A bank in Alberta, Canada, is believed to be the first Canadian bank denying service to U.S. citizens, according to a report in The Globe and Mail.
Canadian Direct Financial of Edmonton-based Canadian Western Bank has stopped opening new Internet accounts for U.S. citizens, even if they reside in Canada. Though, the bank is not closing existing accounts and is still opening in-person accounts for U.S. citizens.
According the report, the bank’s decision was partly influenced by FATCA, with the vice-president of the bank calling FATCA’s provisions “prohibitive.”
FATCA requires overseas financial institutions to send reports on Americans’ international financial accounts to the IRS, linking tax authorities in 110 countries and more than 145,000 financial institutions with the IRS to ensure that individuals and institutions are compliant.
Banks must comply with IRS rules under FATCA, which means either reporting account information on American clients or signing a statement to the IRS that states they have no U.S. clients. Noncompliant banks will see a 30% withholding on U.S.-dollar wires to their bank. The law has caused many overseas institutions to simply close any American-held accounts and not take new American clients.
Canadian financial institutions have been vocal in their opposition to the bill. Even Canada’s former finance minister, the late Jim Flaherty, told the IRS to back off, writing in 2011 that “to rigidly impose FATCA on our citizens and financial institutions would not accomplish anything except waste resources on all sides.”
The United States is the only developed country that collects taxes based on citizenship instead of residency. The only other countries—developed or not—to tax nonresident citizens based on worldwide income are Eritrea and China.