Up to now, in Uruguay Corporate Income Tax (“the CIT”) was assessed over local-sourced income. As per a recent legal reform, and for the fiscal periods starting as from January 1, 2023, CIT will also apply to foreign-sourced passive income (i.e., rents or leases, dividends, interests, royalties, etc.) obtained by Uruguayan entities abroad which do not have adequate substance in Uruguay.
The recent legal reform had entrusted the Executive Branch the fixation of the parameters to determine the substance requirements (in Uruguay) which exclude the CIT assessment (essentially: human resources and facilities; decision making and assumption of risks; and adequate expenses incurred for the investment purposes; always in Uruguay).
A few days ago, the Executive Branch issued the corresponding regulatory decree (“the Decree”). And although a few aspects are yet to be clarified, it is possible to draw -among others- the following guidelines:
Holding Companies or Real Estate Holding Companies
Pursuant to the Decree, holding companies and real estate companies are presumed to have adequate human resources in Uruguay as long as: in Uruguay, they have at least one resident director with appropriate qualifications for the position; and/or the majority of their human resources are Uruguayan residents qualified to carry out the taxed activities.
Holding companies or real estate holding companies are defined as those whose assets directly associated with such activities represent at least 75% of the total assets of the entity.
Outsourcing of Human Resources
The Decree states that, when the personnel resident in Uruguay is outsourced through third parties, such third parties must employ human resources in accordance with the services rendered (in number, qualification and remuneration compatible with those services), and must be subject to adequate supervision by the Uruguayan entity.
Where such services are rendered to more than one client, the Decree establishes that such human resources may not overlap.
Credit for Taxes Paid Abroad
CIT payers are granted with a tax credit: that is, the Uruguayan entity may deduct the tax paid abroad over the same income taxed in Uruguay.
The above communication has been prepared just for information purposes. It cannot be construed as legal advice provided by Bergstein Abogados.
Should you have any further questions, please feel free to contact Dr. Domingo Pereira (dpereira@bergsteinlaw.com) and / or Dr. Guzmán Ramírez (gramirez@bergsteinlaw.com)
