MIAMI, FL / ACCESSWIRE / November 29, 2019 / In May 2019, the U.S. Internal Revenue Service (IRS) issued new regulations relating to the Foreign Account Tax Compliance Act (or FATCA). FATCA "requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders".
As many Mexican investors (many of whom belong to Mexico City's prominent Jewish community) have assets and investments in the U.S., this causes major concerns in Mexico. At present, the Model 1 IGA jurisdictions do not include Mexico, but many experts believe the two countries intend to extend it to Mexico in the foreseeable future.
Insiders claim the Trump administration already considers implementing new regulations which could require Mexican investors to meet stricter FATCA compliance or even disclose Mexican-held assets to the Mexican IRS, called SAT. If the United States announced such regulations, they could soon be adopted by other countries which are under direct U.S. influence, such as Israel.
Israel has long been an easy and convenient destination for Mexican investments, especially by the wealthy Jewish community of Mexico City. Mexican investors are deeply involved in major deals, both in real estate and tech, in Israel. One of these investors is billionaire Carlos Slim, who reportedly came to Israel in 2014 to explore investments. Under President Obrador, many have wondered if the "golden age" of Israel-Mexico ties would come to an end.
Israel joined FATCA in June 2014, "pledging that the Israel Tax Authority would share the information it held about U.S. citizens" with U.S. authorities. These collaborations between governments are meant to prevent tax evasion by investors who keep their fortune overseas to avoid taxation in their home country. Such measures should not come as a surprise to veteran investors and their advisors; in 2010, FATCA imposed a bilateral data transfer between U.S. citizens who are either clients of non-US banks or investors in non-US financial institutions, and the IRS.
"This data transfer includes personal information about investors as well as information related to the investor's bank accounts, ultimate beneficial ownership (UBS), amount of financial assets, and yearly revenues. Thanks to the IGA, the IRS has been able to integrate these rules into the local law of the States adopting FATCA norms. In this way, for the countries which opt for IGA model 1, the model most frequently adopted by third countries, an information transfer of the US investor's data occurs firstly from the financial institution or bank to his tax administration and secondly, from the tax administration to IRS," wrote Antoine Dupuis and Gilles Sturbois in December 2018.