Recently enacted legislation in Uruguay introduces a deemed-dividend regime and new rules imposing limitations on loss carryforwards.
Law 19.438 (Ley de Rendición de Cuentas y Balance de Ejecución Presupuestal) establishes, among other tax provisions, a deemed-dividend regime and limitations on loss carryforwards. The provisions are effective at separate times in 2017.
Multinational companies operating in Uruguay must now plan for possible deemed dividends if there are undistributed earnings and plan for the limitations that will affect their ability to carry forward losses.
Under the current corporate tax regime, dividend distributions to resident or non-resident individuals or entities are subject to a withholding tax of 7%.
Law 19.438 establishes a deemed-dividend regime—that is, net fiscal profits accumulated for a period of more than three fiscal years will be treated as distributed and are subject to the 7% withholding tax. There are some exceptions, primarily with respect to reinvestments of accumulated earnings made in local companies or in certain fixed assets.
The deemed-dividend regime will be effective 1 March 2017.
Current law allows the full carryover of tax losses for a period of five years from the end of the fiscal year in which the loss was incurred.
Law 19.438 limits the loss carryforward to 50% of the net fiscal income for each year of the five-year carryforward period, after all other adjustments contemplated by law are made. Thus, the new changes not only limit the loss calculation for each fiscal year, but also increase the likelihood that the losses may not be used before the end of the carryforward period.
This loss carryforward measure will be effective 1 January 2017.
For more information, contact a tax professional with KPMG’s Latin America Markets practice or with the KPMG member firm in Uruguay:
Devon Bodoh | +1 (202) 533 5681 | firstname.lastname@example.org
Alfonso A-Pallete | +1 (305) 913 2789 | email@example.com
Luis A. Aisenberg | + 598 290 24546 | firstname.lastname@example.org
Gustavo Melgendler | + 598 290 24546 | email@example.com
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.