March 20, 2023
Uruguayan Tax Office clarifies substance requirements applicable to the Corporate Income Tax’s source criteria
Uruguay’s Tax Office (Dirección General Impositiva – DGI) has issued a resolution aiming to clarify several aspects of the substance requirements applicable to Corporate Income Tax’s source criteria.
The resolution is effective as of 15 March 2023.
On 15 March 2023, the Uruguayan Tax Office issued a resolution that aims to clarify several aspects of the substance requirements applicable to the Corporate Income Tax’s (CIT’s) source criteria (for background, see EY Global Tax Alert, Uruguay’s Ministry of Economy and Finance issues decree regulating law that modifies Uruguayan CIT source criteria, dated 16 December 2022).
These are the main regulations introduced by Tax Office Resolution No.488/023:
Scope clarification regarding certain elements of income:
Yields of capital and capital gains from brands will be considered Uruguayan-source (i.e., regardless of whether economic substance requirements are met), as long as the CIT taxpayer forms part of a multinational group
The substance requirements would not apply for notional interests
Currency exchange results would not be subject to the economic substance test, unless originated on brands or any other asset liable to produce income under scope
“Necessary strategic decisions” definition: The decision making involved in the acquisition, holding and property transfer of the assets under scope
Outsourcing documentation: When activities are outsourced to a third party, invoicing of the services should detail human resources affected, hours applied on the performances of the activities within Uruguayan territory and the facilities where the activities were developed (this requirement would apply as of 1 April 2023)
The Resolution was published on 15 March 2023 and enters into force as of that date.
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