In a Regulatory Decree issued 26 October 2018, Uruguay’s Ministry of Economy and Finance established definitions applicable to the preparation and presentation of the country-by-country (CbC) report and master file under the transfer pricing rules. These definitions were previously included in Chapter IV of Law No. 19,484 of 5 January 2017. The definitions align with Action 13 of the Base Erosion and Profit Shifting (BEPS) Plan of the Organisation for Economic Co-operation and Development (OECD).

According to the Regulatory Decree, the CbC report must contain:

• Information on each of a multinational group’s entities, the country of tax residence, the country of incorporation (when it differs from the country of residence), and the activities carried out
• Consolidated gross income, income obtained with related parties and independent firms, financial results before taxes, income tax paid and accrued, share capital, retained earnings, number of employees and intangible assets

The master file should include the following:

• Structure of the multinational group: Organization chart with the legal structure, a description of the profit drivers for corporate profits, a description of the supply chain for the five main products or services, a list of intragroup agreements that are relevant to the provision of services between members of the group, a list of cost-sharing agreements, a description of the geographical markets in which the group operates, a functional analysis in which the main contributions made by each of the group’s entities are described, a description of any restructuring of the business or corporate operations, and a list of mergers and/or acquisitions that the group has conducted during the tax year
• Multinational group’s intangibles: A general description of the group’s overall transfer pricing strategy for intangibles, a list detailing the group’s intangibles that are relevant for transfer pricing purposes, a list of agreements related to intangibles held between related entities, a general description of the group’s policies on transfer pricing in relation to the research and development of intangibles, and details on transfers of intangibles, and the rights that are held on the intangibles in the tax year under analysis
• Financial activities between entities that are members of the multinational group: A general description of the way in which the group is financed that details the main financing agreements with unrelated lenders, a list of the group entities that carry out centralized financing functions for the group and a general description of the group’s transfer pricing policies with regard to financing agreements between related entities

The master file also must contain:

• The financial and tax position of each of the entities of the multinational group
• A copy of the group’s consolidated financial statements
• A list of the group’s anticipated transfer pricing agreements

Taxpayers that are subject to the corporate income tax and form a “multinational group of great economic dimension” must report the following information in the master file:

• Name and residence of the entity that will file the CbC report on behalf of the multinational group
• Name and residence of the final controlling entity of the multinational group
• Names of the other multinational group entities in Uruguay

A multinational group of great economic dimension is a group whose total consolidated revenues at the end of the tax year equal or exceed €750 million (or its equivalent reported in a different currency on the consolidated financial statements at the exchange rate applicable at the tax year end). The total consolidated income reported on the consolidated financial statement will be used to verify the established threshold has been met.

The group’s tax year corresponds to the annual accounting period that is used by the final controlling entity of the multinational group to prepare the consolidated financial statements. When the consolidated income corresponds to a tax period different than 12 months, the €750 million threshold applies pro rata to the months that make up that tax year.

The Regulatory Decree establishes that the special tax returns corresponding to the CbC report and the master file must be submitted within 12 months of the end of the reporting period. The Regulatory Decree applies to tax years beginning on 1 January 2017 and onwards.

Although the Regulatory Decree requires “special sworn statements” to be included with the CbC report and master file, the Uruguayan tax authority has not determined how the special sworn statements must be made.

While the tax law establishes that corporate income taxpayers must provide the information in the CbC report and master file, the Decree has not clarified the conditions for filing the CbC report and master file.

Finally, failure to comply with the provisions of the transfer pricing regime may result in progressive penalties, depending on the severity of the failure.

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

Ernst & Young Uruguay, Montevideo

• Martha Roca | martha.roca@uy.ey.com
• María Inés Eibe | ines.eibe@uy.ey.com

Ernst & Young, LLP, Latin American Business Center, New York

• Ana Mingramm | ana.mingramm@ey.com
• Enrique Perez Grovas | enrique.perezgrovas@ey.com
• Pablo Wejcman | pablo.wejcman@ey.com

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

• Jose Padilla | jpadilla@uk.ey.com

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

• Raul Moreno, Tokyo | raul.moreno@jp.ey.com
• Luis Coronado, Singapore | luis.coronado@sg.ey.com

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