Beyond FATCA, Costa Rica Adopts “GATCA” Tax Reporting Measures
The unpopular Foreign Account Tax Compliance Act (FATCA) of the United States has set off a rash of similar legislation around the world, and Costa Rica has been eager to adopt these international asset reporting treaties, which many taxpayers consider overreaching and in violation of financial privacy.
The Costa Rica Star has reported on FATCA numerous times, and in September 2014 we reported on “GATCA,” a nickname for the Global Standard for Automatic Exchange of Information sought by the Organization for Economic Cooperation and Development (OECD), wherein the “G” stands for “global.”
The idea of GATCA as envisioned by the OECD is to make it easier for governments to exchange detailed financial information on their taxpayers who have moved overseas, ostensibly for tax collection services. GATCA measures also seek to eliminate the use of offshore tax havens recently and scandalously revealed by the Panama Papers.
Costa Rica has agreed to mutually share financial data of expats not just from the U.S. but also Argentina, Canada, Finland, France, Mexico, Norway, Sweden and the Kingdom of the Netherlands. The latest GATCA measure adopted by Costa Rica is with Italy, and the next jurisdictions include Bermudas, Panama and South Korea.
Each GATCA measure is introduced by the ruling administration and must be approved and ratified by the Legislative Assembly. Thus far, legislators have essentially rubber stamped these GATCA measures, which are seldom discussed barely reported on by news media outlets in Costa Rica.
It is important to note that none of the GATCA measures being approved are as onerous as FATCA; they don’t ask for access to all the bank accounts of expats residing in Costa Rica. Instead, the mutual exchange of financial information is requested in certain cases such as suspicion of tax evasion or money laundering.
Since these are mutual agreements, taxpayers from Costa Rica living abroad would be subject to GATCA measures, but this is hardly a concern since our legislation does not tax income earned abroad.