The Foreign Tax Compliance Act known as FATCA is legislation passed by the United States which is intended to deter the evasion of US tax laws by persons that have foreign accounts. FATCA implements a reporting and compliance system on foreign financial institutions so that they cooperate in providing information of foreign account holders. The Internal Revenue Service summarizes the requirements as follows:
|U.S. individual taxpayers must report information about certain foreign financial accounts and offshore assets on Form 8938 and attach it to their income tax return, if the total asset value exceeds the appropriate reporting threshold.|
Form 8938 reporting is in addition to FBAR reporting.
To avoid being withheld upon, a foreign financial institution may register with the IRS, obtain a Global Intermediary Identification Number (GIIN) and report certain information on U.S. accounts to the IRS.
| If a jurisdiction enters into an Intergovernmental Agreement (IGA) to implement FATCA, the reporting and other compliance burdens on the financial institutions in the jurisdiction may be simplified. Such financial institutions will not be subject to withholding under FATCA.|
Costa Rica is complying with FATCA regulations and has entered into a bilateral agreement with the United States for the implementation of FATCA in Costa Rica.