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What the recent FATCA decision means for US Expats (and the news is not good).
On Thursday, July 13, 2023, the Supreme Court of Canada handed down a landmark decision to dismiss an application for leave to appeal a challenge to the constitutionality of Part XVIII of the Canadian Income Tax Act. The decision obliterated any hope of striking down FATCA (Foreign Account Tax Compliance Act) legislation that allows Canadian banks to share the banking information of any US citizens living in Canada. And to put an exclamation mark on that ruling, the case is now ineligible for further appeal.
Gwendolyn Louise Deegan and Virginia Hillis, two women from Ottawa who hold dual citizenship in Canada, initiated legal action in 2014 by filing a statement of claim, asserting that the IGA (Inter-Governmental Agreement), entered into by the US and Canada, contravened Canadian tax legislation and unfairly subjected them to “double taxation” (i.e. paying taxes to the US and their home country).
In subsequent appeals, Deegan and Hillis contended that the law violated sections of the Canadian Charter of Rights and Freedoms which safeguarded “the right to be protected against unreasonable search and seizure” and “equal protection under the law.” However, in 2022, the Federal Court of Appeals ruled against them, determining that the public interest in enforcing the seizure outweighed the private interests of individuals affected by the legislation.
So, what does that mean for the future of US expats living in Canada and around the world? It means FATCA is not going away in the 100+ countries, including Canada, that have agreed to turn over their US citizens living abroad to the IRS. It also means that renouncing one’s US citizenship properly remains the only and most effective option for protecting US expats against double taxation. It also means that ensuring you are US tax compliant has never been more critical. Burying your US expat head in the non-US sand will not work anymore!
This is not only a final wake-up call for non-compliant US citizens living in Canada but expats around the world. Similar challenges to topple FATCA globally have seen similar fates, but the Canadian challenge was viewed as one of the more important. With more US citizens living in Canada than any country in the world (other than the US) while also being the largest trade partner the US has, this was the Super Bowl of FATCA challenges. And the IRS won in a blowout.
As this last-ditch, “Hail Mary” to solve the US tax problem for expats failed, there is still an option to get the same result in avoiding double taxation: renouncing one’s US citizenship the “right way”. Thankfully, we can assist on that front.
Our team of US lawyers represents between 600 and 900 US citizens and green card holders who decide to renounce their US status correctly every year on six continents – more than any other firm in the world. We can also help expedite your renunciation process by identifying US embassies and consulates with shorter wait times worldwide.
We’ve helped thousands of US expats and green card holders successfully terminate their citizenship status – but, again, it MUST be done the right way.
If you or a family member is a US citizen or green card holder considering renunciation in light of the latest setback, we invite you to visit our dedicated webpage for more information. This page contains links to register for our upcoming renunciation webinars. You can find one tailored to your geographic location in our events listings.
These webinars thoroughly review everything you need to know about the US citizenship renunciation process and available options should you decide to take the next steps. For more information, click HERE.
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