Income Tax Act

Marginal note:Identification obligation — financial accounts

• 265 (1) Every reporting Canadian financial institution shall establish, maintain and document the due diligence procedures set out in subsections (2) and (3).

• Marginal note:Due diligence — general

  (2) Every reporting Canadian financial institution shall have the following due diligence procedures:

  • (a) for preexisting individual accounts that are lower value accounts, other than accounts described in paragraph A of section II of Annex I to the agreement, the procedures described in paragraphs B and C of that section, subject to paragraph F of that section;

  • (b) for preexisting individual accounts that are high value accounts, other than accounts described in paragraph A of section II of Annex I to the agreement, the procedures described in paragraphs D and E of that section, subject to paragraph F of that section;

  • (c) for new individual accounts, other than accounts described in paragraph A of section III of Annex I to the agreement, the procedures described in paragraph B of section III of Annex I to the agreement;

  • (d) for preexisting entity accounts, other than accounts described in paragraph A of section IV of Annex I to the agreement, the procedures described in paragraphs D and E of that section; and

  • (e) for new entity accounts, other than accounts described in paragraph A of section V of Annex I to the agreement, the procedures described in paragraphs B to E of that section.

• Marginal note:Due diligence — no designation

  (3) If a reporting Canadian financial institution does not designate a financial account under subsection 264(1) for a calendar year, the institution shall have the following due diligence procedures with respect to the account:

  • (a) if the account is a preexisting individual account described in paragraph A of section II of Annex I to the agreement, the procedures described in paragraphs B and C of that section, subject to paragraph F of that section;

  • (b) if the account is a new individual account described in paragraph A of section III of Annex I to the agreement, the procedures described in paragraph B of section III of Annex I to the agreement;

  • (c) if the account is a preexisting entity account described in paragraph A of section IV of Annex I to the agreement, the procedures described in paragraphs D and E of that section; and

  • (d) if the account is a new entity account described in paragraph A of section V of Annex I to the agreement, the procedures described in paragraphs B to E of that section.

• Marginal note:Rules and definitions

  (4) For the purposes of subsections (2) and (3), subparagraphs B(1) to (3) of section I, and section VI, of Annex I to the agreement apply except that

  • (a) in applying paragraph C of that section VI, an account balance that has a negative value is deemed to be nil; and

  • (b) the definition NFFE in subparagraph B(2) of that section VI is to be read as follows:

    • 2 NFFE

    An NFFE means any Non-U.S. Entity that is not an FFI as defined in relevant U.S. Treasury Regulations or is an Entity described in subparagraph B(4)(j) of this section, and also includes any Non-U.S. Entity

    • a) that is resident in Canada and is not a listed financial institution within the meaning of Part XVIII of the Income Tax Act; or

    • b) that is resident in a Partner Jurisdiction other than Canada and is not a Financial Institution.

• Marginal note:U.S. indicia

  (5) For the purposes of paragraphs (2)(a) and (b), subparagraph (2)(c)(ii), paragraph (3)(a) and subparagraph (3)(b)(ii), subparagraph B(3) of section II of Annex I to the agreement is to be read as follows:

  • 3 If any of the U.S indicia listed in subparagraph B(1) of this section are discovered in the electronic search, or if there is a change in circumstances that results in one or more U.S. indicia being associated with the account, then the Reporting Canadian Financial Institution must seek to obtain or review the information described in the portion of subparagraph B(4) of this section that is relevant in the circumstances and must treat the account as a U.S. Reportable Account unless one of the exceptions in subparagraph B(4) applies with respect to that account.

• Marginal note:Financial institution

  (6) For the purpose of applying the procedures referred to in paragraphs (2)(d) and (e) and (3)(c) and (d) to a financial account of an account holder that is resident in Canada, the definition Financial Institution in subparagraph 1(g) of Article 1 of the agreement is to be read as follows:

  • g) The term Financial Institution means any Entity that is a Custodial Institution, a Depository Institution, an Investment Entity or a Specified Insurance Company, and that is a listed financial institution within the meaning of Part XVIII of the Income Tax Act.

• Marginal note:Dealer accounts

  (7) Subsection (8) applies to a reporting Canadian financial institution in respect of a client name account maintained by the institution if

  • (a) property recorded in the account is also recorded in a financial account (in this subsection and subsection (8) referred to as the “related account”) maintained by a financial institution (in this subsection and subsection (8) referred to as the “dealer”) that is authorized under provincial legislation to engage in the business of dealing in securities or any other financial instrument, or to provide portfolio management or investment advising services; and

  • (b) the dealer has advised the institution whether the related account is a U.S. reportable account.

  However, subsection (8) does not apply if it can reasonably be concluded by the institution that the dealer has failed to comply with its obligations under this section.

• Marginal note:Dealer accounts

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

  • (a) subsections (1) to (4) 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 U.S. reportable account.