FATCA Impact On Thousands In Nicaragua

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Wendy Álvarez Hidalgo

Worldwide and national banks will have to comply with rules set forth by the Foreign Account Tax Compliance Act (FATCA) in order to continue to have access to US sources of capital.

By 2015, almost a year and half from today, all banks worldwide that hold information on financial assets owned by US citizens, those who hold dual citizenship or are in possession of a "green card" (USA permanent residents) and reside in another country, will have to disclose such information to United States authorities.

The aim is to curtail tax evasion by U.S. tax payers, and Nicaragua is not exempt from this task. According to Carlos A. Núñez Vivas, owner and manager of Vivas & Foodman Tax Compliance, a US-based business that specializes on Tax issues with an office in Managua, FATCA might affect at least some 150 thousand bank customers in Nicaragua.

The task of tracking tax evasion is outlined by the Foreign Account Tax Compliance Act (FATCA). On August 19 of this year, the Department of the Treasury of the United States of America, through the IRS, called on all financial institutions to register and start the process to comply with said American law.

Once they sign up in the IRS on-line registration portal—as explained in a bulletin of the KRPMG firm, financial institutions shall be notified that they have been accepted and will be issued a global intermediary identification number (GIIN).

What follows, Núñez said, is that before April 25, 2014, financial institutions affected by this foreign law must comply, because in June of that year FATCA will announce a list of all entities that committed to follow FATCA's regulations, which the financial institutions may use as a letter of introduction when seeking external financing from U.S. sources.

The expert said that the high number of bank clients who will be affected by this foreign law in Nicaragua is comparable to Costa Rica's, and for this reason he urged Nicaraguan banks to start the process of notifying their clients in order to beat the deadlines established by the U.S. government and thus avoid compliance delays.

To date, the Bank Superintendence and other financial institutions have not announced whether the Nicaraguan government will commit to a FATCA intergovernmental agreement, so the banks might have to sign one directly with the IRS.

GET THEIR CLIENTS READY

"I have noticed that in Nicaragua people are wishful thinking, so to speak, hoping that FATCA will go away, that the U.S. government will change its mind. Many clients still know nothing about this law because the banks have not taken the steps necessary to advise them on the matter", he stated.

He said that Nicaraguan banks should start the process now in order to avoid the possibility that their customers may blame them for disclosing private information protected by bank secrecy. He also reminded that information on the client may not be disclosed without his or her authorization, and that obtaining such consent would take some time.

The expert also advised that banks should start electronic registration with the IRS, "time goes by quite swiftly; an extension was given and now we have deadlines." The next step is for clients affected by this law to go to the bank and regularize their situation by authorizing compliance with the American law.

THERE WILL BE NO GOING BACK

Núñez said that Congress might make some amendments to FATCA, but that its implementation is inevitable. Some areas of possible modification are the legal matter of reciprocity, and the issues related to operational efficiency.

With FATCA, the U.S. government aims at collecting revenue of up to 7.6 billion dollars in a ten-year period. Banks may withhold 30% of payments from U.S. sources to persons affected by this law who oppose having information on their accounts end up in the hands of U.S. tax authorities. Banks might also stop providing banking services to them.

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