Understanding International Tax Reporting (including FATCA) Grant Morton Learning & Development Consultant Distributor Relations & Training

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments Rick Mercer on FATCA

Sample Title and content slide Learning Objectives By the end of this session, you will be able to:  Describe international tax reporting, including what it is, its rationale and Canada’s response  Explain how international tax reporting impacts Manulife, advisors & distributors, and the clients they support and;  Identify where to go for further information

Sample Title and content slide  What is international tax reporting?  What it means for:  Manulife  Clients  Advisors  Additional resources Agenda

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments What is International Tax Reporting?

Sample Title and content slide Rationale for Multinational Tax Information Exchanges

Sample Title and content slide 7  The U.S. is at the forefront of international tax reporting  FATCA stands for Foreign Account Tax Compliance Act  It is a new U.S. tax regulation aimed at reducing offshore tax evasion through enhanced reporting  Requires foreign (non-U.S.) financial institutions (FFIs) to report U.S. account holders to the U.S. Internal Revenue Service (IRS)  Will require reporting on all U.S. persons by potentially imposing punitive withholding tax on FFIs who do not cooperate  Does not impose new taxes – only helps ensure foreign income is reported properly What is FATCA?

Sample Title and content slide  Examples of FFIs include most:  Banks  Life insurance companies  Collective investment vehicles  Hedge funds  Mutual funds  Trust companies  Custodians  Stockbrokers  Investment banks  A number of Manulife’s businesses are considered FFIs under FATCA Foreign (Non-U.S.) Financial Institutions (FFIs)

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments Canada’s Response to FATCA

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments CRAIRS Canadian Financial Institutions American Financial Institutions Information about U.S. persons holding Canadian accounts Information about Canadian persons holding U.S. accounts Canada – U.S. Information Sharing Agreement

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments  Avoids imposing U.S. rules on Canadian financial institutions  Ensures Canada will receive equal reporting from the IRS  Reporting to CRA allows Canadian privacy laws to be upheld  Exempts most registered accounts from reporting  Eliminates U.S. withholding taxes under FATCA and possible account termination for non-responsive clients Canada – U.S. Agreement – Key Benefits

Sample Title and content slide What International Tax Reporting Means for Manulife

Sample Title and content slide Who?  Clients with “U.S. status” – I.e., U.S. persons, or entities with substantial ownership by U.S. persons  Clients who fail to respond to inquiries about their U.S. status What?  Name  Address  U.S. Taxpayer Identification Number (TIN)  Account and/or policy number(s)  Account balances or values  Amounts credited to the client’s account, including interest, dividends and other income  Any withdrawals  For accounts owned by non-U.S. entities, the name, address and TIN of each substantial U.S. owner Impact – New CRA Reporting Requirements

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments  Financial institutions may collect the U.S. status of non-registered account holders by asking questions such as: Are you a U.S. Citizen or U.S. Resident for tax purposes? If yes, please provide your Taxpayer Identification Number (TIN) Impact – New Accounts & Policies

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments  Financial Institutions will need to look for 7 indicators of a person’s U.S. status. These indicators are: 1.U.S. citizen or resident 2.U.S. place of birth 3.U.S. mailing or residence address (if not temporary) 4.U.S. telephone number 5.Standing instructions to transfer funds to an account maintained in the U.S. 6.POA or signing authority granted to a person with a U.S. address 7.An “In-care-of” or “hold mail” address that is the sole address on file for the account holder 7 Indicators of U.S. Status

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments Impact – Preexisting Accounts & Policies

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Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments Manulife Insurance Products Impacted  Performax Gold  Manulife UL  InnoVision  Security UL All cash value insurance policies are impacted including:

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments Manulife Investment Products Impacted All non-registered Manulife Investments products are impacted including:  Manulife RetirementPlus  GIF Select  Manulife PensionBuilder  Manulife Private Investment Pools  Manulife Investments Guaranteed Interest Contracts (GIC)  Annuities

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments Manulife Bank Products Impacted Non registered deposit products (individual and business):  Individual Accounts:  Personal Advantage Account  U.S. $ Advantage Account  Personal GICs  Business Accounts:  Business Advantage Account  U.S. $ Advantage Account  Business GICs Mortgage products are also impacted, but remain part of the Banking Consultants’ application process with clients

Sample Title and content slide What International Tax Reporting Means for Clients

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments  U.S. persons must file annual tax returns to the U.S. IRS, regardless of where in the world they reside  This is different from most countries, where tax reporting obligations are based on residency  This has always been the case and is not a result of FATCA U.S. Person Tax Reporting

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments  A U.S. person is defined in U.S. law and examples include:  A U.S. citizen  A permanent resident (green card holder)  A person residing in the U.S. i.e., a person who spends a significant number of days in the U.S. each year – the U.S. refers to these individuals who meet its substantial presence test as “resident aliens” U.S. Persons - Individuals

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Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments  A temporary U.S. address or phone number may be confused as a permanent address by financial institutions, resulting in the U.S. tax status questions being asked Temporary U.S. Address or Phone Number

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments  Entities are grouped into the following broad categories: 1.Entities organized in the U.S. (or subject to U.S. law) 2.Foreign (non-U.S.) Financial Institutions (FFIs) 3.Non-Financial Foreign (non-U.S.) Entities (NFFEs) U.S. Tax Classification of Entities

Sample Title and content slide  FFIs include most:  Banks  Life insurance companies  Collective investment vehicles  Hedge funds  Mutual funds  Trust companies  Custodians  Stockbrokers  Investment banks  FFIs must abide by international tax reporting rules set out in the Canadian Income Tax Act and administered by the CRA  Managing General Agencies and Insurance Broker Corporations are categorized as NFFEs, not FFIs Foreign (Non-U.S.) Financial Institutions (FFIs)

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments  NFFEs are defined as any non-U.S. entity that is not an FFI  NFFEs include:  Corporations  Partnerships  Trusts  Estates  NFFEs are classified as either active or passive Non-Financial Foreign Entities (NFFEs)

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments  NFFEs are generally classified as active if:  Less than 50% of their income is investment income and;  Less than 50% of their assets held produce passive income, such as: dividends, interest, royalties etc.  Accounts of active NFFEs are not reportable Active NFFEs

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments  Entities that do not pass the active tests are passive  Passive NFFEs must provide added details regarding ownership and control  If beneficial owners or those controlling the entity directly or indirectly are U.S. persons, then the entity and the beneficial owner information is reportable under FATCA Passive NFFEs

Sample Title and content slide What International Tax Reporting Means for Advisors

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments  Advisors are the first person clients will call for help  You can support your clients by:  Ensuring that their information is captured accurately at financial institutions  Helping them obtain the right information on CRA and IRS websites  Providing historical account/policy information and tax receipts as needed Ways to Support Your Clients

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments  Earn trust  Build loyalty  Strengthen client relationships  Improve retention  Earn referrals International Tax Reporting is an Opportunity

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments  While the financial planning services that advisors provide their clients often include tax planning, it is inappropriate and illegal for advisors or agents to assist clients in avoiding legal tax obligations  Advisors should direct their clients with questions or issues about complex tax obligations to obtain independent tax advice Complex Tax Obligations & Advice

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments Additional Training Available in Repsource (Home) under Quick Links > CE Centre > CE Centre > Doing Business > Compliance > Compliance Rules & Regulations Learning Series > Understanding Int’l Tax Reporting

Sample Title and content slide Tip To add/replace image: Delete any existing image Click icon and add your own image Image will be cropped to fit the placeholder Use the crop tool to make adjustments  To learn more about international tax reporting, visit the following key resources:  CRA website:  Enhanced financial account information reporting Enhanced financial account information reporting  Canadian Residents Going Down South Canadian Residents Going Down South  IRS website:  Foreign Account Tax Compliance Act Foreign Account Tax Compliance Act  FATCA Information for Individuals FATCA Information for Individuals  FATCA Information for Foreign Financial Institutions and Entities FATCA Information for Foreign Financial Institutions and Entities  Do You Need to File a Federal Income Tax Return? Do You Need to File a Federal Income Tax Return? Additional Resources

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