Tax Insight Recent amendments with impact in January 2017

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Mervyn Smith
6 years ago
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1 Recent amendments with impact in 2017 January 2017

2 Recent amendments with impact in 2017 Tax transparency On December 29th, 2016, the Congress passed the bill law remitted by the Executive Power back in July, 2016, which introduces amendments to the existing tax rules, with the objective of enhancing tax transparency. Even when it has been modified during the course of the parliamentary discussions, it substantially reflects the Executive Power original proposal. We believe its is appropriate to recall the most relevant proposed modifications, which became effective on 1 st January, Automatic information to the Tax Office Resident financial entities and branches of non-resident financial entities situated in the country, will provide certain information to the Tax Office (DGI, as per its Spanish acronym) annually. This information refers to accounts maintained by individuals, legal persons or other non-resident entities, in particular, the balances of accounts at the end of each calendar year as well as their annual average, and all income or returns generated by such balances, and by financial assets in custody or in investment on behalf of third parties, whichever its nature or denomination. Bank secrecy, the protection of personal data law and any other provision that enshrine a duty of secrecy, reservation or confidentiality are not applicable for the compliance with the law. Identification of the ultimate beneficiaries and of the holder of nominative titles Resident and non-resident entities must identify and inform to the Central Bank of Uruguay, their final beneficiaries and their percentage of participation, as well as the chain of ownership. In addition, those entities with nominative shares or social quotas must communicate the corresponding information of their shareholders through an affidavit, also including the percentage of their participation in the capital, and subsequent amendments within 30 days (90 days if holders are nonresidents entities or individuals). Personal or agrarian societies whose social quotas belong to individuals and civil or de-facto societies are not required to inform but to identify their final beneficiary, provided that they are their final ones. Entities whose securities are listed on national stock exchanges or on prestigious international stock exchanges or those under other procedures of public offering, are not obliged to inform their ultimate beneficiaries. The obliged entities will not be allowed to pay profits, dividends, capital redemptions, or the result of the liquidation of the entity and any other similar concepts, to the beneficiaries in respect to whom the identification obligation has not been fulfilled, under a penalty fee equivalent to the distributed amount. Low or no-tax jurisdictions and regimes It shall be understood as countries, jurisdictions or regimens of low or no-tax, those countries or jurisdictions that do not comply with the requirements of minimum effective tax rate, collaboration levels and transparency, as determined by the Executive Power. PwC 2

3 Recent amendments with impact in 2017 Tax transparency It is included in the Corporate Income Tax (IRAE), in the Non-Residents Income Tax (IRNR) and in the Individuals Income Tax on Residents (IRPF) a provision by which the income derived from the transfer of shares or the constitution or disposal of their usufruct- or other participations in the equity of entities located in law or not tax jurisdictions, which directly or indirectly own assets located in Uruguay exceeding 50% of their total assets, is deemed to be Uruguayan sourced (thus taxable in the country). The IRNR rate applicable to income obtained by entities located in law or not tax jurisdictions is increased to 25% (except in the case of dividends or profits paid by IRAE taxpayers to those entities, in which case the tax rate remains unchanged (7%)). In addition, the concept of Uruguayan source income is extended for IRNR purposes, to certain items of income that entities located in law or not tax jurisdictions obtain, as a result of operations with IRAE counterparts, including income derived from imports of goods and the ones obtained from the sale of goods abroad if the goods had previously been exported by IRAE taxpayers. The applicable tax rate for Net Wealth Tax (IP) purposes is increased to 3% for assets that entities located in law or not tax jurisdictions have in Uruguay. Adjustments to the Transfer Pricing regime An annual obligation is required for Uruguayan taxpayers (including head offices and permanent establishments) that integrate a multinational group of large economic dimension and verify the related party assumptions, to file -in addition to the current local file - two new information returns: a Master file and a Country-by-Country report. The recent modifications also introduce the possibility that taxpayers obtain bilateral and multilateral Advanced Pricing Agreements (APA), in order to provide certainty in relation to the taxation of intercompany transactions of multinational groups. Additionally, and even when there is no relation between the entity located in the law or not tax jurisdiction and the IRAE taxpayer, income derived from the sale of intangibles assets to be economically exploited in Uruguay, as well as capital gains -obtained as from 1 January derived from sale or promise to sell of real estate located in Uruguayan territory, will also be considered of Uruguayan source and will be subject to rates of up to 30,25%. PwC 3

4 Recent amendments with impact in 2017 Law of Accountability In the same line of recalling provisions of immediate application, below there is an overview of the main tax provisions contained in the Law of Accountability, approved earlier in The results taxed by IRAE which have not been distributed, obtained by the taxpayers of such tax, will be consider distributed if at the end of each fiscal year they are older than three years and provided that they have not been reinvested in the participation of other entities, fixed assets and intangibles, or had been destined to increase the company s gross working capital. Such fictional distribution of profits or dividends will be taxed by IRPF or IRNR at a rate of 7%. Limitation on the deduction of tax losses from previous years, which will now be computed by up to 50% of the net tax result. Increase in the IRPF/IRNR rate from 3% to 7% applicable to deposits in local currency, and in indexed units, over one year, in local Financial Institutions; interest on bonds and other debt securities issued by resident entities with a term exceeding 3 years, through public subscription and stock exchange listing, and contracts for certificates of participation of financial trusts for a term of 3 years, through public subscription and stock exchange listing. Increase in the IRPF/IRNR rate from 5% to 7% applicable to interests on deposits in local Financial Institutions for a year or less, in local currency and indexed units, without adjustment clause. Modification of applicable tax rates for individuals and family units whose salary is higher than 15 BPC nominal monthly. Elimination of the deduction of patronal notional salaries, remaining the benefit exclusively for those taxpayers who calculate the corresponding IRAE notionally. Obligation to calculate the IRAE based on the sufficient accounting regime for personal societies that provide services outside the employment relationship to societies providing services of the same nature, in which the providers are its partners or shareholders. PwC 4

5 Contacts Patricia Marques Eliana Sartori Mario Ferrari Montevideo Cerrito 461, piso Montevideo, Uruguay T: WTC Free Zone Dr. Luis Bonavita 1294, 1st floor, office Montevideo, Uruguay T: Zonamerica Business & Technology Park Ruta 8, km Edificio M1, oficina D Montevideo, Uruguay T: Punta del Este Avda. Córdoba y Tailandia Maldonado, Uruguay T: +598 PwCUruguay PwC Uruguay This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors PricewaterhouseCoopers Ltda., PricewaterhouseCoopers, PricewaterhouseCoopers Professional Services Ltda. and PricewaterhouseCoopers Software Ltda. All rights reserved. PwC refers to the Uruguayan member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details.

Tax insight New regulations to the Free Zones Law

www.pwc.com.uy Tax insight New regulations to the Free Zones Law September 2018 On September 24 th, the Ex ecutive Power announced the approval of Regulatory Decree of the Free Zones Law (FZL), which had