International Exchange of Financial Account Information
This article will discuss the requirements and application in Costa Rica for the automatic exchange of foreigners’ financial account information with their country of origin. This exchange of financial information provides transparency to the bank accounts of foreign companies doing business in Costa Rica and individuals.
By Law 9.118 and its decree Nº 37619-RE, both in 2013, Costa Rica ratified the Convention on Mutual Administrative Assistance in Tax Matters of the Organization for Economic Cooperation and Development (OECD). Law 9.118 states that all institutions within the national banking system must submit reports based on their records at the end of each year, and also provide that data to the tax authorities in the person’s or company’s country of origin.
Costa Rica adopted the international Common Reporting Standard (CRS) on July 15, 2014, when it was approved by the OECD council. The CRS requires an exchange of certain financial information between the member countries and jurisdictions.
Tax office compliance
By the decree No. DGT-R-16-2020, published on August 5, 2020, in the official journal La Gaceta, the Costa Rica tax office established compliance as follows:
- implementation of this modality of information exchange
- definitions and general obligations to report information
- due diligence procedures for accounts of natural and legal persons
- conditions and compliance deadlines for the entities obliged to supply the information
- effective application referred to the financial accounts as established by the CRS and its comments
In addition, the tax administration establishes the so-called “frequently asked questions” (FAQs) as required, and their answers, corresponding to this topic and published by OECD Global Forum.
The above decree was ratified and all financial and banking regulated institutions were notified by the General Superintendence of Financial Institutions (SUGEF), issued by resolution SGF-2859-2020.
Click https://www.oecd.org/tax/exchange-of-tax-information/Status_of_convention.pdf to view the countries and jurisdictions with an agreement in place that obligates them to provide this information, as well as the jurisdictions to which Costa Rica must provide the financial information.
This is an annual, automatic exchange of financial data between the applicable countries. Some of the countries that belong to the international Convention are the United States, Canada and the United Kingdom.
According to the law, Costa Rican financial institutions must report the following to the person’s or company’s country of origin:
- Tax Residences
- IBAN account numbers
- Current bank account balances of foreigners and companies
- All account balances, regardless of amount of balance
Of note, the following will be considered high-value accounts and subject to more rigorous review:
- Individuals: Those whose bank balance from 2016 onward exceeds USD $1 million
- Corporate account: Those whose bank balance from 2016 onward exceeds USD $250,000
There are some exceptions to the reporting requirements as follows:
- pre-existing accounts related to retirees
- life insurance contracts
- the sale, exchange or lease of properties provided that the account is opened and used only to guarantee the buyer’s obligations
This international Convention allows for cross-border transparency with relation to financial accounts. It defines the type of financial information to be exchanged, the financial institutions required to provide such information, the different types of accounts which should be included and the taxpayers involved, as well as the standard monitoring procedures that financial institutions must follow.
The details of this law can be complex. We are here to answer any questions you may have. Please feel free to contact us at firstname.lastname@example.org