04 November 2016 Uruguay expands investment promotion regimes The Decree provides additional tax benefits, including exemptions from corporate income tax and personal income tax. Taxpayers should review the new provisions and determine if they meet the requirements for the new tax benefits. Uruguay's Ministry of Economy and Finance issued a Decree, on October 13, 2016, that extends some investment promotion regimes and modifies the definition of tax residence. The Decree modifies Decree 251/014 (see Tax Alert 2014-1587) by expanding the list of activities a SSC may perform. Under the modifications, the following services will be entitled to the benefits of the SSC regime: a. Management and administration services, which include strategic planning, business development, publicity, administration and personnel training The Decree also exempts 70% of the income derived from the services rendered by the SSC from the corporate income tax for five tax years. For the exemption to apply, the SSC must generate at least 100 new jobs and the staff training plan must exceed 5 million indexed units (approx. US$ 640,000). The Decree retains the requirement that at least 75% of the new jobs should be given to Uruguayan citizens. The exemption also will apply when the services rendered to resident related parties do not exceed 5% of the total services rendered by the SSC within the fiscal year. Services rendered to resident related parties, however, would be subject to tax under the general income tax regime, not the SSC regime. Before the Decree, restrictive rules applied to services provided from an FTZ to a Uruguayan territory. The Decree relaxes the rules and allows an entity in a FTZ to render management, administrative, accounting and similar services to related entities outside of the FTZ, as long as the income from the services does not exceed 5% of the total year's revenue of the entity in the FTZ. Among other criteria, an individual will have Uruguayan tax residency if the individual has his or her economic interests in Uruguay. The Decree adds the following factors that will be considered to prove that the individual has economic interests in Uruguay (unless tax residency is proven in another country): 1. Real estate investments of more than 15 million indexed units (approx. USD 1.92 million) The Decree extends the VAT imposed on the rental of a conference room for an international event to organizational services rendered in the conference room and registration fees for the event. For VAT purposes, services rendered in the conference room will be treated as an export of services. The Decree establishes personal income tax and non-resident income tax exemptions under Investment Promotion Law No. 16,906 (dated January 1998) for income from financing activities intended to facilitate the development of business projects that have a favourable opinion from the National Investigation and Innovation Agency. The business projects must include scientific and technological development. Financing activities are defined, for these purposes, as capital contributions in cash to entities that develop those projects. The exemptions will apply for five tax years, which will count from the first year in which the entity obtains taxable income. If an entity, however, has losses for four years after receiving the favourable opinion from the National Investigation and Innovation Agency, the exemptions will be extended for four more years.
Document ID: 2016-1877 | |||||||||||||||||||
