The Internal Revenue Service announced the formal enforcement of the Intergovernmental Agreement, United States-Dominican Republic, to Improve International Tax Compliance (IGA) and implement the Foreign Account Tax Compliance Act (FATCA), ratified by the National Congress.
FATCA Law
The agreement entered into force following the diplomatic note issued last Wednesday, the 17th of the current month, and notified by the Ministry of Foreign Affairs of the Dominican Republic to the U.S. Government.
The agreement regulates the automated exchange of information regarding Reportable Accounts between the United States and the Dominican Republic.
In this regard, Dominican financial institutions must identify the accounts of individuals, corporations, or other specialized entities such as U.S. trusts, to submit relevant information to the United States Internal Revenue Service (IRS), detailing their transactions, accounts, receipts, and other operations.
In turn, the United States must provide the Dominican Government with information on accounts held by Dominican Republic residents in financial institutions in that country.
It also states that if Dominican financial institutions fail to submit the required information under the agreement, they would be considered non-cooperative institutions and would be subject to a 30% withholding on all transfers received from the United States, whether direct or indirect.
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The Ministry of Finance, through Resolution No. 137-2014, delegated to the Director-General of Internal Revenue the authority as Competent Authority for the application of international agreements to avoid double taxation and prevent tax evasion, in tax information exchange agreements, and the FATCA-IGA Agreement.
For this reason, Internal Revenue acquired a technological platform in 2017 to carry out the automatic exchange of information. This platform will enable the institution to collect financial information provided by local financial intermediaries for subsequent submission to the U.S. IRS.
That same year, the DGII conducted a series of training sessions for various financial sectors on the management of the platform and the format for sending the corresponding reports. It should be noted that this same platform will allow the automatic exchange with more than 130 jurisdictions under the Multilateral Convention promoted by the OECD once it enters into force.
About FATCA
The Foreign Account Tax Compliance Act (FATCA) was passed by the U.S. Congress on March 18, 2010. It was created to identify U.S. citizens and residents holding assets outside the country in foreign financial institutions, with the aim of verifying the accuracy of tax declarations and applying the relevant withholdings.
