Canadian Court Dismisses FATCA Lawsuit

October 3, 2015

There is no avoiding FATCA, a Canadian court has recently ruled. FATCA continues to withstand legal challenges, eliminating the last hope that some businesses had that FATCA will go away. The latest court ruling further proves FATCA and the expansion of global reporting are here to stay.

The lawsuit was filed by two American expatriates – Virginia Hillis and Gwendolyn Louise Deegan – who live in Vancouver. In Virginia Hillis and Gwendolyn Louise Deegan v. the Attorney General of Canada and the Minister of National Revenue, these plaintiffs were seeking an injunction that would prevent Canada’s tax authority from sharing reportable account data with the United States.

The Federal Court of Canada dismissed the plaintiff’s lawsuit against the Canadian government on September 16, which challenged the legality of the Model 1 IGA that Canada and the United States signed on February 5, 2014. Canadian financial institutions will now have to proceed with turning over account information of US citizens living in Canada.

Under the provisions of FATCA, foreign financial institutions (FFIs) that enter into an intergovernmental agreement with the US are required to turn over account information – including names, addresses and Tax Identification Numbers. Institutions are required to report such information on individual accounts for US citizens with a minimum balance of $50,000. For entities with a majority controlling ownership by a US citizen, the minimum balance on accounts is $250,000.

Unless specifically exempt, FFIs that do not register and agree to report such account-holder information face a 30 percent withholding tax on certain US-source payments made to them, according to the IRS.

Plaintiffs Claim FATCA is a Violation of Canadian Constitution

The Wall Street Journal wrote that the plaintiffs’ lawsuit sought to challenge the Canadian Constitutionality of the Canada-US agreement, claiming it violated certain provisions of the Constitution Act of 1867 and the 1982 Canadian Charter of Rights and Freedoms.

Tax-News wrote that the suit alleged the collection and disclosure of taxpayer information to the US violated the existing provisions of the Canada-US double taxation agreement (DTA), “as the information is not relevant for carrying out the provisions of the DTA, or the domestic tax laws of Canada or the US”.

Tax-News also reported that the agreement between the two governments subjected US citizens living in Canada to more burdensome tax requirements than Canadian citizens are subject to.

Lawsuit Ruling and Implications for FATCA

In its ruling, the Canadian court stated that the collection and disclosure of account-holder information, per the intergovernmental agreement, is “legally authorized in Canada by the provisions of the IGA Implementation Act.” The court also ruled that the collection and disclosure of such information did not violate the provisions of the Canada-US DTA.

FATCA was passed to target tax evasion. To avoid having to pay US tax rates, some US citizens have “offshored” their assets in countries that either have more favorable tax rates or no taxes at all.

Though FATCA was passed in 2010, this year is the first in which financial institutions and foreign governments will report account information on US citizens living abroad. The court’s decision to dismiss the lawsuit clears any road blocks that would prevent FFIs in Canada from complying with FATCA. The Canada Revenue Agency has indicated that the automatic transfer of data under the Canada-US IGA will proceed as planned and FFIs should have started transmitting information on September 30.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.



Sovos is a leading global provider of software that safeguards businesses from the burden and risk of modern transactional taxes. As VAT and sales and use tax go digital, businesses face increased risks, costs and complexity. The Sovos Intelligent Compliance Cloud is the first complete solution for modern tax, giving businesses a global solution for tax determination, e-invoicing compliance and tax reporting. Sovos supports more than 7,000 customers, including half of the Fortune 500, and integrates with a wide variety of business applications. The company has offices throughout North America, Latin America and Europe. Sovos is owned by London-based Hg. For more information visit and follow us on LinkedIn and Twitter.
Share This Post

LATAM VAT & Fiscal Reporting
May 20, 2020
Sovos Acquires Taxweb, Extends Tax Determination Capabilities in World’s Most Challenging Compliance Landscape

Earlier this month Sovos announced its second acquisition of 2020, completing our solution for Brazil with an unparalleled offering that solves tax compliance in the place where it is most challenging to do so.  Too many companies doing business in Brazil have been burdened by managing multiple point solutions for continuous transaction controls (CTCs), tax […]

ShipCompliant United States
December 3, 2020
Illinois’ New Economic Nexus Sales Tax Rules to Affect Direct Wine Shippers

Starting January 1, 2021, many direct-to-consumer (DtC) wine shippers will face an added sales tax burden on their shipments to Illinois. The Illinois Department of Revenue (DOR) published FY 2021-06, which explains the upcoming change. Under the recent “Leveling the Playing Field for Illinois Retail Act,” the state will require all remote sellers with economic […]

EMEA VAT & Fiscal Reporting
December 2, 2020
Brexit and Fiscal Representation

Recently, we outlined the need for speed in understanding fiscal representation obligations. As the UK looks set to become a third country from 1 January 2021, there will be many ramifications for businesses operating cross-border – among them the requirement to appoint a fiscal representative to register for VAT purposes. As outlined in our previous […]

E-Invoicing Compliance EMEA Italy VAT & Fiscal Reporting
December 2, 2020
Italian Tax Controls: Five Key Facts to Know Before the New Year

While Italy rolled out its continuous transaction controls (CTC) reform in 2019, 2020 has been a year of expansion. Italian authorities plan to leverage all potential benefits of the successful implementation of the country’s central e-invoicing platform. Many of the updates will either be launched or enforced in the upcoming year, or later in 2022. […]

Tax Compliance Tax Information Reporting United States
December 1, 2020
Unclaimed Property Dormancy Periods by State: What You Need to Know

Understanding unclaimed property dormancy periods by state and executing the appropriate decisions can make or break your company’s unclaimed property program. This is due primarily to the fact that each state has varying dormancy periods. To complicate matters even further, each state has specific dormancy periods for each corresponding property type. As a result, determining […]

Sales & Use Tax United States
December 1, 2020
How Was the Nevada Economic Nexus Law Modified?

When the Supreme Court ruled on South Dakota v. Wayfair, Inc., remote sellers and marketplace facilitators across the country had to make changes in how they collected and remitted sales tax. The Nevada economic nexus law is one example of a state modifying its requirements for both remote sellers and marketplace facilitators in relation to […]