WASHINGTON, D.C. — United States authorities have begun the exchange of information with Mexico on all Mexicans with bank accounts or investments in the U.S. who have obtained more than $10 USD in annual interest.
With the implementation of the Foreign Account Tax Compliance Act (FATCA), Mexico plans to deliver to the U.S. information on all Americans with accounts or investments in Mexican institutions of more than $50,000 USD.
While FATCA was enacted in the United States in 2010 as a new legal tool against tax evasion because of the scandal of HSBC Bank, its implementation will be carried out this month, amid successive lawsuits against the law.
The Texas Bankers Association and the Florida Bankers Association sued the U.S. Treasury Department in 2013, while Sen. Rand Paul and American expatriates maintain their own legal challenge (Crawford vs US Treasury) in progress.
Since the enactment of FATCA by President Barack Obama, the United States launched the negotiation of bilateral agreements with over 70 countries, in order to formalize the mutual exchange of information. In the case of Mexico, the agreement was finalized on April 9, 2014.
“Mexico and the U.S. have conducted technical tests for months on the exchange of information (…) The implementation of the bilateral agreement will be gradual,” he told Notimex an official source.
Under the bilateral agreement, information about accounts for 2014 and subsequent years will be shared between the Internal Revenue Service (IRS) of the United States and Tax Administration Service (SAT) of Mexico.
“That’s going to allow a safety standard and to receive the information and send the information”, SAT Director Aristotle Nunez Sanchez said at a recent forum in Mexico.
The plan of the SAT is to collect and evaluate information on Mexicans with accounts or investments in the US, with a view to initiating the respective audits in appropriate cases starting from 2016.
The IRS will provide to Mexico the name, address and tax identification number of residents of Mexico with accounts or investments in the US that have obtained at least $10 USD in interest on the previous or current year. The program is not retroactive.
IRS also will deliver the account number or equivalent, the name of the depositary institution, the amount of interest paid, the amount of dividends or income received or credited in the United States and the source of other resources of Mexican residents.
Mexico will provide the IRS the name, address and tax number of Americans with accounts whose balance is greater than $50,000 USD, the account number, the monthly balance and the amount of interest paid.
So far more than 600 banking and financial institutions in Mexico have agreed to participate in FATCA. Under US law, those who do not could face penalties, including a 30 percent tax on their assets in the United States.
It is estimated that worldwide more than 173,500 banking institutions have agreed to participate in FATCA and report information about their US account holders.
In the United States, two major associations of bankers, the Texas and Florida groups, began in April 2013 a legal battle against FACTA, contending that its provisions are unduly burdensome can affect investments in this country.
According to the Texas Bankers Association, the imminence of FATCA led to the departure of more than $500 million in foreign accounts in that state and also may causea greater risk of capital flight from the US.
Last year, Judge James Boasberg of the District Court in Washington, DC, dismissed the claim, but bankers associations appealed the ruling to the Court of Appeals for the District of Columbia.
In August, three circuit judges ruled in favor of the US government.
But the battle against FATCA also includes a group of expatriates who sued the federal government in Ohio, and Senator Rand Paul and the Republican Party, whose national committee denounced the law as invasive of personal privacy.
FATCA’s opponents also argue that the law is causing an unprecedented number of Americans to renounce their citizenship to avoid the effects of the law. Last year 3,415 gave up citizenship, compared with 742 in 2009, before FATCA.
Although there is no official estimate on the amount of taxes not collected by the United States on foreign accounts, US lawmakers have estimated that number at about $100 billion USD.
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