Why does my bank keep asking about my company's FATCA status?
Because this regime turns on how an entity is classified, not on what kind of income it receives. The institution cannot apply the rules to your account until it holds a classification for you, and it is not permitted to guess one. That is why the request keeps arriving, and why it does not go away when you explain that the account earns nothing taxable in the United States. What the bank needs is a status, certified by you, with whatever supporting detail its onboarding rules require behind it.
My company is not a financial institution, does this still apply?
Yes. A non-financial entity still has a status under this regime and still has to certify it. Part of that question is usually whether the entity has substantial owners connected to the United States, which means the certification reaches through the company to the people behind it. Owners are often surprised that a trading company with no financial activity has to answer anything at all. The practical point is that there is no category called not applicable: every entity being paid, or holding an account, falls into one classification or another.
Can withholding apply even if the income is not taxable to me?
Yes, and that is the feature of this regime that catches people out. It is keyed to status rather than to the character of the income, so an amount that would bear no tax at all in your hands can still be withheld on, because the classification behind the account is missing or unreliable. Explaining the tax treatment of the income does not answer the question being asked of you. The document that stops the withholding is the status certification, and the argument about what the income is belongs to a return.
What happens if I ignore the status request from my custodian?
The custodian treats the account as undocumented, which is a classification in itself and not a helpful one. In practice that means withholding on payments into the account, and reporting it as undocumented, without further correspondence with you. Reversing it later is slower than answering at the outset, because the institution has to re-run its onboarding checks before it will accept a late certification. Where a change of directors, trustees or controlling persons has happened, expect the request to come round again, and answer it promptly.
Does a tax treaty stop this withholding?
Not by itself. A treaty addresses which country may tax an item of income and at what rate, and this regime is not asking about the income. It asks whether the entity holding the account, or receiving the payment, has certified its status. A treaty claim lodged against a missing classification answers a different question and leaves the withholding where it is. Both may be needed on the same payment: the classification to satisfy this regime, and the treaty certification to reduce the rate under the regime that taxes the income itself.
Is this withholding recoverable once it has been applied?
Recovery depends on establishing what the entity was actually entitled to for the year and filing to claim it, which is slower and dearer than certifying correctly at the outset. In some cases the entitlement can be evidenced and the amount credited or repaid; in others the practical outcome is that the money is gone. That is why work on these files goes into classification before payment rather than into recovery afterwards. Settle the status, get it onto the institution's file, and the question does not arise.
Do I pay tax twice on a foreign dividend?
Not at full rates if the relief is claimed. The paying country usually withholds at source, capped by treaty where one applies and the paperwork is in place; your residence country then taxes the dividend and credits the foreign withholding against its own charge. Where the withholding exceeded the treaty rate because no declaration was filed, the excess is recovered from the paying country, not credited at home. See the dividends article.
Can I set up a trust that works in two countries?
You can, but the two systems classify and tax trusts differently enough that a structure which is efficient in one is often a reporting problem in the other — a Canadian family trust with a US beneficiary, or a US revocable trust holding Canadian property, are the classic pairs. Canada's twenty-one-year deemed disposition, the US grantor rules and each country's reporting have to be read together, before drafting rather than after. See cross-border wills and trusts.
