The modifications provide certain tax reductions. Taxpayers should determine whether they have complied with the regulations and may benefit from the new reductions.

Uruguay's Ministry of Economy and Finance issued Decree No. 279/016 (September 12, 2016), which modifies the tax regulations to adopt the changes made by Law No. 19,355 (National Budget Law).

The modifications add the following provisions to the regulations:

— Determination of Uruguayan-sourced income for advertising and propaganda services for corporate income tax (CIT) payers. The regulations will treat as Uruguayan-sourced income and subject to the CIT only 5% of the total income derived from advertising and propaganda services performed abroad by a CIT payer for other CIT payers, provided up to 10% of the service recipient's total income is subject to the CIT. If the recipient does not have income subject to the CIT, the income from services will be treated as foreign income that is not subject to taxation.

— Determination of Uruguayan-sourced income for technical, advertising and propaganda services rendered abroad by personal income tax (PIT) or non-resident income tax (NRIT) payers (both non-employees). The regulations will treat as Uruguayan-sourced income only 5% of the total income derived by PIT and NRIT payers from technical, advertising and propaganda services rendered abroad to CIT payers, provided up to 10% of the service recipient's total income is subject to the CIT. If the services are not part of the service recipient's activity cost, the regulations will treat 5% of the total income derived from those services as Uruguayan-sourced income, provided up to 10% of the service recipient's total income was subject to the CIT in the previous year.

— Change in valuation criterion of transferable securities and precious metals when valued at their acquisition cost. For fiscal years starting on or after January 1, 2016, the adjustment in the value of transferable securities and precious metals must be calculated by using the Consumer Price Index, instead of the Uruguayan Products Producer Index.

— Modification to comparable transaction prices under transfer pricing rules. If the comparable transaction occurred on a different date from the taxpayer's actual transaction, taxpayers should use the Consumer Price Index to adjust the comparable transaction price to take into account changes in prices due to timing differences between the two transactions. This modification applies to fiscal years starting on or after January 1, 2016.

— Reduction in late payment penalties when taxes are withheld and paid by the substitute liable for the third party's tax obligations. Beginning January 1, 2016, late payment penalties will be 5% of the tax due when the tax is paid within five business days after its due date.

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