U.S. and Costa Rica plan to sign tax agreement today

Costa Rica is scheduled today to sign an agreement with the United States over the Foreign Account Tax Compliance Act.

This is the U.S. law that targets tax non-compliance by U.S. taxpayers with foreign accounts, according to the U.S. Internal Revenue Service.  It also is controversial because of the paperwork involved.

There has been no announcement what the agreement between the two countries will mean, but almost certainly the pact would give U.S. tax investigators access to Costa Rican banking information.

The law requires banks there and other financial entities to withhold 30 percent of any proceeds due foreign banks who do not agree to the U.S. demands.

The law also requires U.S. citizens and others who pay taxes there to report their assets over a certain amount along with the annual tax return. This requirement is different than the report of foreign bank accounts.

The agreement today is due to be signed at the Ministerio de Relaciones Exteriores y Cultro.

The United States is one of a few countries that taxes its citizens on money earned overseas. There is a $95,100 exemption for earned income, but investment and capital gains are not exempted. The U.S. also is trying to find money stashed overseas by its citizens.

Despite the law and the aggressive effort by U.S. tax officials to obtain this information, Americans here have said that the agency almost never follows up on reports of illegalities. Some expats have tried to claim a reward for turning in tax cheats. Their efforts have generally been unsuccessful, and some complained they never even got responses from the Internal Revenue Service.

The Criminal Investigating Division also has failed to respond to letters from A.M. Costa Rica on certain newsworthy cases here.

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