WASHINGTON, (Reuters) – The United States has signed agreements with the Cayman Islands and Costa Rica to help those countries’ banks comply with an anti-tax evasion law starting next year, the Treasury Department said yesterday.
The deals are part of the U.S. effort to enforce the Foreign Account Tax Compliance Act (FATCA), enacted in 2010 and set to take effect in July 2014.
FATCA requires foreign financial institutions to tell the U.S. Internal Revenue Service about Americans’ offshore accounts worth more than $50,000. It was enacted after a Swiss banking scandal showed U.S. taxpayers hid substantial fortunes overseas.
With these two deals, both signed this week, the Treasury has now finished 12 FATCA “intergovernmental agreements” (IGAs), which help countries’ financial institutions comply with the law.
The FATCA agreement with the Cayman Islands was initially agreed to in August.
The island nation of 53,000 people has no income tax and is frequently labeled as a tax haven by critics. It is one of the world’s most popular destinations for investment funds to organize for tax purposes.
Costa Rica was one of three Central America countries the Organization for Economic Development and Co-operation (OECD) has tagged as a tax haven. Panama and Belize were the other two.