By now, most expats have heard of FATCA, the 2010 U.S. law that turned the world into a financial reporter to the Treasury.
The notion of financial exchange of information had been around for some time. When FATCA was enacted, preexisting international efforts picked up steam. The Common Reporting System (CRS) came along. There are about 90 countries signed up, Canada and Mexico included.
CRS institutions identify customers who are “residents” of a “participating jurisdiction” and report financial account information meeting specific criteria. That way one’s “home jurisdiction” may learn of overseas accounts. FATCA identifies persons based on U.S. “indicia”: citizenship, place of birth, addresses, telephone numbers. CRS looks for “residence.” In looking for reportable accounts, it seems to me that CRS will go deeper into ownership of entities (corporations, partnerships, trusts and so forth) that have financial accounts. Under CRS, it’s the financial institution’s job to report. Under FATCA, both institutions and persons can have reporting obligations. Under FATCA even retirement accounts and “tax benefitted” retirement and pension accounts are reported, not so under CRS.
Earlier this year, Mexico issued rules requiring CRS reporting to 69 countries. Expect that number to go up. Of course, if another one of those countries considers you a resident of Mexico, your information will be sent to Mexico’s tax agency, the SAT.
While FATCA was “out the gate” the only and therefore most comprehensive scheme, CRS has improved and capitalized on American efforts. FATCA has yielded over US$1 billion in “found money” for American coffers. I would not be surprised if the U.S. Treasury observes CRS, mimicking what works, optimizing FATCA for yet more revenue.
Mexican financial institutions have SAT guidelines to identify customers and reportable accounts. New account holders are in for a special treat, as they will have to provide more information than preexisting customers. Further, some institutions may choose to be over inclusive and report away more accounts than required. I heard in a recent presentation that Mexican institutions may seek to identify every single non-Mexican and pass their information along. Because of overlapping rules, some may be reported to more than one CRS jurisdiction – plus the U.S. under FATCA. Some people have all the luck.