Uruguay

Corporate - Significant developments

Last reviewed - 30 December 2021

Corporate - Significant developments

Promotion of construction Projects of Great Economic dimension

The Executive Power regulated the promotion of building activities for the sale or lease of real estate destined to offices, housing and housing developments, qualifying as “Projects of Great Economic Dimension”.

On May 17th, 2022 Decrees 155/022 and 156/022 were issued, amending regulations of 2016 and 2020 (which granted more tax benefits, reduced the requirements to qualify and broadened the scope of building activities and eligible investments). Tax benefits granted include an exemption of CIT of up to 40% of the eligible investment with an annual exemption limit of 90% of CIT and a maximum term of 10 years. As to Net Wealth Tax (NWT), there is an exemption for the civil construction work and lands with different terms depending on the location in or outside the capital of the country. Movable assets are also exempt from NWT during their useful life. In addition, there is a Value Added Tax (VAT) and import taxes exemption, as well as VAT tax credit for the acquisition of equipment, machines, materials and services destined for the civil construction work and for the movable assets designated for common areas.

The new Decree extends the term for executing the projects that were filed under Decree 138/020, which cannot exceed September 30th, 2026. As to projects filed under the original regulations of 2016, the term for executing the investments was extended to December 31st, 2023.

New Double Tax Treaties (DTT)

The DTT signed between Japan and Uruguay for the avoidance of double taxation and the prevention of fiscal evasion, with respect to taxes on income, entered into force on July 23th, 2021 and its provisions apply as from January 2022.  The DTT - which was signed on 13th September, 2019 - is the first of this type between the two countries.

As to treaties ratified but not yet in force, a reference to the case of Brazil is to be made. On June 17th, 2019 in Brasilia, the DTT was signed, being expected to enter into force 15 days after the exchange of ratification instruments. As of December, 2021, the exchange of notes is still pending. On November 19th, 2021, the authorities of Colombia and Uruguay signed a tax treaty to avoid double taxation and prevent fiscal evasion with respect to taxes on income and on capital, which is not ratified up to date.

 Low-or-No-Tax Jurisdictions (LNTJ)

The Executive Power issued regulations to establish the requirements for a country to be considered as LNTJ. In this context, the Uruguayan Tax Authority is empowered to issue a consolidated list for tax and transfer pricing purposes of countries, jurisdictions and regimes that meet the conditions in order to be considered as a LNTJ.

On February 2022, the Uruguayan Tax Authority issued Resolution 223/022, which became effective on January 1st, 2022.

According to this Resolution, as of January 1st, 2022 the following jurisdictions are considered as LNTJ.

    

1)    Angola

2)    Ascensión

3)    Guam

4)    Guyana

5)    Honduras

6)    Isla de Cocos (Isla de Keeling)

7)    Isla de Navidad

8)    Isla de Santa Elena

9)    Isla Norfolk

10)  Isla Pitcairn

11)  Islas del Pacífico

12)  Islas Fiji

13)  Islas Maldivas

14)  Islas Malvinas/Falkland Islands

15)  Islas Palau

16)  Islas Solomón

17) Islas Vírgenes de Estados Unidos de América

18)  Jamaica

19)  Jordania

20)  Kiribati

21)  Labuán

22)  Liberia

23)  Niue

24)  Polinesia Francesa

25)  Puerto Rico

26)  Reino de Tonga

27)  República de Yemen

28)  San Martin (Antigua integrante de Antillas Holandesas)

29)  San Pedro y Miquelón

30)  Sultanato de Omán

31)  Svalbard

32)  Swazilandia

33)  Tokelau

34)  Tristán de Acuña

35)  Tuvalu

36)  Yibuti (Djibouti)

 

Goods produced in Free Zones

The Uruguayan Ministry of Foreign Affairs together with Brazil issued a statement by which both countries committed to different strategic and trade measures.   

The first topic that was agreed upon is the reduction of the Common External Tariff, that is, such tariffs applicable to goods which do not come from countries in the customs area. The second matter that was agreed upon was the economic complementation between both countries. Among the measures agreed upon as part of the economic complementation project, special attention shall be given to the agreement between both countries on the preferential access of goods produced in Uruguayan free trade zones and special customs areas in Brazil. The statement issued is of high relevance to our economy given the key role of operating in the free zones, as well as the new opportunities that may be created as a result of the announcement.

 

Value Added Tax relief – Decree 140/022    

On May 4th, Decree Nbr. 140/022 was issued extending the term of the provisions set forth in Decree 318/021 until September 30th, 2022. The regulations established that the following activities will have a reduction of 9% in the VAT rate (standard rate 22%), provided the transactions are executed through electronic means:

  • Gastronomic services provided by restaurants, bars, canteens, cafes, tea rooms and alike, or by hotels, motels, apart hotels, inns, tourist stays, country hotels, tourist farms, country inns, country houses and camping hostels; provided that the services do not include lodging.
  • Catering services for parties and events
  • Parties and events services, not included in the previous literal.
  • Vehicles rental without chauffeur.
  • Mediation services for the leasing of real estate for tourist purposes.

For VAT taxpayers under the “small companies’ regime”, the reduction is determined by applying a discount of 7.38% on the total amount of the transaction.