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One of the most derided provisions of taxation in the United States is the Foreign Account Tax Compliance Act (FATCA), which is a topic that The Costa Rica Star has previously discussed more than once. This overreaching law, which has not yet entered a period of strict enforcement, has already led to the renunciation of U.S. citizenship by expats around the world. As unpopular as FATCA may be, a proposal is already underway for other nations to implement similar tax collection measures under an international standard nicknamed “GATCA,” wherein the G stands for global.

Author’s Note: The use of the noun and adjective “American” in this article conforms to the definition in Princeton’s WordNet: (A native or inhabitant of the United States), and the recommendation by the Associated Press Stylebook: (An acceptable description for a citizen of the United States). Natives and inhabitants of North, Central and South America are also Americans

When The Costa Rica Star recently reported on the change of consular fees announced by the U.S. Embassy, we promised you a FATCA update, and here it is. According to a recent report from business magazine Forbes, the Organization for Economic Cooperation and Development (OECD):

unwrapped a new global version [of FATCA]. The OECD proposal is called the Global Standard for Automatic Exchange of Information and it’s meant to facilitate the exchange of detailed account information between governments.

If you listened hard enough, you could hear the collective sigh of global financial firms as they prepared to confront yet another complicated administrative hurdle.

FATCA has been a major pain point for large financial institutions. The law, which formally took effect in July but won’t be rigorously enforced until 2016, requires all foreign financial firms to report their holdings of U.S. citizens’ money to the IRS. The goal of the law is to limit the use of offshore tax shelters by U.S. investors.

As we have previously clarified. FATCA is not just for fat cats. In Costa Rica, FATCA encompasses not just American citizens; the correct way to explain it is that it involves reporting on all U.S. taxpayers, who could include those who are conditional residents. This does not mean that all American expats living in Costa Rica will one day wake up and realize that the Internal Revenue Service (IRS) has taken money from their bank, accounts; what is means is that:

U.S. persons, who include U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts and meet the reporting threshold, which is $10,000 at any time during the calendar year.

The above is taken directly from http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-(FBAR), and it means that you may be subject to reporting your accounts and assets in Costa Rica if they add to $10,000 or more at anytime during the tax year. How would the IRS or agents from the Treasury Department’s enforcement division know if you have money in bank accounts in Costa Rica? That’s easy, the government of Costa Rica agrees to happily provide such information to the U.S.

The OECD’s announcement of a GATCA proposal is stealing away the sighs of relief that were briefly enjoyed by European expats in Costa Rica. GATCA is a work in progress, but 65 nations have already agreed to advance the proposal so that it can be implemented in 2017. As it happens, Costa Rica has been trying to gain admission to the OECD, and compliance with FATCA and cooperation with GATCA could help in this regard -even if it causes displeasure among expats.