Group taxation is not permitted in Uruguay.
Specific provisions regarding the existence of an 'administrative economic unit' are included in NWT law, but only for agricultural and/or farming investments for determining the application of NWT exemption and corresponding NWT rates (i.e. group taxation is still not permitted).
As a general principle, transfer pricing rules are applicable to international transactions between related parties. However, Uruguayan legislation has extended the scope of these regulations to transactions carried out with LNTJs (either international or domestic) and to certain operations through third-party intermediaries. Domestic transactions with Uruguayan FZ users fall under this category.
The definition adopted by the law for related parties is quite broad. Such a relationship is configured when both parties are subject (directly or indirectly) to the management or control of the same individuals or legal entities, or when they have power of decision to direct or define the taxpayer’s activities due either to their participation in capital interest, the level of their credit rights, or their functional or any other type of influence (whether contractual or not).
All taxpayers subject to the transfer pricing regime should have the documents and other supporting evidence justifying the transfer prices used and the comparison criteria applied in order to duly demonstrate the prices/amounts declared in their annual tax return.
The transfer pricing documentation shall be kept by the taxpayers for the statute of limitations period (five years; this can be extended to ten years in the case of failure to obtain sworn declarations, failure to register with the tax authorities, or fraud).
In the annual tax return (which expires by the fourth month after the fiscal year-end), all taxpayers should inform whether a transfer pricing adjustment applies (and its amount), as well as the inter-company transactions performed during the fiscal year.
Taxpayers that perform inter-company transactions that exceed the threshold stipulated by rules in force (50 million 'Indexed Units', equivalent to approximately USD 7,550,000, within the fiscal year), or are notified by the tax authorities, will be required to file the following annual information to the tax authorities within the ninth month after the year-end:
- Transfer pricing documentation (Local File) in Spanish with minimum content (functional analysis: functions performed, risks assumed and assets used; economic analysis: amount of each inter-company transaction; method selected as the most appropriate and the transfer pricing adjustment).
- Informative tax return (exhaustive information about the taxpayer and group is required).
- Financial statements.
It is important to note that there is a new annual obligation for taxpayers that integrate a multinational enterprise of large economic dimensions (i.e. those whose consolidated income exceeds 750 million euros [EUR]) and verify the related party assumptions to file, in addition to the current local file, a Country-by-Country (CbC) report. Additionally, Master File requirements were established (to be specified yet who will be required to file it). Such obligation is in force for fiscal years initiated as of 1 January 2017.
Country-by-Country (CbC) report
A CbC report is required in Uruguay for fiscal years commencing after 1 January 2017. Legislation contemplates an annual obligation for Uruguayan taxpayers that integrate a multinational enterprise (MNE) of large economic dimensions. To this effect, MNE groups of large economic dimensions are defined as those whose total consolidated income at the end of the group's fiscal year exceeds EUR 750 million.
Taxpayers that comply with these regulations shall submit to the local tax authorities the CbC report. Information shall be submitted to the Uruguayan Tax Office (Dirección General Impositiva [DGI]), and could be used by local tax authorities for complying with their duties and for the exchange of information with competent authorities of foreign states, in the framework of international agreements and respective protocols of understanding ratified by Uruguay, ensuring confidentiality and reciprocity.
Taxpayers will not be subject to file a CbC report when the return is submitted by an entity that integrates the MNE to a foreign tax administration of a jurisdiction with whom Uruguay has an exchange of information agreement in force, and the report can be effectively exchanged with the tax authorities of the jurisdictions of the MNE.
In this sense, taxpayers belonging to MNE groups of large economic dimensions are required to fill a CbC notification. The notification must include the identity and tax residence of the reporting entity. It must be filed annually, prior to the closing date of the report.
Regarding the CbC report, it must be submitted (if corresponds) within a period of 12 months, counting from the closing date of the group’s fiscal year referred to in the report.
The minimum content to be included in the Master File is determined by the Regulatory Decree. Taxpayers required to submit the Master File shall prepare a special return to be filed to the DGI within a period of 12 months, counting from the closing date of the group's fiscal year referred to in the report. It is worth mentioning that, at the moment, there is no threshold that determines the obligation of submitting the report.
Advance Pricing Agreements (APAs)
Regarding transfer pricing administration rules, the Executive Power can enter into APAs with taxpayers that cannot cover more than three fiscal years. Additionally, since 2017, the Executive Power can also enter into BAPAs, which includes not only the negotiation with local taxpayers but also with other tax authorities from countries with which the local taxpayer could have inter-company transactions.
Furthermore, strong penalties are set for failure of compliance with transfer pricing formal duties and with other formal documentation requirements.
There are no thin capitalisation rules in Uruguay.
Controlled foreign companies (CFCs)
There are no CFC rules in Uruguay other than those applicable to individuals.