Bill C-31

I. General

A. This Annex may be modified by a mutual written decision entered into between the Competent Authorities of Canada and the United States:

1. To include additional Entities, accounts, and products that present a low risk of being used by U.S. Persons to evade U.S. tax and that have similar characteristics to the Entities, accounts, and products identified in this Annex as of the date of signature of the Agreement; or

2. To remove Entities, accounts, and products that, due to changes in circumstances, no longer present a low risk of being used by U.S. Persons to evade U.S. tax.

Any such addition or removal shall be effective on the date of signature of the mutual decision unless otherwise provided therein.

B. Procedures for reaching a mutual decision described in paragraph A of this section may be included in the mutual agreement or arrangement described in paragraph 6 of Article 3 of the Agreement.

II. Exempt Beneficial Owners

The following Entities shall be treated as Non-Reporting Canadian Financial Institutions and as exempt beneficial owners for the purposes of sections 1471 and 1472 of the U.S. Internal Revenue Code:

A. Central Bank

1. The Bank of Canada.

B. International Organizations

1. A Canadian office of an international organization as defined under paragraph (1) of Section 2 of the Foreign Missions and International Organizations Act.

C. Retirement Funds

1. Any plan or arrangement established in Canada and described in paragraph 3 of Article XVIII (Pensions and Annuities) of the Convention, including any plan or arrangement that the Competent Authorities may agree under subparagraph 3(b) of Article XVIII is similar to a plan or arrangement under that subparagraph.

D. Investment Entity Wholly Owned by Exempt Beneficial Owners

1. An Entity that is a Canadian Financial Institution solely because it is an Investment Entity, provided that each direct holder of an Equity Interest in the Entity is an exempt beneficial owner, and each direct holder of a debt interest in such Entity is either a Depository Institution (with respect to a loan made to such Entity) or an exempt beneficial owner.

III. Deemed-Compliant Financial Institutions

The following Financial Institutions are Non-Reporting Canadian Financial Institutions that shall be treated as deemed-compliant FFIs for the purposes of section 1471 of the U.S. Internal Revenue Code:

A. Financial Institution with a Local Client Base

A Financial Institution that qualifies as a local FFI as described in relevant U.S. Treasury Regulations, applying subparagraphs A(1), A(2) and A(3) of this section in lieu of the relevant paragraphs in those regulations:

1. Beginning on or before July 1, 2014, the Financial Institution must have policies and procedures, consistent with those set forth in Annex I, to prevent the Financial Institution from providing a Financial Account to any Nonparticipating Financial Institution and to monitor whether the Financial Institution opens or maintains a Financial Account for any Specified U.S. Person who is not a resident of Canada (including a U.S. Person that was a resident of Canada when the Financial Account was opened but subsequently ceases to be a resident of Canada) or any Passive NFFE with Controlling Persons who are U.S. residents or U.S. citizens who are not residents of Canada;

2. Such policies and procedures must provide that if any Financial Account held by a Specified U.S. Person who is not a resident of Canada or by a Passive NFFE with Controlling Persons who are U.S. residents or U.S. citizens who are not residents of Canada is identified, the Financial Institution must report such Financial Account as would be required if the Financial Institution were a Reporting Canadian Financial Institution (including by following the applicable registration requirements on the IRS FATCA registration website) or close such Financial Account;

3. With respect to a Preexisting Account held by an individual who is not a resident of Canada or by an Entity, the Financial Institution must review those Preexisting Accounts in accord-ance with the procedures set forth in Annex I applicable to Preexisting Accounts to identify any Financial Account held by a Specified U.S. Person who is not a resident of Canada, by a Passive NFFE with Controlling Persons who are U.S. residents or U.S. citizens who are not residents of Canada, or by a Nonparticipating Financial Institution, and must report such Financial Account as would be required if the Financial Institution were a Reporting Canadian Financial Institution (including by following the applicable registration requirements on the IRS FATCA registration website) or close such Financial Account;

B. Local Bank

A Financial Institution that qualifies as a nonregistering local bank as described in relevant U.S. Treasury Regulations, using the following definitions where applicable:

1. The term “bank” shall include any Depository Institution to which the Bank Act or the Trust and Loan Companies Act applies, or which is a trust or loan company regulated by a provincial Act; and

2. The term “credit union or similar cooperative credit organization that is operated without profit” shall include any credit union or similar cooperative credit organization that is entitled to tax-favored treatment with respect to distributions to its members under Canadian law, including any credit union as defined in subsection 137(6) of the Income Tax Act.

C. Financial Institution with Only Low-Value Accounts

A Canadian Financial Institution satisfying the following requirements:

1. The Financial Institution is not an Investment Entity;

2. No Financial Account maintained by the Financial Institution or any Related Entity has a balance or value in excess of $50,000, applying the rules set forth in Annex I for account aggregation and currency translation; and

3. The Financial Institution does not have more than $50 million in assets on its balance sheet, and the Financial Institution and any Related Entities, taken together, do not have more than $50 million in total assets on their consolidated or combined balance sheets.

D. Sponsored Investment Entity and Controlled Foreign Corporation

A Financial Institution described in subparagraph D(1) or D(2) of this section having a sponsoring entity that complies with the requirements of subparagraph D(3) of this section.

1. A Financial Institution is a sponsored investment entity if:

a) It is an Investment Entity established in Canada that is not a qualified intermediary, withholding foreign partnership, or withholding foreign trust pursuant to relevant U.S. Treasury Regulations; and

b) An Entity has agreed with the Financial Institution to act as a sponsoring entity for the Financial Institution.

2. A Financial Institution is a sponsored controlled foreign corporation if:

a) The Financial Institution is a controlled foreign corporation¹ organized under the laws of Canada that is not a qualified intermediary, withholding foreign partnership, or withholding foreign trust pursuant to relevant U.S. Treasury Regulations;

¹ A “controlled foreign corporation” means any foreign (i.e., non-U.S.) corporation if more than 50 percent of the total combined voting power of all classes of stock of such corporation entitled to vote, or the total value of the stock of such corporation, is owned, or is considered as owned, by “United States shareholders” on any day during the taxable year of such foreign corporation. The term a “United States shareholder” means, with respect to any foreign corporation, a United States person who owns, or is considered as owning, 10 percent or more of the total combined voting power of all classes of stock entitled to vote of such foreign corporation.

b) The Financial Institution is wholly owned, directly or indirectly, by a Reporting U.S. Financial Institution that agrees to act, or requires an affiliate of the Financial Institution to act, as a sponsoring entity for the Financial Institution; and

c) The Financial Institution shares a common electronic account system with the sponsoring entity that enables the sponsoring entity to identify all Account Holders and payees of the Financial Institution and to access all account and customer information maintained by the Financial Institution including, but not limited to, customer identification information, customer documentation, account balance, and all payments made to the Account Holder or payee.

3. The sponsoring entity complies with the following requirements:

a) The sponsoring entity is authorized to act on behalf of the Financial Institution (such as a fund manager, trustee, corporate director, or managing partner) to fulfill applicable registration requirements on the IRS FATCA registration website;

b) The sponsoring entity has registered as a sponsoring entity with the IRS on the IRS FATCA registration website;

c) If the sponsoring entity identifies any U.S. Reportable Accounts with respect to the Financial Institution, the sponsoring entity registers the Financial Institution pursuant to applicable registration requirements on the IRS FATCA registration website on or before the later of December 31, 2015 and the date that is 90 days after such a U.S. Reportable Account is first identified;

d) The sponsoring entity agrees to perform, on behalf of the Financial Institution, all due diligence, reporting, and other requirements (including providing to any immediate payor the information described in subparagraph 1(e) of Article 4 of the Agreement), that the Financial Institution would have been required to perform if it were a Reporting Canadian Financial Institution;

e) The sponsoring entity identifies the Financial Institution and includes the identifying number of the Financial Institution (obtained by following applicable registration requirements on the IRS FATCA registration website) in all reporting completed on the Financial Institution’s behalf; and

f) The sponsoring entity has not had its status as a sponsor revoked.

E. Sponsored, Closely Held Investment Vehicle

A Canadian Financial Institution satisfying the following requirements:

1. The Financial Institution is a Financial Institution solely because it is an Investment Entity and is not a qualified intermediary, withholding foreign partnership, or withholding foreign trust pursuant to relevant U.S. Treasury Regulations;

2. The sponsoring entity is a Reporting U.S. Financial Institution, Reporting Model 1 FFI, or Participating FFI, and is authorized to act on behalf of the Financial Institution (such as a professional manager, trustee, or managing partner);

3. The Financial Institution does not hold itself out as an investment vehicle for unrelated parties;

4. Twenty or fewer individuals own all of the debt interests and Equity Interests in the Financial Institution (disregarding debt interests owned by Participating FFIs and deemed-compliant FFIs and Equity Interests owned by an Entity if that Entity owns 100 percent of the Equity Interests in the Financial Institution and is itself a sponsored Financial Institution described in this paragraph E); and

5. The sponsoring entity complies with the following requirements:

a) The sponsoring entity has registered as a sponsoring entity with the IRS on the IRS FATCA registration website;

b) The sponsoring entity agrees to perform, on behalf of the Financial Institution, all due diligence, reporting, and other requirements (including providing to any immediate payor the information described in subparagraph 1(e) of Article 4 of the Agreement), that the Financial Institution would have been required to perform if it were a Reporting Canadian Financial Institution and retains documentation collected with respect to the Financial Institution for a period of six years;

c) The sponsoring entity identifies the Financial Institution in all reporting completed on the Financial Institution’s behalf; and

d) The sponsoring entity has not had its status as a sponsor revoked.

F. Restricted Fund

A Financial Institution that qualifies as a restricted fund as described in relevant U.S. Treasury Regulations, applying the procedures set forth in, or required under, Annex I in lieu of the procedures set forth in, or required under, Treasury Regulation section 1.1471-4, and applying references to “report” or “reports” in lieu of references in relevant paragraphs in those regulations to “withhold and report” or “withholds and reports”, provided that the Financial Institution provides to any immediate payor the information described in subparagraph 1(e) of Article 4 of the Agreement, or fulfills the requirements described in subparagraph 1(d) of Article 4 of the Agreement, as applicable.

G. Labour-Sponsored Venture Capital Corporations prescribed under section 6701 of the Income Tax Regulations.

H. Any Central Cooperative Credit Society as defined in section 2 of the Cooperative Credit Associations Act and whose accounts are maintained for member financial institutions.

I. Any entity described in paragraph 3 of Article XXI (Exempt Organizations) of the Convention.

J. An Investment Entity established in Canada that is regulated as a collective investment vehicle, provided that all of the interests in the collective investment vehicle (including debt interests in excess of $50,000) are held by or through one or more exempt beneficial owners, Active NFFEs described in subparagraph B(4) of section VI of Annex I, U.S. Persons that are not Specified U.S. Persons, or Financial Institutions that are not Nonparticipating Financial Institutions.

K. Special Rules

The following rules apply to an Investment Entity:

1. With respect to interests in an Investment Entity that is a collective investment vehicle described in paragraph J of this section, the reporting obligations of any Investment Entity (other than a Financial Institution through which interests in the collective investment vehicle are held) shall be deemed fulfilled.

2. With respect to interests in:

a) An Investment Entity established in a Partner Jurisdiction that is regulated as a collective investment vehicle, all of the interests in which (including debt interests in excess of $50,000) are held by or through one or more exempt beneficial owners, Active NFFEs described in subparagraph B(4) of section VI of Annex I, U.S. Persons that are not Specified U.S. Persons, or Financial Institutions that are not Nonparticipating Financial Institutions; or

b) An Investment Entity that is a qualified collective investment vehicle under relevant U.S. Treasury Regulations;

the reporting obligations of any Investment Entity that is a Canadian Financial Institution (other than a Financial Institution through which interests in the collective investment vehicle are held) shall be deemed fulfilled.

3. With respect to interests in an Investment Entity established in Canada that is not described in paragraph J or subparagraph K(2) of this section, consistent with paragraph 3 of Article 5 of the Agreement, the reporting obligations of all other Investment Entities with respect to such interests shall be deemed fulfilled if the information required to be reported by the first-mentioned Investment Entity pursuant to the Agreement with respect to such interests is reported by such Investment Entity or another person.

IV. Accounts Excluded from Financial Accounts

The following accounts and products established in Canada and maintained by a Canadian Financial Institution shall be treated as excluded from the definition of Financial Accounts, and therefore shall not be treated as U.S. Reportable Accounts under the Agreement:

A. Registered Retirement Savings Plans (RRSPs) — as defined in subsection 146(1) of the Income Tax Act.

B. Registered Retirement Income Funds (RRIFs) — as defined in subsection 146.3(1) of the Income Tax Act.

C. Pooled Registered Pension Plans (PRPPs) — as defined in subsection 147.5(1) of the Income Tax Act.

D. Registered Pension Plans (RPPs) — as defined in subsection 248(1) of the Income Tax Act.

E. Tax-Free Savings Accounts (TFSAs) — as defined in subsection 146.2(1) of the Income Tax Act.

F. Registered Disability Savings Plans (RDSPs) — as defined in subsection 146.4(1) of the Income Tax Act.

G. Registered Education Savings Plans (RESPs) — as defined in subsection 146.1(1) of the Income Tax Act.

H. Deferred Profit Sharing Plans (DPSPs) — as defined in subsection 147(1) of the Income Tax Act.

I. AgriInvest accounts — as defined under “NISA Fund No. 2” and “net income stabilization account” in subsection 248(1) of the Income Tax Act including Quebec’s Agri-Quebec program as prescribed in section 5503 of the Income Tax Regulations.

J. Eligible Funeral Arrangements – as defined under subsection 148.1 of the Income Tax Act.

K. Escrow Accounts. An account maintained in Canada established in connection with any of the following:

1. A court order or judgment.

2. A sale, exchange, or lease of real or immovable property or of personal or movable property, provided that the account satisfies the following requirements:

a) The account is funded solely with a down payment, earnest money, deposit in an amount appropriate to secure an obligation directly related to the transaction, or a similar payment, or is funded with a financial asset that is deposited in the account in connection with the sale, exchange, or lease of the property;

b) The account is established and used solely to secure the obligation of the purchaser to pay the purchase price for the property, the seller to pay any contingent liability, or the lessor or lessee to pay for any damages relating to the leased property as agreed under the lease;

c) The assets of the account, including the income earned thereon, will be paid or otherwise distributed for the benefit of the purchaser, seller, lessor, or lessee (including to satisfy such person’s obligation) when the property is sold, exchanged, or surrendered, or the lease terminates;

d) The account is not a margin or similar account established in connection with a sale or exchange of a financial asset; and

e) The account is not associated with a credit card account.

3. An obligation of a Financial Institution servicing a loan secured by real or immovable property to set aside a portion of a payment solely to facilitate the payment of taxes or insurance related to the real or immovable property at a later time.

4. An obligation of a Financial Institution solely to facilitate the payment of taxes at a later time.

L. An account maintained in Canada and excluded from the definition of Financial Account under an agreement between the United States and another Partner Jurisdiction to facilitate the implementation of FATCA, provided that such account is subject to the same requirements and oversight under the laws of such other Partner Jurisdiction as if such account were established in that Partner Jurisdiction and maintained by a Partner Jurisdiction Financial Institution in that Partner Jurisdiction.