CANADA Law and Practice Contributed by: Ian Hull, Suzana Popovic-Montag and Nick Esterbauer, Hull & Hull LLP
compliance with FATCA and instead requires domes - tic banks to report accounts with US indicia (such as American-born account holders or US dollar bank accounts) to the CRA, which then forwards relevant information to the IRS. Information shared with the IRS through FATCA is subject to confidentiality protections and limitations under the Canada–United States Tax Convention. Canada has also adopted the OECD’s Common Reporting Standard (CRS) to combat cross-border tax evasion. Holders of accounts with Canadian financial institutions (including corporations) can be required to certify their residence status for tax purposes and provide supporting documentation. Combined with the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (signed in 2015), the CRS facilitates the exchange of account information with other tax jurisdictions. Under the Tax Conventions Implementation Act, 2002, S.C. 2002, c. 24, Sched. 6, this information must be treated as secret, and may only be used for tax purposes. Canada is also committed to adopting the OECD’s Crypto-Asset Reporting Framework, and released draft legislation to amend the Income Tax Act in 2025. The framework requires crypto-asset service provid - ers to make an annual report relating to crypto-asset transactions and customers. Canada is also sched - uled to begin exchanging crypto tax information inter - nationally in 2028. Legislation requiring the creation of a federal benefi - cial ownership registry in Canada for federal corpora - tions was passed in November 2023. The registry is intended to increase transparency and deter financial crimes. Most provinces and territories already have beneficial ownership registries, except Alberta, the Northwest Territories and Nunavut. 2. Succession 2.1 Cultural Considerations in Succession Planning Canada has a range of family structures, including common-law relationships, marriages involving sec -
ond spouses (due to either death or divorce), and lone-parent families. Canada’s population is also ageing. As baby boom - ers die, Canada is expected to experience its largest intergenerational wealth transfer. However, because Canadians are also living longer, they may require more funds for personal care, leaving less wealth for transfer to loved ones. Technology is also prominent in Canada. Individuals of all ages are accumulating digital assets, which should not be neglected when creating or amending estate plans (see 2.7 Transfer of Assets: Digital Assets ). 2.2 International Planning Estate planning should include consideration of where beneficiaries are located and whether benefitting for - eign beneficiaries with interests in a Canadian estate will expose them, or the estate, to taxation not appli - cable to Canadian residents. Each jurisdiction has its own rules governing estates, testamentary gifts and inter vivos gifts. A transaction or corporate interest that does not trigger taxation in Canada may be tax - able in another jurisdiction. For example, if a testa - mentary gift is made to an individual living in a juris - diction that imposes inheritance tax, the gift may be subject to that tax. Estate distributions to beneficiaries who reside out - side of Canada are also generally subject to withhold - ing tax. The estate representative must determine the applicable withholding rate based on the beneficiary’s country of residence. If Canada does not have a tax treaty with that country, tax is generally withheld at 25% of the gross payment. However, tax treaties may reduce this rate. For example, under the Canada–US Tax Treaty, the withholding rate on certain income dis - tributions to US resident beneficiaries is 15%. 2.3 Forced Heirship Laws While most Canadian jurisdictions recognise testa - mentary freedom, testators’ legal and moral obliga - tions may restrain their right to benefit whomever they choose after death. Moral obligations typically take a backseat to legal obligations.
144 CHAMBERS.COM
Powered by FlippingBook