Fincen Regulations in Costa Rica: What US Taxpayers Need to Know
Introduction
As Costa Rica continues to develop its economy, many US taxpayers have made investments in the country’s infrastructure. However, this has also raised concerns about Foreign Bank and Financial Account (FBAR) reporting requirements for US persons with accounts overseas.
Which Accounts are Reportable?
US taxpayers with accounts in Costa Rica must report their financial information if the aggregate total of all accounts exceeds $10,000. This includes:
- U.S. Citizens: Those who hold a U.S. passport or meet other citizenship eligibility criteria.
- Lawful Permanent Residents: Individuals who have obtained permanent resident status in the United States and hold a Green Card.
- Foreign Nationals who meet the Substantial Presence Test: Those who are not U.S. citizens or lawful permanent residents but have spent significant time in the United States.
Reporting Basics
The FBAR reporting deadline is April 15, but it’s automatically extended to October. US taxpayers must report their financial information from all accounts in Costa Rica, including:
- Term deposits and fixed deposit accounts: These are time deposits that offer a fixed interest rate for a specified period.
- Certificates of Deposit (CDs): Time deposits offered by banks with a fixed interest rate and maturity date.
- Stock investment accounts: Accounts that hold shares of stock in companies listed on a stock exchange.
- Mutual Funds, ETFs, and SICAVs: Investment vehicles that pool money from multiple investors to invest in a diversified portfolio.
Largest Banks in Costa Rica
Some of the largest banks in Costa Rica include:
- Banco de Costa Rica (BCR)
- Banco Improsa
- Banco Davivienda (Costa Rica)
- Scotiabank de Costa Rica
- Banco Promerica – Costa Rica
FBAR Amnesty Program Summary
The IRS offers various amnesty programs for taxpayers who are already out of compliance with FBAR reporting requirements. These programs include:
- Voluntary Disclosure Program (VDP or “New” OVDP): A program that allows taxpayers to come into compliance and avoid willful penalties.
- Streamlined Domestic Offshore Procedures: A simplified procedure for taxpayers who have not committed willful tax evasion and have met the requirements of the Streamlined Procedure.
- Streamlined Foreign Offshore Procedures: Similar to the Streamlined Domestic Offshore Procedure, but for taxpayers with foreign income.
- Delinquency Procedures: For taxpayers who are late in filing their FBARs or amended returns.
- Reasonable Cause: A program that allows taxpayers to request relief from penalties if they have a reasonable cause for not filing their FBARs.
Important Note
US taxpayers cannot simply start filing FBAR this year if they have a prior-year reporting requirement. This is considered an FBAR Quiet Disclosure, which can lead to willful penalties and even a criminal investigation by the IRS Special Agents.
If you’re unsure about your FBAR reporting requirements or need assistance with offshore disclosure, consider consulting a qualified tax professional or attorney who specializes in international tax law.