Costa Rica Takes Steps to Comply with FATCA Regulations
Introduction
The Costa Rican government has made significant strides in implementing the Foreign Account Tax Compliance Act (FATCA) regulations, which require financial institutions to report on assets held by US citizens and residents.
Signing of Intergovernmental Agreement (IGA)
In 2013, Costa Rica signed an Intergovernmental Agreement (IGA) with the United States to share financial information, ensuring transparency in transactions involving US citizens. The IGA allows Costa Rican financial entities to comply with FATCA provisions.
Amendments to Tax Code
To facilitate implementation, the Costa Rican government amended the Tax Code through Law No. 9296 of May 18, 2015, adding Article 106 quater. This article obligates financial entities to provide the tax administration with information on their clients that is foreseeably relevant for tax purposes and required for international instruments.
New Information Exchange Agreement
In April 2018, Costa Rica signed a new information exchange agreement with the United States, aimed at meeting OECD standards for fiscal transparency. The agreement will enable both countries to assist each other in determining, settling, and collecting taxes, as well as investigating or prosecuting tax matters.
Tax Information Exchange Agreements (TIEAs)
Costa Rica has also established valid Tax Information Exchange Agreements (TIEAs) with several countries, including:
- Argentina
- Australia
- Canada
- Denmark
- Ecuador
- El Salvador
- Faroe Islands
- Finland
- France
- Greenland
- Guatemala
- Guernsey
- Holland
- Honduras
- Iceland
- Mexico
- Nicaragua
- Norway
- South Africa
- South Korea
- Spain
- Sweden
Multilateral Convention on Mutual Administrative Assistance in Tax Matters
Costa Rica is a member of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
Penalties for Non-Compliance
The government has also established penalties for financial entities that fail to comply with FATCA regulations, as outlined in Law No. 9416 of November 14, 2016. The law requires that information be handled confidentially by tax authorities.
Conclusion
Costa Rica’s efforts demonstrate its commitment to fiscal transparency and compliance with international standards. The country’s free-trade bilateral treaties, including the US-Central American-Dominican Republic Free Trade Agreement (CAFTA-DR), also promote favorable conditions for merchandise exchange between contracting parties.
Overall, Costa Rica’s implementation of FATCA regulations reflects its dedication to maintaining a transparent financial system and adhering to global tax standards.