The GIC (Guaranteed Investment Certificate) US Tax, FBAR & FATCA

The GIC (Guaranteed Investment Certificate) US Tax, FBAR & FATCA

GIC (Guaranteed Investment Certificate) US Tax, FBAR & FATCA

The country of Canada provides many different investment opportunities for citizens and residents of Canada. One of the more common types of investments beyond a TFSA (Tax-Free Savings Account) and RRSP (Registered Retirement Savings Plan) is the GIC (Guaranteed Investment Certificate). The GIC is a safer investment than other types of investments, because it is comprised of low-risk investments with some backing from the Canadian government.  Similar to a Certificate of Deposit in the United States or a Fixed Deposit in India a GIC is a time-based investment which accrues interest — and then once the time has passed, the taxpayer receives the original investment and interest. Unlike the United States which provides a $250,000 FDIC insured protection for most CDs at a bank, Canada provides $100,000 deposit insurance. When the person is actually a US Person with a GIC, there are US Tax and Reporting requirements as well. Let’s go trough the basics of the GIC and US Tax, FBAR & FATCA.

GIC and US Tax

From a US Tax perspective, the GIC is taxable interest income. That is because the foreign investment is generating income and the income would then be taxed in the U.S. – since there is no exception for GIC to avoid Tax in the United States, such as how a foreign pension plan such as the RRSP may defer (or even avoid) US Tax. 

GIC & FBAR (FinCEN Form 114)

The GIC is considered a foreign financial account and therefore would be reportable each year on the FBAR (Foreign Bank and Financial Account Reporting aka FinCEN Form 114).

GIC & FATCA (Form 8938)

Since the GIC is considered a foreign financial account, it would also (not instead of) be reportable each year on for FATCA Form 8938 as well (Foreign Account Tax Compliance Act).

Missed Reporting GIC?

If you missed reporting your GIC — or other assets, accounts, and investments — to the IRS and FinCEN, there are various safe amnesty programs you can use to get into compliance. You should speak with an International Tax Lawyer/Board-Certified Tax Law Specialist to get an understanding of what your options may be.

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