The Governments of the United States and Colombia signed in May 2015 agreement to implement FATCA Act, which makes it important to know and understand this agreement, which falls within what is internationally known as the I.G.A. (Intergovernmental agreements)
Let’s start by recalling that this Agreement is provided only to allow the Colombian Financial Institutions can meet the requirements of FATCA, failing which their income in the United States become subject to withholding tax.
Suffice it to recall the name of the Agreement: “Memorandum of Understanding regarding the Agreement between the Government of the Republic of Colombia and the Government of the United States to enhance the International Tax Compliance and Implementing the automatic exchange of information regarding the Tax Compliance Act relating to accounts abroad (FATCA). “
Nothing more eloquent to demonstrate the above that the fact that 32 of the 52 pages detailing Agreement address (in the so-called Annex I), specific procedures applicable to the Colombian entities in order to comply with FATCA reports.
It will be interesting to readers that the reporting requirements and reporting agreement was established from 2,014, having a “retroactive” effect, but this is due to two practical elements: firstly, the fact that FATCA went into effect for residents in USA and its citizens, from July 2014 and, on the other hand, the Agreement corresponds to a model that the United States presented for signature to different countries.
The reality, as recognized by the Agreement itself is that entities in Colombia had not implemented the closure of 2,014 protocols for reporting information to the Agreement and that entities in the US, until today not even incorporated information foreigners who have assets in that country, tax identification number and 2014 were very lax in filling out the form W8.
In the preamble to the Agreement, when mentioned to the United States, it is left sitting clearly premised that it only includes financial assets, “the US Government. UU collects information on certain accounts of residents of Colombia held in US financial institutions and is committed to exchange such information with the Government of the Republic of Colombia and to seek equivalent levels of exchange, provided there are safeguards and adequate infrastructure …. ”
This also has a conceptual explanation, namely that the United States did not raise property taxes or settled presumptive income on assets (the ALTERNATIVE MINIMUN TAX is paid on income), which neither the IRS nor any other entity collects that information and registration of real estate is local, like company registration but is not Federal State.
So much is it true that the agreement states: “… the parties are not required to obtain and include the NIT of Colombia or the US TIN. UU., As applicable, on the information exchanged by any person if the taxpayer identification number is not in the records of the financial institution subject to Report. In these cases, the Parties shall obtain and include the date of birth of the relevant person in the exchanged information when the financial institution subject to Report have this information in your records. ”
But perhaps the most important element to highlight is the condition that the United States entered in the Agreement, when it states:
“Following the entry into force of this Agreement, each Competent Authority shall make a written request to the other Competent Authority when it is satisfied that the other Competent Authority are (i) appropriate measures to ensure safeguards notice that information received under this Agreement shall be kept confidential and used only for tax purposes, and ….
The competent authorities should strive in good faith to meet before September 2015, to establish that there are safeguards in each jurisdiction and infrastructure. ”
It will not be easy to prove that Colombia can ensure such compliance and proper handling of information. In the past, one of the fundamental reasons for the US government to deny any information has been the intimate conviction that exists in this country that Colombia is not serious in handling classified information from taxpayers.
But more than that, the firm commitment of the United States only occurs from 2,017 (as already indicated, the date of June 2014 is a benchmark for coverage and force), because only at that time is that the government that country states:
“As of 1 January 2017, to report with respect to 2017 and subsequent years, the United States agrees to establish rules requiring financial institutions to the US. UU subject to Report, obtain and report of Colombia NIT each Accountholder a Reportable Account to Colombia … .. ”
That Annex, the sole of the Agreement, is entitled: “Due Diligence Obligations for Identification and Report to the US Reportable Accounts and payments to certain non PFIs”