Transparency and Exchange of information for Tax Purposes

(OCDE & URUGUAYAN LAW)

by Laura Romero, Head Legal Offshore Affairs da BP Tax.



Uruguay is considered one of the top countries of Latin America with strong political stability and democratic soundness. It is a country with a strong respect for the rules. Uruguay has worked to establish certain regulations with the aim of converging or adjusting local rules to international standards of International Tax Transparency and Information Exchange, Prevention of Money Laundering and Terrorism Financing.


Recently, it has received an overall rating of “Largely Compliant” issued by the Global Forum on Transparency and Exchange of Information for Tax Purposes (During Phase 2). Uruguay’s legal and regulatory structure guarantees that ownership, accounting and bank information is available for all relevant entities.

This article is intended to act as a general guide on this matter and a summary about one of the regulations, Law 19.484 enacted in January 2017 and regulated by decree No 77/017 (March 2017, as amended by Decree 243/2018) which is divided into four Chapters:

Chapter I. Obligation to automatically provide information on balances and income of financial sources to the Uruguayan Tax Administration (DGI).

For reasons of general interest, financial institutions residing in the country and branches located in the country of non-resident financial institutions must provide the Tax Administration with the following information on an annual basis in relation to duly identified accounts, maintained in Uruguay and held by individuals, legal entities or other entities which constitute fiscal residence in another jurisdiction, under the terms and conditions established by the Executive Branch and established in DGI Resolution No. 6396/2017 about CRS Report):


1. Name, tax identification number and address of the Financial Entity


2. Data identifying the person subject to communication of information:

i. in the case of a natural person or the final beneficiary of a passive non-financial institution: name, address, tax residence jurisdictions, identification numbers (or its functional equivalent), date and place of birth;

ii. in the case of a legal person or entity or a passive non-financial institution that maintains an account whose final beneficiary is one or more persons subject to communication of information: name, domicile, jurisdictions of tax residence and tax identification number (or its functional equivalent);

3. Account number or its equivalent;

4. Legal entities or other resident entities of a foreign country should indicate whether the balance or the value of the pre-existing account exceeded the value of USD 300,000 approx. as of December 31, of any subsequent year.

5. Information on stocks, shares, annual averages and incomes for all types of financial accounts, in the currency of origin of the account, considering, as appropriate:

i. the balance or value of the account at the end of the corresponding calendar year. In the event of the account being cancelled, said cancellation (Insurance contract: the surrender value). To determine the balance, value or accumulated average of the financial accounts held by a natural or legal person or other entity, the financial entity obliged to report must accumulate all the financial accounts subject to reporting opened in it or in a related entity. The provisions of this subsection shall be applicable only to the extent that the computer systems of the institution establish a link between these accounts.

ii. The annual average of the account throughout the year or other period subject to information, considering for this purpose the average in the calendar year of the balances or values in account at the end of each month.

iii. Information concerning income during the calendar year or other period subject to information (Gross amount, etc)

iv. For other accounts, the total gross amount paid or credited to the account or in respect of the account of which the reporting financial institution is a debtor or obligor.

Failure to send the information by the obliged financial institutions or comply with the due diligence procedures, the incomplete or inaccurate submission of said information or its submission outside the terms and conditions established in the Law and its regulations shall make the financial institution, depending of the breach, liable to:

1) Observation.

2) Warning.

3) a fine of five hundred to one thousand times the maximum value of the fine for contravention established in Article 95 of the Uruguayan Tax Code.

Chapter II. The identification of the Final Beneficiary and the Nominee Holders.

Under the Law, final beneficiaries must be identified and registered before the Central Bank of Uruguay ("BCU"). Final beneficiary is considered the natural person who directly or indirectly holds at least 15% of the capital or exercises final control over the company.


In the case of trusts, the individual or individuals who comply with the conditions set forth in this paragraph in relation to the settlor, trustee and beneficiary must be identified. The identification of this information is also imposed to Notaries under Law 19.574 (AML Law) and Decree 379/2018 which includes requirements to identify the beneficial owners (Due diligence obligations).

Final Beneficiary Communication – terms of 30 or 90 days for modifications depending on whether they are residents or non-residents.

The information referred to in this law shall be secret and confidential. Access to it will be restricted to the following bodies: the Uruguayan Tax Administration (DGI), the National Secretariat for Combating Money Laundering and the Financing of Terrorism (SENACLAFT), the Financial Analysis and information Unit, the Justice body in criminal and food matters, and the Transparency and Public Ethics Board.

This documentation must be maintained at the domicile where the obliged person conducts its business and make it available to SENACLAFT and UIAF upon request. Any refusal to provide the information required to comply with the know-your- client process or due diligence cause the obligation to report this matter to the UIAF as suspicious activity.


Chapter III. The determination of new regulation and tax rates applicable to Entities Residing in Countries or Jurisdictions of Low or No Taxation (BONT) or benefiting from a special BONT regime.

Uruguay has especial regulations to discourage the use of entities incorporated in jurisdictions or entities that benefit from a special BONT regime.

Among other regulations, transactions carried out by taxpayers with entities incorporated or located in countries or jurisdictions with low or no taxation or benefiting from a special regime of low or no taxation, shall be presumed, without admitting evidence to the contrary, to have been carried out between related parties (and regulations about Transfer Price must be applied).

Chapter IV. Adjustments to the regime of Prices of Transfer of Income Tax from Economic Activities.

Law 19.484 regulated by Decree 353/2018 regulates the information and documentation to be provided by the taxpayer regarding related non-resident entities. These obligations are part of the international tax cooperation standards adopted by Uruguay.



Conclusion The Uruguayan legal system has been adapting to international requirements but maintains rights and safeguards framework related to Secrecy provisions (Bank Secrecy, Professional secrecy), procedure for notification of an imminent exchange of information if the person subject to an EOI is also a Uruguayan tax payer, Confidentiality (information is available only to the authorized bodies) etc. The OECD (2020), Global Forum on Transparency and Exchange of Information for Tax Purposes: Uruguay 2020 (Second Round) concluded that Uruguay ́s domestic law meets the standard for confidentiality reflected in Article 26 (2) of the OECD model Taxation Convention and Article 8 of the OECD Model TIEA. The September 2020 ́s OECD Report concluded that Uruguay continues to be rated overall Largely Compliant with the International Standard.

Article written by Laura Romero, Head Legal Offshore Affairs da BP Tax.


More Info:

https://www.bptax.com or contact Laura at laura.romero@bptax.com


Web do CII:

Council of International Investigators - The Councilor Newsletter (cii2.org)


Article: pag 7 a 12:

https://www.cii2.org/assets/councilor/Councilor%202021%20New%20Year.pdf


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