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February 14, 2023
2023-0280

Uruguayan Tax Authority publishes adjustments in interest taxation under Double Tax Treaty between Chile and Uruguay

  • The rate at which interest can be taxed under the Double Tax Treaty between Chile and Uruguay is modified as of 1 January 2023.

On 5 September 2018, Uruguay and Chile signed the Income and Capital Tax Treaty to eliminate double taxation between both countries, issued by the Law 19,548.

On 6 February 2023, the Uruguayan Tax Administration informed that the rate at which interest can be taxed under the Double Tax Treaty (the Treaty) was modified due to application of the Most Favored Nation (MFN) clause in the Double Tax Treaty Protocol. As a result of the MFN clause, the interest rate is reduced from 15% to 10% of the gross amount of interest.

It is important to note that under Uruguay's domestic regulation, Uruguayan companies paying interest to Chilean companies had to withhold at 12% and not the maximum rate of 15% under the Treaty. This 12% will now be capped at 10%.

This change was published on the website of the Uruguayan Tax Authority and entered into force on 1 January 2023. It can be accessed here.

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For additional information with respect to this Alert, please contact the following:

EY Uruguay, Montevideo

Ernst & Young LLP (United States), Latin American Business Center, New York

Ernst & Young LLP (United Kingdom), Latin American Business Center, London

Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific

 

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