Tax Treaty Case Law around the Globe 2016

S. 397Chapter 34 Canada: The Canada-US Enhanced Information Exchange Agreement and the Canada-US Tax Treaty

David G. Duff

34.1. Introduction

The case of Hillis v. Canada involves two Canadian residents who are dual citizens of Canada and the United States, who challenged the Canada-US Enhanced Tax Information Exchange Agreement (the Intergovernmental Agreement or IGA), as well as domestic tax provisions designed to implement this agreement in Part XVIII of the federal Income Tax Act (the ITA). Entered into between Canada and the United States on 27 June 2014, the IGA – like other intergovernmental agreements entered into between the United States and other developed countries – was designed to facilitate compliance by Canadian financial institutions with the US Foreign Account Tax Compliance Act (FATCA) without violating Canadian privacy laws.

Under FATCA, foreign financial institutions are required either to disclose information on accounts held by US persons to the US government or faceS. 398 a 30 % US withholding tax on all US-source payments to the financial institution, irrespective of any rate reductions under tax treaties. As well, US persons with specified foreign financial assets exceedin...