Since it was signed into law by Obama, FATCA has been delayed twice as authorities have struggled to finish drafting the various rules and forms that the banks say they need to comply. Foreign banks that do not comply could effectively be frozen out of U.S. capital markets.
IRS Commissioner John Koskinen, speaking to reporters on Wednesday, said he met with Treasury officials on Tuesday about still-awaited final FATCA regulations. "They're going to come out soon, but I can't tell you date," Koskinen said.
Like earlier pacts, the U.S.-Canadian deal is a so-called intergovernmental agreement. It aims to address Canadian government concerns that FATCA might violate domestic privacy laws and burden financial institutions, a senior Canadian finance official told reporters in a briefing session.
Under the agreement, Canadian tax authorities will collect information from the country's banks and share it with the IRS under an existing bilateral tax treaty.
"Canada engaged in lengthy negotiations with the U.S. government to address our concerns, and as a result, significant exemptions and other relief were obtained," Canadian Finance Minister Jim Flaherty said in a statement.
Canada Deal Addresses Concerns
The Canadian agreement narrows the scope of information required to be collected from account holders in Canada, officials said.
Some smaller Canadian financial institutions will be exempt, as well as certain registered savings vehicles such as Canadian registered retirement savings plans.
It is estimated that about 1 million U.S. citizens reside in Canada, although there is no data available on how many would be affected by the new agreement.
Banks will start collecting information in July and the Canada Revenue Service will begin reporting to the IRS in 2015. The agreement will not require changes to Canadian laws, but will need Parliament's approval.