No More Loopholes for Offshore Banks in Costa Rica.
The Superintendent General of Finances (SUGEF) intends to pass a bill on December 18th highly limiting the operation of offshore banks in Costa rica. Such banks are considered to be foreign owned banks existing in Costa Rica that license their banking to a Costa Rican organization. Until now, these banks enjoyed a large amount of freedom in setting their own interest rates and were not obligated to pay a large tax to the Banco Central de Costa Rica, as national banks are.
The economic authorities voted to restrict the operational activities of offshore banks as they cannot supervise or oversee their monetary control. Currently Costa Rica has six offshore banks operating in Costa Rica of which Scotia Bank and BAC are two of the biggest.
Based on the imminent threat that these new regulations will become a reality, some of the offshore banks have already decided to take action as they have large projects in the works that can be highly affected by these rules.
The financial group BNS, which owns ScotiaBank, announced on the Nov. 25 the immediate selling of its offshore bank, Transamerica Bank and Trust, based in Panama. Gerardo Corrales, General Manager for BAC San Jose stated they would be moving in a similar fashion to that of ScotiaBank in the coming weeks.
The Superintendent General of Finances had made his intention to pass this rule in September and from this intention Banco Cuscatalan (now Citi Bank) made it clear that it had shut down all of its offshore banking.
Under the current system an offshore bank say in Panama gives a license and permission to another organization in another country, say Costa Rica to operate, however that company does not realize its operations there and therefore SUGEF cannot control its monetary movements. The current change will make it impossible for this to happen and an offshore bank will essentially have to set up shop in the country it is operating in and cannot give licenses away. This way effectively the bank will not be offshore and the Costa Rican Financial Controllers can better control the monetary movements.
The Banco Central of Costa Rica will also be able to mold the banks as well and make them pay the 15% with-holding tax in Costa Rica. This 15% tax of course will generate a huge amount of revenue for Costa Rica and some question whether this could be the cause of the rule rather than leveling the playing field for all banks in Costa Rica?
|Written by Richard Bexon|
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Filed under: Business on December 2nd, 2008