Friday 24 September 2021

Banks must provide Treasury with data on foreign individuals and companies

Costa Rica undertook, in an OECD agreement, to the automatic exchange of bank account information. Financial institutions must report on accounts of foreign clients.

NewsBanks must provide Treasury with data on foreign individuals and companies

Costa Rica undertook, in an OECD agreement, to the automatic exchange of bank account information. Financial institutions must report on accounts of foreign clients.

(QCOSTARICA) All financial entities, ie banks, cooperatives, etc must deliver to the Treasury information of the bank accounts of all their foreign clients.

Ministerio de Hacienda (Finance Ministry) main offices in downtown San Jose

Banks are obligated to report, at the end of each year, the name, address, tax residence, IBAN account number and the balance of the same of people and companies of foreign origin to the General Directorate of Taxation, an organ of the Ministerio de Hacienda (Ministry of Finance).

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This was determined in official letter No. DGT-R-16-2020, dated August 5, called Resolution on due diligence for the provision of information corresponding to the standard for the automatic exchange of information on financial accounts: Common Standard Report (CSR).

The document, published in the Official Gazette La Gaceta, dictates the parameters in which financial entities must provide the data to the Treasury so that it remits it to the country of origin of the person or company.

That in order for the Tax Administration to comply with the implementation of this information exchange modality, it is considered essential to establish the definitions, general obligations to report the information, due diligence procedures for the accounts of individuals and legal entities as well as the conditions and compliance deadlines to be complied with by the entities required to provide the information, in addition to the effective application referred to the financial accounts as established by the CRS and its comments“, the document explains.

The order is established based on Law 9.118, of May 2014, in which Costa Rica ratified the Convention on Mutual Administrative Assistance in Tax Matters of the Organization for Economic Cooperation and Development (OECD).

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The agreement establishes the confidentiality and data protection of individuals and companies since the information is only for the treasury of each country.

Germán Morales, managing partner of Grant Thornton Costa Rica, explained to La Nacion that this international agreement, ratified by 183 countries, obliges the financial entity to report to Taxation when the owner of the current account is a foreigner.

This parameter is set for existing accounts and all new.

“The bank must report, each December, the current account balance that the foreign person has here (in Costa Rica). It is intended to be reciprocal; For example, if a Tico opens an account in Mexico, it is reported from there. Then, Taxation will have the current accounts of Costa Ricans abroad,” Morales stressed.

Costa Rica makes similar reports in the cases of US citizens based on the Foreign Account Tax Compliance Act (Fatca) and the European Union, according to Mario Gómez, legal advisor to the Costa Rican Banking Association.

However, by establishing the steps to comply with the OECD convention, the obligation to provide information opens up to more countries.

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The bank that does not make the reports can be fined equal to 2% of the bank’s gross income.

“The resolution establishes the standard procedure for how the information should be delivered and the Taxation of each country will determine the use that will be given to the information,” explained Francisco Villalobos, partner at ICS Abogados and former Tax Director.

Villalobos stressed that the agreement does not imply any modification of the lifting of banking secrecy for Costa Rican citizens. Villalobos emphasized that that would require a court order.



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