8 October 2015
Global Tax Alert
News from Americas Tax Center
EY Americas Tax Center
The EY Americas Tax
Center brings together
the experience and
perspectives of over
10,000 tax professionals
across the region to
help clients address
administrative,
legislative and regulatory
opportunities and
challenges in the 33
countries that comprise
the Americas region of the
global EY organization.
• Copy into your web
browser:
http://www.ey.com/US/en/
Services/Tax/Americas-TaxCenter---borderless-clientservice
Uruguay’s Executive Branch
proposes budget for 2015-2019
Uruguay’s Executive Branch has proposed a budget that, if enacted, would make
significant changes to the tax laws. Many of the changes would grant the Executive
Branch more enforcement power, as well as increase the burden on corporate
taxpayers.
On 31 August 2015, Uruguay’s Executive Branch proposed the budget for 2015-2019,
which includes significant changes to the tax law.
Modifications to the General Rules of the National Tax Law
The proposal would grant the Executive Branch the power to demand payment of
tax obligations in advance from taxpayers who are linked, directly or indirectly, by
reason of their activity, occupation or profession to “taxpayers of the Tax Office” (i.e.,
Uruguayan taxpayers subject to taxes administered by the Tax Office, but not including
social security taxes). The advance payments would be required if the transactions in
which they took part would allow the taxpayers to exercise the corresponding right of
redress after the advance payments are made.
The requirement of a taxpayer to pay another taxpayer’s debt would be considered a
responsibility to pay the tax obligations of third parties. The paying taxpayer would be
jointly liable for the tax obligations that the third party should have paid. If the paying
taxpayer exercises the right of redress, then only that taxpayer would be treated as
the responsible party.
Failure by the responsible party to pay the tax obligations of the third party would
result in fines and the crime of misappropriation.
The proposal would allow the tax authority to add any information about a taxpayer
to the tax registry if formal tax obligations relating to registration in the “unique tax
registry” and its subsequent amendments are not met (i.e., the taxpayer does not
provide accurate information when registering or modifying its situation). Additionally,
the tax authority would be able (but not required as it is now) to warn taxpayers that
their activities may be suspended for a period of up to six working days, when the
failure to satisfy the taxpayer’s obligations is verified.
Modifications to the Tax Code
Tax fraud
Tax fraud would arise, unless
otherwise proven, on the
omission of paying to the Tax
Office the withholding made by
withholding agents responsible
for tax obligations of third parties
or substitute responsible (i.e.,
a company that is responsible
for the personal income tax of
their employees and, therefore,
it withholds the tax for the
employees).
Uruguayan source for corporate
income tax (CIT), personal income
tax and nonresident income tax
Under the proposal, Uruguayansource income would include
income derived from advertising
and propaganda abroad that is
performed by non-employees for
corporate income taxpayers in
deriving corporate taxable income.
Uruguayan-source income also
would include revenue from the
lease, use, assignment for use or
transfer of federal rights, images
and similar items for sportsmen
who participate in resident sports
organizations.
Uruguayan-source income also
would include income derived
from the activities of a commission
agent in mediating the lease, use,
assignment for use or transfer of
federal rights of, images and similar
items of sportsmen who participate
in resident sports organizations.
CIT changes
The proposal would treat corporate
expenses as appropriately
documented, for deduction purposes,
2
if the documentation complies with
the formal requirements established
for value-added tax purposes.
The proposal also would require
the consumer price index to be
used for fiscal years started on
or after 1 January 2016, for the
actualization of net operating losses
(i.e., updating of NOLs by an index)
and fixed assets, and the calculation
of the inflation adjustment.
The additional expense deduction,
which is intended to promote
employment, would not have to
be considered if the company had
CIT derived from the investment
promotion regime forgiven,
provided the investment promotion
regime used the employment
increase goal. At the moment the
company asks for the exoneration of
CIT from the investment project, the
company is required to comply with
certain goals that might include
increasing employment; if this is
the case, they will have to choose
between both special regimes (i.e.,
the additional expense deduction or
investment promotion regime).
Booksellers and optical shops
would not be allowed to have CIT
forgiven under Article 52(e) of
Title 4. Additionally, the Executive
Branch would have the authority
to determine whether a company
is allowed to have CIT forgiven
considering the activity developed.
Regarding the CIT “exemption”
included in Article 53 of Title 4
(i.e., taxpayers with limited income
may deduct from their taxable base
a percentage of specific type of
investments), transport companies
Global Tax Alert Americas Tax Center
that provide regular passenger
services under a state concession
for performing passenger services
or permission to conduct that
activity would not consider the
income limitation established by law
(i.e., the income limitation would
not apply to transport companies).
Changes to Net Wealth Tax
The proposal would grant the
Executive Branch the power
to exempt the assets of credit
administrator companies from
the Net Wealth Tax, provided the
companies are exclusively dedicated
to the realization of productive
microfinance operations (i.e.,
microfinance is a source of financial
services for entrepreneurs and small
businesses lacking access to banking
and related services). The Executive
Branch would have to verify that a
company meets some requirements
to grant the exemption.
The exemption would apply only
to those years in which 60% of the
microfinance commercial portfolio
is made up of microenterprises
(defined by law).
Modification to Real Estate
Transfer Tax
Transfers made as a result of the
replacement or dismissal of a
trustee would not be subject to
the Real Estate Transfer Tax.
Investment promotion regime
If a company took advantage of the
exemption under the investment
promotion regime, the five-year
limitation period would be extended
until the company has complied
with all of the goals set out in a
government resolution as required
by the investment promotion
regime or until the end of the
period established in the resolution
for the utilizing the fiscal benefits
under the investment promotion
regime. If the conditions are not
met, the limitation period for the
right to collect taxes that would
have been wrongly exempted would
be interrupted by a resolution
revoking all or part of the benefits
granted or a resolution from the
application committee stating the
non-fulfilment of the goals agreed
to and the reassessment of taxes.
The tax authority and the insurance
bank would be required to give to
the application commission the
information required to verify the
compliance of the commitments;
therefore, the secrecy provisions
established in Article 47 of the
Tax Code would be relieved.
Other modifications
If a company is liquidated in a
bankruptcy, the Government, as
one of the first creditors, would be
allowed to collect any taxes owed
before other creditors collect their
debts. The proposal would eliminate
the requirement that the debt not
be more than two years old.
All entities, Uruguayan residents or
not, involved directly or indirectly
in the supply or demand of
passenger land transportation or
tourist accommodation, rendered
by individuals or legal entities
that are not duly authorized to
provide such services, shall be
jointly liable for the applicable
tax obligations and penalties. An
individual or entity is authorized
to provide land transportation or
tourist accommodation services
when it has been registered in the
national or municipal registries and
carries out its activity according to
the limits set by such registries.
Entities would be involved
directly or indirectly in the
supply or demand of passenger
land transportation or tourist
accommodation, if one of the
following conditions is met:
a)They act as an intermediary in
providing services (e.g., travel
agency)
b)They provide the suppliers
or users data on the land
transportation or tourist
accommodation services so
that they have the information
necessary to arrange the
services
For additional information with respect to this Alert, please contact the following:
Ernst & Young Uruguay, Montevideo
• Martha Roca
+598 2 902 3147
• Rodrigo Barrios
+598 2 902 3147
[email protected]
[email protected]
Ernst & Young LLP, Latin American Business Center, New York
• Pablo Wejcman
+1 212 773 5129
[email protected]
• Ana Mingramm
+1 212 773 9190
[email protected]
• Enrique Perez Grovas
+1 212 773 1594
[email protected]
• Leticia Arias
+1 212 773 7783
[email protected]
Ernst & Young LLP, Latin American Business Center, London
• Jose Padilla
+44 20 7760 9253
[email protected]
Global Tax Alert Americas Tax Center
3
EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction and advisory
services. The insights and quality services we deliver help build trust and
confidence in the capital markets and in economies the world over. We
develop outstanding leaders who team to deliver on our promises to all
of our stakeholders. In so doing, we play a critical role in building a better
working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of
the member firms of Ernst & Young Global Limited, each of which is a
separate legal entity. Ernst & Young Global Limited, a UK company limited
by guarantee, does not provide services to clients. For more information
about our organization, please visit ey.com.
© 2015 EYGM Limited.
All Rights Reserved.
EYG No. CM5845
This material has been prepared for general informational purposes only and is not intended to
be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for
specific advice.
ey.com