The Foreign Account Tax Compliance Act (FATCA) was passed by the United States Congress in 2010 as a measure to prevent tax evasion by US taxpayers holding accounts in foreign financial institutions (FFIs). The act requires FFIs to report information about their US account holders to the Internal Revenue Service (IRS).
In 2014, Mexico became one of over 100 countries to sign an intergovernmental agreement (IGA) with the US to implement FATCA. The agreement provides a framework for FFIs in Mexico to comply with FATCA by reporting information about US account holders to the Mexican government, which in turn reports that information to the IRS.
Under the agreement, FFIs in Mexico are required to register with the Mexican tax authority and obtain a Global Intermediary Identification Number (GIIN). The GIIN is used to identify the FFI as complying with FATCA and allows the FFI to avoid certain penalties for non-compliance.
The agreement also includes provisions for the exchange of information between the US and Mexican governments. The US may share information about Mexican taxpayers with the Mexican government, and the Mexican government may share information about US taxpayers with the IRS. This helps to ensure that both countries have the information they need to enforce their tax laws.
The FATCA Mexico agreement has had a significant impact on the financial industry in Mexico. FFIs have had to invest in new technology and processes to comply with the regulations, which has resulted in increased costs. However, the agreement has also helped to improve transparency in the financial industry and prevent tax evasion.
In conclusion, the FATCA Mexico agreement is an important aspect of the US government`s efforts to prevent tax evasion by US taxpayers holding accounts in foreign financial institutions. The agreement has helped to improve transparency in the financial industry in Mexico and ensure that both the US and Mexican governments have the information they need to enforce their tax laws.