Tax information exchange with the US Mexico as applicant State

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2 Tax information exchange with the US Mexico as applicant State Society of Trust and Estate Practitioners Abel Francisco Mejia Cosenza January 2014

3 Tax Information Exchange 1. International background and current events 2. Mexico-US Tax Treaty 3. Tax Information Exchange Agreement (TIEA) with the US 4. US Domestic Law 5. Intergovernmental Agreement (IGA) to improve international tax compliance including with respect to FATCA

4 International background and current events Legal and economic international environment International fiscal crisis Increasing attention on profit shifting by MNEs G8 and G20 Statements Moscow meeting 16 February 2013: we agree to take action against non-cooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is o v e r. We note that the OECD has today published a list of countries assessed by the Global Forum against the international standard for e x c h a n g e o f t a x information. Rise in introduction of general tax avoidance rules into domestic laws in various jurisdictions and more concentrated efforts to challenge global treaty shopping

5 International background and current events Mexico s participation in the Global Forum Meeting (September 2009) Established the basis for international information exchange: Information Exchange with prior request. Requested information may contain all that is required to apply domestic law of applicant state Information shall not be denied arguing: Bank secrecy Pertain to a trust Applicant state holding no interest on the information

6 International background and current events OCDE: Mexico as a member from 1994 OECD Report on Tackling Aggressive Tax Planning Through Improved Transparency and Disclosure - 1 February 2011 OECD Report on Corporate Loss Utilization through Aggressive Tax Planning - 30 August 2011 OECD Base Erosion and Profit Shifting Report 12 February 2013 OECD Report on Aggressive Tax Planning Based on After-Tax Hedging 13 March 2013 OCDE Model Tax Convention. Article 26: The competent authorities of the Contracting States shall exchange such information as it is foreseeably relevant for carrying out the provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes 5. In no case shall the provisions of paragraph 3 be construed t o p e r m i t a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interest in a person

7 International background and current events Mexico as an active member in the international tax forum Exchange of information agreements in force: Bahamas, Belize, Bermuda, Canada, Costa Rica, Cayman Islands, C o o k Islands, Guernsey, Isle of Man, Jersey, Netherlands Antilles, United S t a t e s o f America and Samoa. Upcoming exchange of information treaties: Liechtenstein, Gibraltar and Santa Lucia. Exchange of information agreements under negotiation: Aruba, British Virgin Islands, Marshall Islands, Monaco, Turks and Caicos and Vanuatu.

8 Mexico-US legal framework Mexico-US Tax Treaty The Mexico-US Tax Treaty establishes the obligation of Contracting States to exchange information under the Tax Exchange Information Agreement executed on November 9, Authorizes the exchange of information with respect to any tax covered in the treaty. Tax Exchange Information Agreement: Tax authorities must exchange information for the administration and execution of domestic law, including such information needed for the determination, assessment, and collection of tax, the recovery and enforcement of tax claims, or the investigation or prosecution of tax crimes or crimes involving the contravention of tax administration.

9 Mexico-US legal framework Tax Exchange Information Agreement: Taxes covered include those imposed by a state, municipality, or other political subdivisions or local authorities of a Contracting State. The competent authorities of the Contracting States shall automatically transmit information. Contracting States shall spontaneously transmit important information to the other. In addition, the requested State shall provide information upon request by the applicant State. If the information available in the tax files of the requested State is not sufficient to enable compliance with the request, that State shall take all relevant measures to provide the applicant State with the information requested. No information shall be denied by arguing banking secrecy.

10 Mexico-US Reciprocal IGA Foreign Account Tax Compliance Act (FATCA) Enacted on March 18, Included in Chapter 4 of the US Tax Code. Aimed at avoiding tax evasion by US citizens with funds in foreign accounts. Unilateral. Intergovernmental Agreement (IGA) to improve international tax compliance including with respect to FATCA Entered by Mexico and the US on November 19, 2012, following the Reciprocal Model for IGAs. Provides for the rules under which FATCA is applied with respect to Mexico. Automatic Exchange of information about individual accounts and entity accounts held by residents of the other country as of December 31, Parties agreement eliminates banking, trust and stock exchange secrecy restrictions on the exchange of information.

11 Mexico-US Reciprocal IGA US information exchange obligations under IGA Bank Account Information Name Address Tax ID (RFC in Mexico) Account number Gross amount of paid or credited dividends Gross amount of other reportable income Concerning depository accounts, gross amount of paid interest Information must be exchanged within the nine months following the calendar year to which that information pertains. Information concerning the 2013 calendar year must be delivered no later than September 30, 2015.

12 Mexico-US Reciprocal IGA Exempt beneficial owners: The Mexican Government, Central Bank and Pension funds in Mexico. Exempt products: Personal retirement plans, insurance premiums for retirement, and the following pension funds: Mandatory savings administered by the Retirement Fund Administrators (AFORES) Voluntary and Complementary Savings administered by the Retirement Fund Administrators (AFORES)

13 Lic. Abel Mejia Cosenza