On April 7, 2021, an agreement for the exchange of information for tax purposes between the Internal Revenue Service (SRI) and the United States Tax Authority (IRS) was signed.
The following is a summary of the agreement:
The SRI may request from the IRS information that the latter has or is able to obtain, for determining, liquidating and collecting any tax administered by the SRI (income tax, VAT, overseas remittance tax (ISD), solidarity contribution, tax on assets abroad or others).
The IRS must send to the SRI the requested information, provided it is obtained in the United States of America, including American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, the United States Virgin Islands (USVI) and any other territory or possession of the United States, held by persons (corporations and individuals), banks, other financial institutions, any person acting in a representative or fiduciary capacity, foundations, trusts and the like in those jurisdictions, regarding any matter that serves the purpose of the SRI achieving the objective mentioned in the preceding paragraph.
When requesting the information, the SRI must describe the reasons why they consider that the information requested will be foreseeably relevant to them and why they consider that such information is held by the IRS or by a person (corporation or individual) in the United States.
The SRI will have the same obligation to submit to the IRS the information requested by them under the framework described above.
Furthermore, Ecuador and the United States may agree in the future to automatically exchange the information detailed in the preceding paragraphs.
There will also be a spontaneous exchange of information that catches the attention of either tax authority, which they believe may be relevant to the other.
SRI officials will be allowed to conduct tax inspections in the U.S. and vice versa.
Any tax authority may refuse a request for information from its counterpart, for example, in the following cases: when the requesting party has not exhausted all reasonable efforts to obtain it, when it involves disclosure of a commercial, business, industrial or professional secret, when it is intended for the disclosure of confidential communications between a client and a lawyer, if the information is contrary to public policy or is intended to be used in ongoing or anticipated legal proceedings.
The information exchanged will be kept confidential and will only be used for the tax purposes provided for in the Convention or for the investigation of conduct that could be a criminal offense.
The Agreement will become effective one month after the date on which Ecuador gives written notice to the United States that the domestic ratification and publication processes have been completed and will be effective for requests made on or after the effective date, regardless of the tax period to which the request refers.
For more information on the agreement and its impacts, please contact us at utlegal@pbplaw.com.
Editorial Board
