Costa Rica – An End to Financial Privacy
Costa Rica Eliminates Financial Privacy
In March of 2012 Costa Rica was the first country in Central America to sign the Convention on Mutual Administrative Assistance in Tax matters with the Organization for Economic Co-operation and Development (OECD).
Under the agreement member countries must share tax information.
In order to comply with the treaty Costa Rica has introduced into the Legislature a new law under bill number 17.677 which would in effect bring to end financial privacy.
Since 1964the Costa Rican Commercial Code article 615 has made it illegal for banks to reveal private financial information without a court order.
Article 615 provides that :
The banking accounts may not be violated and the Banks may only reveal information about accounts at the request or by authorization from the account holder or by a duly issued court order.The exception is any compliance in carrying out the duties required by the Financial Regulatory Agency .
The tax authorities are prohibited from reviewing bank account.
The proposed bill (17.677) would significantly change the privacy provisions and instead would require the financial institutions to provide to the taxing authority information about their clients, users of their financial services, including information about transactions, operations, account movements on checking accounts, savings accounts, deposits, certificates of deposits, loans,trusts and any other type of financial account so long as the information is relevant to verify any tax obligation.
The request for information would be made before an administrative judge who will simply verify that the correct identity of the individual or entity is used and may not rule on the underlying basis of the request.
The proposed law expands the definition of financial entity to include al banking and financial institutions, brokerage institutions, pension funds and insurance companies.
All persons and companies that maintain financial accounts in Costa Rica should keep a close eye on the outcome of this new legislation since it will allow the taxing authority to go on fishing expeditions without having to justify the underlying reasons to a judge.