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Costa Rica: A new era in the exchange of financial information

The OECD has established policies to support cooperation between jurisdictions in order to solve common problems. Among these is the exchange of financial information to reduce problems such as tax evasion and avoidance, and money laundering. This situation has been a challenge for central American jurisdictions when it comes to the approval of new regulations. As a result, several international treaties have been signed and local regulations have been enacted, and several other initiatives and bills are currently being discussed from a political and technical perspective.

Treaties such as the Convention on Mutual Administrative Assistance on Tax Matters (the Convention), along with the cooperation of the Financial Action Task Force (FATF), have paved the way for an endless array of tools and possible regulations for jurisdictions to tackle tax evasion and avoidance, and money laundering. The Convention has been signed by most Central American countries: by Costa Rica as of 2012 with enforcement in 2013, by El Salvador in 2015 with an enforcement date still pending, and by Guatemala in 2012, with enforcement as of October 2017. As of today, it is still pending signature by Honduras and Nicaragua. In addition, several tax information exchange agreements (TIAs) have been signed by the Central American countries and by other jurisdictions.

Moreover, the anti-tax avoidance base erosion and profit shifting (BEPS) initiative has been actively followed in the region, especially by Costa Rica as it is currently in the process of accessing the OECD as a permanent member. Therefore, it is very important for local, regional and multinational enterprises conducting bussinesses in central America to be up-to-date on the continous regulatory initiatives promoted in each of the countries. BEPS is definitely having an impact on the global tax system, and central America will be no exception.

Furthermore, Costa Rica has commited to implementing the common reporting standards promoted by the OECD's Global Forum of Transparency, which allows automatic exchange of information from financial institutions as of 2018.

This new era will imply an increase in regulatory supervision through the adoption of new laws for that purpose. Hence, this may have a significant impact on Central American countries from a regulatory and tax perspective.

Diego Salto

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