Tax transparency law
Tax Transparency Law 19,484 introduced a set of provisions aimed to enhance the achievement of international standards on tax transparency and prevention of money laundering. The Law introduces the following:
- Provisions that regulate the automatic information that the financial entities must submit to the Uruguayan Tax Office.
- Provisions that seek the identification of final beneficiaries of local and foreign entities with a relevant nexus with the country.
- Tax rules aimed to discourage the use of entities resident, domiciled, or located in low or no-tax jurisdictions (LNTJs):
- The bill introduces a change from the 'exhaustive list' approach by which a jurisdiction is considered a tax haven towards a substantive criterion. The rules to be issued by the Ministry of Finance will determine the conditions (minimum effective CIT rate, minimum levels of cooperation and transparency) that countries, jurisdictions, or entities must meet to be considered as LNTJ.
- Income derived from the transfer of shares or participations in entities from LNTJs whose assets located in Uruguay exceed 50% of their total investments is deemed to be Uruguayan sourced (thus taxable) for CIT purposes. Similar provisions apply to resident individuals and to non-resident taxpayers.
- Discouraging the use of intermediary entities that reside in LNTJs; when a resident individual participates in their capital, passive income and/or capital gains received by these entities will be assigned as deemed dividend, thus taxed in the hands of the individual beneficiaries.
- In line with this through the 2015 Tax Accountability Law, rates are increased from 12% to 25% for Uruguayan-sourced income obtained by entities resident in LNTJs.
- Adjustments to the transfer pricing regime (see Transfer pricing in the Group taxation section).
Bank secrecy and identification of title holders
The inclusion of the request of information by a treaty partner is approved as one of the hypotheses under which banking secrecy can be lifted.
Identification of holders of shares
The identification of holders of bearer and nominative titles representing the capital of entities domiciled or doing business in Uruguay is mandatory. In this regard, Laws 18,930 and 19,484 include the compliance of certain obligations for identification purposes. This obligation relies on the holders, who must identify themselves with the Central Bank of Uruguay, providing not only their identity but also the percentage of their participations in the entity.
Information shall be kept by the Central Bank of Uruguay and subject to secrecy, although the National Tax Office, anti-money laundering authorities, penal and family courts, and related entities may access them in certain cases, with sufficient and proved justification.
The duty of identification applies to all entities domiciled in Uruguay and to companies incorporated abroad, provided that they act in Uruguay through a PE or if their management is carried out in Uruguay.
Identification of ultimate beneficial owners
According to aforementioned legislation, entities whose share capital is represented through bearer or nominative certificates must also communicate to the Central Bank of Uruguay not only the ownership of those participations but also the ownership chain until reaching its ultimate beneficial owners.
In this regard, the law considers as ‘beneficial owners’ those natural people who directly or indirectly hold at least 15% of the paid-in capital or its equivalent, the rights to vote, or who otherwise exercise the final control of the company.
The law foresees exemptions to the obligation of communicating the mentioned information, such (i) those particular cases where beneficial owners do not hold at least 15% of the paid-in capital; (ii) companies whose titles are listed on a stock exchange of recognised prestige (national or international); or (iii) when in the ownership chain exists an investment fund or trust, also with their participations contributed publicly in the stock exchange. It is worth mentioning that qualifying for this exception does not necessarily consist in not requesting information from those companies since the form must be filled anyway but with less information requested.
Uruguay has entered into DTTs with the following countries:
- United Arab Emirates
- United Kingdom