Cayman Islands, Costa Rica sign FATCA agreements with US
FATCA requires foreign financial institutions to tell the US Internal Revenue Service about Americans' offshore accounts worth more than US$50,000. It was enacted after a Swiss banking scandal showed US taxpayers hid substantial fortunes overseas.
With these two deals, both signed this week, the Treasury has now finished 12 FATCA "intergovernmental agreements" (IGAs), which help countries' financial institutions comply with the law.
The FATCA agreement with the Cayman Islands was initially agreed to in August.
The island nation of 53,000 people has no income tax and is frequently labelled as a tax haven by critics. It is one of the world's most popular destinations for investment funds to organize for tax purposes.
Costa Rica was one of three Central America countries the Organization for Economic Development and Co-operation (OECD) has tagged as a tax haven. Panama and Belize were the other two.
Significantly, the Costa Rica deal is reciprocal, meaning the Costa Rican government can get tax information about its citizens with assets in the United States.
The trading financial information, though not part of the Cayman Islands deal but included in many of the other 11 FATCA agreements, has rankled US banks.
In April, the Texas Bankers Association and the Florida Bankers Association, both industry groups, filed a lawsuit attempting to block a Treasury Department rule that would allow the IRS to send certain bank account information to foreign governments.
The case, filed in the US District Court for the District of Columbia, is awaiting a judge's ruling on whether the bankers' associations have standing.
Source: IFC Review