What does DGT do with FATCA and CRS information?
First of all, we would like to remind you that next Wednesday is the deadline for filing two important declarations: That of the registration of beneficiaries before the Central Bank and the informative declaration of inactive companies ( form d 195 ).
The discussion on whether our tax system only taxes income produced by capital invested in Costa Rica, by goods located here or by services rendered from here, is once again becoming relevant in the light of control actions carried out by the General Directorate of Taxation when investigating the origin of funds Costa Ricans have in bank accounts outside of Costa Rica. The DGT now has access to banking information, account balances in which Costa Ricans appear as beneficiaries, in the following types of accounts: checking accounts, investment accounts, custody accounts, and insurance accounts. The DGT investigates, asking Costa Rican beneficiaries with accounts abroad more or less the following: explain the origin of these funds and explain in detail if they have any relation to activities carried out in Costa Rica. It seems to me that they are trying to give the taxpayer the task of explaining that these funds were generated completely outside of Costa Rica and just to be sure, they also ask for proof that they were declared in another country.
In view of this, the respondent should: a- demonstrate that such income has no relation with Costa Rica b- that it was or should not have been taxed in the country where it originated.
The question should be easily settled thanks to the sort of authentic interpretation that our legislators made in 2023 in Article 1 of the first article of the Income Tax Law:
For the purposes of this law, income, earnings, or benefits from Costa Rican sources shall be understood as those generated exclusively in the national territory according to the definition of territorial space and for which the national territory shall be understood according to the geographical limits established in articles 5 and 6 of the Political Constitution, from services provided, goods located, capital invested, and rights used, obtained during the fiscal period, in accordance with the provisions of this law, regardless of the nationality, domicile, or residence of those involved in the operations of legal business transactions, as well as regardless of the origin of the goods or capital, the place of negotiation over these or their linkage to the economic structure in the national territory.
Therefore, this is what the Tax Administration finally seems to be looking for:
In the event that monies have not been declared, the taxpayer is urged to file the appropriate tax return(s) in which the income related to the previously indicated account is declared.
For now the DGT works with information from the Common Reporting Standard, which does not include accounts in U.S. banks, but it will be a matter of time before these are also included in these new controls.