U.S. Law Requires Costa Rica Banks To Report Balances To The IRS

Banks, investment funds and stock exchanges in Costa Rica and around the world must report, starting July 2013, the balances and movements on investments of U.S. citizens to the Internal Revenue Service (IRS).

The obligation is based on the Fair and Accurate Credit Transactions Act, a United States federal law, passed by the United States Congress that asks agencies to document all those customers and transfer this information to U.S. tax collector.

Financial institutions violating the provision are exposed to the IRS withholding 30% of all interest, dividends or profits sent from the United States.

"Factat applies to all entities around the world as the U.S. wants to better regulate their capital and above all raise more the taxpayer escapees", Enrique Rojas, tax manager with Deloitte told La Nación.

Too meet the requirements, financial institutions must sign an agreement with the IRS, and to inform customers about the extent to which they, in turn, authorize a disclaimer.

"If the customer does not want to sign the release, the entity must close the account, because otherwise, violates the Fatca", said Rojas, who commented that many of these people have such investments outside the US hidden away from the IRS.

Local banks are now preparing to implement the requirements. "They must generate reporting protocols, having a special software, compliance officers and training, for a financial institution are many processes that must be anticipated", said Rojas.

On the subject, Franco Naranjo, President of the Asociación Bancaria Costarricense (ABC) - Costa Rican Banking Association, said that the law has already been studied by the guild, to consider the interaction of Costa Rican law.

"Fatca integrates highly sensitive issues such as the closure of accounts and bank secrecy", said Franco, who said that the banks are work to conform to the requirements for documentation of existing accounts.

On the hunt for resources, Fatca is a component of the Employment Contracts Act enacted in 2009.

"Fatca is an important development in U.S. effortsto deal with breaches", said Doug Shulman, IRS commissioner, in a statement.

In addition, the IRS encourages voluntary disclosure program, which since 2009 rose to 30,000 the number of statements.

Facts on FACTA
The Fair and Accurate Credit Transactions Act of 2003 (FACT Act or FACTA, Pub. L. No. 108-159) is a United States federal law, passed by the United States Congress on November 22, 2003,and signed by President George W. Bush on December 4, 2003, as an amendment to the Fair Credit Reporting Act. The act allows consumers to request and obtain a free credit report once every twelve months from each of the three nationwide consumer credit reporting companies (Equifax, Experian and TransUnion). In cooperation with the Federal Trade Commission, the three major credit reporting agencies set up the website, annualcreditreport.com, to provide free access to annual credit reports.

The act also contains provisions to help reduce identity theft, such as the ability for individuals to place alerts on their credit histories if identity theft is suspected, or if deploying overseas in the military, thereby making fraudulent applications for credit more difficult. Further, it requires secure disposal of consumer information.

The FACT Act contains seven major titles: Identity Theft Prevention and Credit History Restoration, Improvements in Use of and Consumer Access to Credit Information, Enhancing the Accuracy of Consumer Report Information, Limiting the Use and Sharing of Medical Information in the Financial System, Financial Literacy and Education Improvement, Protecting Employee Misconduct Investigations, and Relation to State Laws.