The new law’s provisions are effective as of 1 January 2017.
The main purpose of the law (passed by the parliament on 29 December 2016) is to introduce international standards regarding fiscal transparency and to discourage the use of “tax havens.” The new provisions, thus, need to be considered by multinational corporations when structuring their operations and may have an impact on their effective tax burden.
The new law requires domestic financial entities and subsidiaries of non-resident financial entities to provide certain information about their resident and non-resident clients to the Uruguayan tax authorities on an annual basis. Such information includes account balances as of the end of the calendar year, annual account averages, gains or profits generated by deposits, and financial assets held in custody by the financial entity.
The new law applies regardless of any bank secrecy obligations the financial entities may have toward its clients. These reporting obligations are effective beginning 1 January 2017.
The new law requires certain resident and non-resident entities to disclose the identity of their ultimate beneficial owners to the Central Bank of Uruguay. “Ultimate beneficial owners” are defined as individuals that, directly or indirectly, hold at least 15% of the entity’s capital or voting rights, or otherwise have control over the entity.
Additionally, owners of nominative shares of Uruguayan entities must also register with the central bank. This reporting obligation already applies to holders of bearer shares.
The reporting requirements will apply to resident entities and nonresident entities that have a permanent establishment or their place of effective management in Uruguay, or that own local assets valued above approximately US $300,000. Certain exceptions apply for securities that are quoted on stock exchanges or held by or through foreign investment funds and trusts duly constituted and supervised in their country of residence, subject to conditions established by subsequent regulations.
Failure to comply with these reporting obligations will result in monetary penalties and other sanctions, including a prohibition on dividend distributions and the suspension of tax certificates.
Regulations setting forth procedures to comply with the reporting obligations established by the new law are expected to be issued.
The new law also introduces measures to discourage the use of foreign entities located in low tax jurisdictions or that benefit from low tax regimes. These measures include:
These new measures are effective 1 January 2017.
The new law includes an exemption from taxes levied on the transfer of Uruguayan assets by entities in low tax jurisdictions, provided the transfer takes place on or before 30 June 2017 and is subject to certain other conditions. This provision is meant to facilitate the restructuring of operations that may be affected by the changes introduced by the new law.
The new law incorporates provisions adopting the OECD recommendations under BEPS Action 13, regarding Master file and country-by-country reporting for transfer pricing purposes. These provisions are 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 M. Bodoh | +1 (202) 533 5681 | firstname.lastname@example.org
Alfonso A-Pallete | +1 (305) 913 2789 | email@example.com
Luis A. Aisenberg | +598 29024546 | firstname.lastname@example.org
Gustavo Melgendler | +598 29024546 | email@example.com
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