Tax Information Exchange Agreement (1989)
This Treaty was signed on March 15, 1989 and entered into force on February 12, 1991.
AGREEMENT BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF COSTA RICA FOR THE EXCHANGE OF INFORMATION WITH RESPECT TO TAXES
The Government of the United States of America and the Government of the Republic of Costa Rica, desiring to conclude an Agreement for the exchange of information with respect to taxes (hereinafter referred to as the “Agreement”), have agreed as follows:
Article 1. Object and Scope of the Agreement
1- The Contracting States shall assist each other, through exchange of information authorized pursuant to this Agreement, to assure the correct assessment and collection of the taxes referred to herein, as well as to prevent fraud and evasion and to develop the best sources of exchange of information for tax matters, pursuant to this Agreement.
2- Information shall be exchanged to fulfill the purpose of this Agreement without regard to whether the person to whom the information relates is, or whether the information is held by, a resident or national of a Contracting State.
Article 2. Definitions
1- Unless otherwise specified, for purposes of this Agreement, the following definitions shall apply:
a) “competent authority”:
i) in the case of the Republic of Costa Rica, the Minister of Finance or his delegate; and
ii) in the case of the United States of America, the Secretary of the Treasury or his delegate.
b) “national”: any citizen of either of the Contracting States and any legal person, partnership, corporation, trust, estate, association, or other entity deriving its status as such from the laws in force in the Contracting States.
c) “person”: any individual and any partnership, corporation, trust, estate, association, or other legal entity.
d) “tax”: any tax to which the Agreement applies.
e) “information”: any fact or statement that may be relevant or material to tax administration and enforcement, including testimony of an individual, documents, records or personal property of a person or Contracting State.
f) “applicant State”: the Contracting State applying for or receiving information; and “requested State”: the Contracting State providing or requested to provide such information.
g) “Costa Rica”: the Republic of Costa Rica; and
h) “United States”: the United States of America, including Puerto Rico, the Virgin Islands, Guam, and any other possession or territory of the United States. Subparagraphs g) and h), above, determine the geographic area within which jurisdiction to compel production may be exercised.
2- Any term not defined in this Agreement, unless the context otherwise requires or the competent authorities agree to a common meaning pursuant to the provisions of Article 7, paragraph 2, shall have the meaning which it has under the laws of the Contracting State relating to the taxes which are the subject of this Agreement.
Article 3. Taxes Covered by the Agreement
1- This Agreement shall apply to the following taxes imposed by or on behalf of a Contracting State:
a) In the case of the Republic of Costa Rica:
i) income tax; and
ii) other taxes that the Central Government is authorized to collect.
b) In the case of the United States of America:
i) Federal income taxes;
ii) Federal taxes on self-employment income;
iii) Federal taxes on transfers to avoid income tax;
iv) Federal estate and gift taxes; and
v) Federal excise taxes.
2- This agreement shall apply also to any identical or substantially similar taxes imposed after the date of signature of the Agreement in addition to or in place of the existing taxes. The competent authorities of each Contracting State shall notify the other of changes in laws which may affect the obligations of that State pursuant to this Agreement.
3- This Agreement shall not apply to the extent that an action or proceeding concerning taxes covered by this Agreement is barred by the applicant State’s statute of limitations.
4- This Agreement shall not apply to taxes imposed by provinces, states, municipalities or other political subdivisions or possessions of a Contracting State.
Article 4. Exchange of Information (General)
1- The competent authorities of the Contracting States shall exchange information to administer and enforce the domestic laws concerning the taxes covered by this Agreement. Included in this information is that which may be relevant to the determination, assessment and collection of taxes, the recovery and enforcement of tax claims, and the enforcement of laws relating to tax crimes or crimes involving the contravention of tax administration.
2- The competent authority of a Contracting State may spontaneously transmit, to the competent authority of the other Contracting State, information that has come to his attention and that is likely to be relevant to and bear significantly on, accomplishment of the purposes referred to in the preceding paragraph. The competent authorities shall determine the information to be exchanged as provided herein and take such measures and implement such procedures as are necessary to ensure that the information is forwarded to the competent authority of the other State.
3- The competent authority of the requested State shall provide information, upon request by the competent authority of the applicant State, for the purposes referred to in paragraph 1. 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 in accordance with the provisions of the Agreement to provide the applicant State with the information requested.
4- For purposes of the preceding paragraph, the requested State shall have the authority to:
a) examine any books, papers, records, or other personal property that may be relevant or material to such inquiry;
b) receive testimony and investigate any person that has information or has knowledge, custody or control of information that may be relevant or material to the inquiry;
c) compel any person having knowledge, custody or control of information that may be relevant or material to the inquiry, or that possesses such information, to appear at a stated time and place to testify under oath and to produce books, papers, and records or other personal property.
5- The laws or practices of the requested State pertaining to the disclosure of information by banks, by nominees or persons acting in an agency or fiduciary capacity, and respecting ownership of interests in a person other than an individual shall not prevent or otherwise affect the authority described in the preceding paragraph. As a result, the competent authorities of the Contracting States shall obtain and provide information notwithstanding such disclosure laws and practices.
6- When Costa Rica is the requested State, in accordance with the preceding paragraph, it shall provide the information relating to banks with the authorization of the Judge of Administrative Trials, who will grant it, unless good cause is shown that the information is not related to the enforcement of laws relating to a possible tax fraud matter as defined in the Codigo de Normas y Procedimientos Tributaries de Costa Rica (Code of Tax Norms and Procedures of Costa Rica), Title III, Chapter I Section II, Article 68 and Chapter II, Section I, Articles 88 an 90 in effect at the time of the signing of this Agreement.
Article 5. Exchange of Information in Specific Cases
1- When a Contracting State requests information pursuant to paragraph 3 of Article 4, the requested State shall obtain and provide the information in the same form, as if the tax of the applicant State were the tax of the requested State, and shall apply the following procedures if specifically requested by the applicant State:
a) specify the time and place for the taking of testimony or the production of books, papers, records, and other personal property;
b) place the individual giving testimony or producing books, papers, records, and other personal property under oath, and advise him of the legal consequences resulting from the giving of false sworn testimony;
c) permit the presence o£ those individuals designated by the competent authority of the applicant State as being involved in or affected by the execution of the request, including the accused or investigated person and his attorney and up to two commissioners or special masters or representatives charged with the administration or enforcement of the tax laws of the applicant State;
d) permit the competent authority of the applicant State to submit questions in writing to which the individual producing books, papers, records, and other personal property is to respond regarding the item produced, subject to prior evaluation by the requested State;
e) the individuals who are authorized to be present are also permitted to question, through the executing authority, the individual giving testimony or producing books, papers, records, and other personal property;
f) secure original and unedited books, papers, records, and other personal property, or require that true and correct copies of such books, papers, records, or personal property be made part of the response.
g) examine the individual producing books, papers, records, and other personal property regarding the purpose for which and the manner in which the items produced are or were maintained;
h) perform any other act not in violation of the laws or at variance with the administrative practice of the requested State;
i) determine the authenticity of books, records, papers, and other personal property produced; and
j) certify either that procedures requested by the competent authority of the applicant State were followed or that the procedures requested could not be followed, with an explanation of the deviation and the reason therefor.
2- The provisions enumerated in the preceding paragraph shall be construed so as to impose on the requested State the obligation to use all legal means and its best efforts to comply with this Agreement. The requested State shall not:
a) carry out administrative measures at variance with the laws and administrative practice of the Contracting States. It shall not be considered that actions based on the provisions contained in Article 4, paragraphs 5 and 6, are contrary to the laws and administrative practice of the Contracting States.
b) supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process;
c) supply information the disclosure of which would be contrary to public policy;
d) supply information requested by the applicant State to administer or enforce a provision of a tax law of the applicant State or a requirement related to said provision, which discriminates against a national of the requested State. A provision of tax law or connected requirement is considered to be discriminatory against a national of the requested State, if it is more burdensome with respect to a national of the requested State than with respect to a national of the applicant State in the same circumstances. In this regard, a national of the applicant State who is subject to tax on worldwide income is not in the same circumstances as a national of the requested State who is not subject to tax on worldwide income.
3- The privileges established by the laws or practices of the applicant State shall not apply to the requested State’s execution of a request but shall be preserved for resolution by the applicant State.
Article 6. Confidentiality of the Information
1- Any information received by a Contracting State shall be treated as confidential in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to individuals, judicial and administrative authorities (and those charged with their oversight) involved in the determination, assessment, administration, and the collection of tax claims and in the application of the tax laws, as well as in the enforcement of laws relating to tax crimes and violations or the determination of appeals in respect of the taxes which are the subject of this Agreement.
2- The individuals or authorities referred to in the preceding paragraph, shall use the information exclusively for the purposes expressly stated in said paragraph, and shall only disclose the information in public court proceedings or in judicial decisions.
Article 7. Mutual Agreement Procedure
1- The competent authorities of the Contracting States shall agree to implement a program to carry out the purposes of this Agreement. This program may include, in addition to exchanges specified in Articles 4 and 5, other measures to improve tax compliance, such as exchanges of technical know-how, development of new audit techniques, identification of areas of non-compliance, and joint studies of non- compliance areas.
2- The competent authorities of the Contracting States shall endeavor to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of this Agreement. In particular, the competent authorities may agree to a common meaning of a term and may determine when costs are extraordinary for purposes of Article 8.
3- The competent authorities of the Contracting States may communicate with each other directly for the purposes of reaching an agreement under this Article.
Article 8. Costs
Unless the competent authorities of the Contracting States otherwise agree, ordinary costs incurred in providing assistance shall be borne by the requested State and extraordinary costs incurred in providing assistance shall be borne by the applicant State.
Article 9. Application of the Agreement
The application of this agreement is specifically limited to the matters contained herein.
Article 10. Other Applications of Agreement
This Agreement is consistent with the standards for an exchange of information agreement described in section 274(h)(6) of the United States Internal Revenue Code of 1986 (the “Code”) (relating to deductions for attendance at foreign conventions), and referred to by cross-reference in sections 927(e)(3)(A) (relating to foreign sales corporations) and 936(d)(4)(B) of the Code (relating to the investment of section 936 funds in Caribbean Basin Beneficiary Countries).
Article 11. Entry Into Force
This Agreement shall enter into force upon an exchange of notes by the duly authorized representatives of the Contracting States confirming their mutual agreement that both sides have met all constitutional and statutory requirements necessary to effectuate this Agreement.
Article 12. Termination
This Agreement shall remain in force until terminated by one of the Contracting States. Either Contracting State may terminate the Agreement at any time after the Agreement enters into force, provided that at least six months notice of termination has been given through appropriate diplomatic channels.
DONE at San Jose, Costa Rica in duplicate, in the Spanish and English languages, the two texts having equal authenticity, this 15th day of March, 1989.
FOR THE GOVERNMENT OF THE FOR THE GOVERNMENT OF
UNITED STATES OF AMERICA THE REPUBLIC OF COSTA RICA