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Attorneys Comment on Proposed Regs on Reporting Interest Paid to Nonresident Aliens

APR. 27, 2011

Attorneys Comment on Proposed Regs on Reporting Interest Paid to Nonresident Aliens

DATED APR. 27, 2011
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MEMORANDUM

 

 

TO: CC:PA:LPD:PR (REG-146097-09)

 

Internal Revenue Service

 

 

FROM: Hector Delgado, Esq.

 

Bickerstaff Heath Delgado Acosta LLP

 

1700 Pacific Ave., Ste 4501

 

Dallas, Texas 75201

 

 

Dr. Carlos Perez Chow

 

Perez Chow y Asociados S.C.

 

4501 Bosque de Duraznos 75 - 303

 

Bosques de las Lomas,

 

Delegacion Miguel Hidalgo

 

Mexico, D.F. 11700

 

 

Date: April 27, 2011

 

 

RE: Comment to Proposed IRS Regulation 146097-09 Guidance on

 

Reporting Interest Paid to Nonresident Aliens

 

 

We understand that the comment period with respect to the above-referenced proposed Regulation expired April 7, 2011; however, we are submitting this memorandum in the event an additional comment period may be extended after the public hearing scheduled for April 28, 2011, and appreciate the opportunity to present our comment in such event. We also acknowledge that our comment does not specifically address the economic impact of compliance on small businesses that are regulated by this rule as requested.

In short, our joint comment with respect to the proposed IRS Regulation is that the United States may not be able to obtain reciprocity with respect to the access of information relating to U.S. taxpayers because Mexico's bank secrecy laws and judicial system, along with the U.S./Mexico Tax Treaty, are such that the flow of information from Mexico can be blocked through Mexico's judicial system.

Mexico and the United States have signed the following International Treaties related to taxes:

1. Agreement signed by the Government of the Mexican United States and the Government of the United States of America, to avoid double taxation and to impede evasion of Income Tax, signed in Washington D.C. on September 18, 1992, as amended on September 8, 1994.

2. Agreement between by Mexican United States and the United States of America for the exchange of tax information, signed in Washington D.C. on November 9, 1989, as amended on

3. Mutual Cooperation Agreement by and between the government of Mexican United States and the government of the United States of America, for the exchange of information regarding money transactions through financial institutions to attack illicit activities, signed in Washington D.C. on October 28, 1994.

 

(i) Based on the above international agreements, for the U.S. government to obtain information on investments by U.S. citizens or U.S. residents within a Mexican financial institution, the U.S. government can be required to submit a request before the Mexican government and provide the name of the specific financial institution and the corresponding account number. The Mexican government will then request such information from the corresponding Mexican financial institution and, before delivering such information, the Mexican financial institution must provide a notice to its customer U.S. citizen or resident, giving him or her the opportunity, under certain circumstances, to obtain a judicial order prohibiting the financial institution from providing such information. That is to say, the reciprocal information may not flow automatically to the U.S. government.

(ii) In addition to the above, Mexico's bank secrecy laws and regulations are very protective of customers' information such that, when combined with Mexico's complex legal and procedural system, it is likely that the reciprocal flow of information will be prevented.

 

Thank you for the opportunity to submit this memorandum and for its consideration in the event a subsequent comment period is extended for this purpose.
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