On May 20, 2015, Ambassador Kevin Whitaker and Colombian Finance Minister Mauricio Cardenas signed a Foreign Account Tax Compliance Act (FATCA) intergovernmental agreement, aimed at combating offshore tax evasion and promoting transparency through the exchange of tax information.
FATCA is rapidly becoming the global model for combating offshore tax evasion and promoting transparency. Enacted in 2010, FATCA seeks to obtain information on accounts held by U.S. taxpayers in other countries. It also provides for foreign governments to obtain similar information on their taxpayers resident in the United States.
The agreement signed today will allow information on U.S. taxpayers in Colombia to be referred by financial institutions to Colombia’s Dirección de Impuestos y Aduanas Nacionales de Colombia (DIAN) which will subsequently transfer that information to the Internal Revenue Service (IRS) in the United States. In turn – and consistent with the reciprocal nature of this instrument – DIAN will receive information about Colombian taxpayers’ holdings in U.S. financial institutions. This exchange of information will be done respecting the confidentiality of information by both parties.
“Today’s signing marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion – an objective that mutually benefits both our countries,” said Ambassador Whitaker.
Information for Individuals
Under FATCA, U.S. taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS. This reporting is made on Form 8938, which taxpayers attach to their individual federal income tax return. To help individuals understand how FATCA may impact their filing and reporting responsibilities, see the attached IRS link: Information for U.S. Taxpayers on Form 8938 Requirements
Information for Foreign Financial Institutions
FATCA will require foreign financial institutions to report to the IRS, through DIAN, information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest. Foreign financial institutions looking for information on this topic may visit the IRS website. Colombian financial institutions may also contact Colombia’s DIAN regarding implementation of the FATCA intergovernmental agreement with the United States.
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