Uruguay proposes amendments to the law on international fiscal transparency
Article 4 minute read

Uruguay proposes amendments to the law on international fiscal transparency

11 October 2016

The Executive Branch in Uruguay proposed amendments to the Law on fiscal transparency to achieve greater convergence with international standards. Our local expert offers a summary of the most important points.

Last July, the Executive Branch in Uruguay sent a Bill to the General Assembly, proposing certain modifications to achieve greater convergence with international standards in matters of fiscal transparency, prevention of money laundering and financing of terrorism. Here are some of the most important points.

Automatic report of financial information to the Tax Administration

As of January 1, 2017, local financial entities and branches of non-resident financial entities will be obliged to supply annually to the General Tax Directorate (DGI) all the information related to balances and income at the closing of the calendar year, duly identified accounts held by natural persons, legal entities or other resident entities or not, within the terms and conditions established by the Executive Power.

The proposed bill empowers the Executive Branch to exclude from the obligation to inform certain financial entities in consideration of their purpose and under fiscal risk and to exclude from the obligation to be informed accounts that result from low fiscal risk. The entities of high risk in tax evasion, must also inform the final beneficiary of them.

Identification of the final beneficiary and holders of registered shares

As of January 1, 2017, tax resident entities in Uruguay and non-residents that operate in Uruguay through a Permanent Establishment or establish their effective address in Uruguay, must identify before the Central Bank of Uruguay (BCU) their final beneficiaries, meaning as such the individual who directly or indirectly owns at least 15% of the capital or its equivalent, or the voting rights, or who by other means exercises final control of an entity.

The final beneficiaries of foreign investment funds and trusts must also be identified, whose administrators or fiduciaries are residents in the national territory.

Corporations with nominative or book-entry securities, partnerships limited by shares, agricultural associations or any other legal entity or entity authorized to issue shares or registered securities must also communicate the identifying details of their holders as well as the percentage of their participation in the corresponding social capital.

They will not be obliged to provide the information of the final beneficiaries, the personal companies, de facto or civil companies formed exclusively by natural persons, provided that these are their final beneficiaries.

The information provided will be confidential and its access will be restricted to the DGI, the money laundering control agencies, the Criminal Justice agency and the Transparency and Public Ethics Board.

The breach will be punished with a fine of up to one hundred times the maximum value of the penalty for contravention established in article 95 of the Tax Code as well as the impossibility to pay profits, dividends, redemptions, recesses, result of the liquidation of a company or items Similar.

Rules applicable to resident entities of countries or jurisdictions with low or no taxation that benefit from a low or no taxation regime (BONT)

The Bill establishes changes to the concept of Uruguayan source of income derived from disposals of shares and other equity participations of entities with low or no taxation (BONT) in which more than 50% of its assets are directly or indirectly integrated by goods located in the Republic.

The capital income obtained by BONT entities, relating to income and equity transfers, will be classified as dividends or profits distributed to the resident natural person at the moment in which the aforementioned entity receives it abroad.

It is foreseen the modification of the rate of the IRNR referring to the entities BONT, taxable to 25%, being reached the incomes coming from real estate located in national territory of an additional rate of 5,25% (the rate would happen to be 30, 25%).

The income obtained in property increases of real estate located in national territory will be determined on a real basis as of January 1, 2018. For the remaining income originated in property transfers, the fictitious income is established by 30%. BONT entities that do not operate in the country through a permanent establishment will be 3%.

The disposals of goods made by the BONT entities will be exempted from the IRNR and ITP, provided they are made before June 30, 2017, the purchaser is not a BONT and they have requested their closure before the DGI as well as in the corresponding organisms within of the 30 days of the referred date.

Modifications to the IRAE transfer pricing regime

The Bill proposes modifications to the Transfer Pricing regime in the need to adapt the regulations to the measures proposed by the OECD for the Erosion of the Taxable Base and the Transfer of Benefits (BEPS).

In this sense, the Bill intends to introduce for certain multinational groups according to their economic dimension, the presentation of a "Country by Country Report".

This report must contain information on the multinational Group, country by country, relating to:

  • Identification of each of the entities that make up the multinational group, country of fiscal residence, or country of incorporation when it differs from its country of residence, and activities that it develops.
  • Consolidated gross income, distinguishing between those obtained with related and independent entities, income for the year, income tax, social capital, accumulated results, number of employees and intangible assets.

The aforementioned report must be presented annually, except when an entity that is part of the multinational group must present it before a tax administration of a jurisdiction with which Uruguay has an information exchange agreement in force and that report can be effectively exchanged with the DGI.

The aforementioned will apply for financial years beginning on or after January 1, 2017.

Undoubtedly, the flexibility of banking secrecy, the identification of the final beneficiary as well as the other rules under discussion, will provide a great deal of information to the comptroller agencies.

The complete project can be viewed here: Bill of Law

Contact our experts at TMF Uruguay

Written by

Virginia Zarauz Marino

Managing Director

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