance with AML/KYC procedures, and

  • (ii) if the self-certification referred to in subparagraph (i) indicates that the account holder is resident in a reportable jurisdiction, treat the account as a reportable account unless it reasonably determines, based on information in its possession or information that is publicly available, that the account holder is not a reportable person with respect to the reportable jurisdiction; and

• (b) with respect to an account holder of a new entity account (including an entity that is a reportable person), the reporting financial institution must determine whether the account holder is a passive NFE with one or more controlling persons who are reportable persons and, if so, treat the account as a reportable account and, for the purposes of

  • (i) determining whether the account holder is a passive NFE, the reporting financial institution must obtain a self-certification from the account holder to establish its status, unless it has information in its possession or information is publicly available, based on which it can reasonably determine that the account holder is

    • (A) an active NFE, or

    • (B) a financial institution other than an entity that

      • (I) is an investment entity because of paragraph (b) of that definition, and

      • (II) is not a participating jurisdiction financial institution,

  • (ii) determining the controlling persons of an account holder, a reporting financial institution may rely on information collected and maintained in accordance with AML/KYC procedures, and

  • (iii) determining whether a controlling person of a passive NFE is a reportable person, a reporting financial institution may rely on a self-certification from the account holder or the controlling person.

Marginal note:Special due diligence rules

• 277 (1) A reporting financial institution may not rely on a self-certification or documentary evidence if the reporting financial institution knows or has reason to know that the self-certification or documentary evidence is incorrect or unreliable.

• Marginal note:Exception — individual beneficiary receiving death benefit

  (2) A reporting financial institution may presume that an individual beneficiary (other than the owner) of a cash value insurance contract or an annuity contract receiving a death benefit is not a reportable person and may treat the financial account as other than a reportable account unless it has actual knowledge, or reason to know, that the beneficiary is a reportable person.

• Marginal note:Aggregation rules

  (3) For the purposes of

  • (a) determining the aggregate balance or value of financial accounts held by an individual or entity,

    • (i) a reporting financial institution is required to aggregate all financial accounts maintained by the reporting financial institution, or by a related entity, but only to the extent that the reporting financial institution’s computerized systems

      • (A) link the financial accounts by reference to a data element such as a client number or TIN, and

      • (B) allow account balances or values to be aggregated, and

    • (ii) each holder of a jointly held financial account shall be attributed the entire balance or value of the jointly held financial account; and

  • (b) determining the aggregate balance or value of financial accounts held by an individual in order to determine whether a financial account is a high value account, a reporting financial institution is also required — in the case of any financial accounts that a relationship manager knows, or has reason to know, are directly or indirectly owned, controlled or established (other than in a fiduciary capacity) by the same individual — to aggregate all such accounts.

• Marginal note:Dealer accounts

  (4) Subsection (5)

  • (a) applies to a reporting financial institution in respect of a client name account maintained by the institution if

    • (i) property recorded in the account is also recorded in a financial account (in this subsection and subsection (5) referred to as the related account) maintained by a financial institution (in this subsection and subsection (5) referred to as the dealer) that is authorized under provincial legislation

      • (A) to engage in the business of dealing in securities or any other financial instrument, or

      • (B) to provide portfolio management or investment advising services, and

    • (ii) the dealer has advised the institution whether the related account is a reportable account; and

  • (b) does not apply, despite paragraph (a), if it can reasonably be concluded by the institution that the dealer has failed to comply with its obligations under this Part.

• Marginal note:Dealer accounts

  (5) If this subsection applies to a reporting financial institution in respect of a client name account,

  • (a) sections 272 to 276 do not apply to the institution in respect of the account; and

  • (b) the institution shall rely on the determination of the dealer in respect of the related account in determining whether the account is a reportable account.

• Marginal note:Group insurance and annuities

  (6) A reporting financial institution may treat a financial account that is a member’s interest in a group cash value insurance contract or group annuity contract as a financial account that is not a reportable account until the day on which an amount becomes payable to the employee, certificate holder or beneficiary, if the financial account meets the following requirements:

  • (a) the group cash value insurance contract or group annuity contract is issued to an employer and covers 25 or more employees or certificate holders;

  • (b) the employees or certificate holders are entitled to

    • (i) receive any contract value related to their interest, and

    • (ii) name beneficiaries for the benefit payable upon the employee’s or certificate holder’s death; and

  • (c) the aggregate amount payable to any employee or certificate holder or beneficiary does not exceed 1 million USD.