Transfer Pricing in Uruguay
Transfer pricing in Uruguay has been regulated since 2007, in Chapter VII, Title IV, of the 1996 Ordinance as amended.
Nonetheless, Master Report and Country by Country Report (CbC Report) were introduced in 2017 by Law 19484 as formal obligations for certain taxpayers.
Due to the last modification, Uruguay has aligned with Action 13 of the BEPS (Base and Erosion and Profit Shifting) Plan of the Organization for Economic Cooperation and Development (OECD) on supporting documentation in order to combat tax evasion and avoidance.
Principle of Full Competence
Also named Arm’s Length Principle, which governs Transfer Pricing, is based on prices agreeing upon in transactions among related parties must be in accordance with market values.
This principle is also regulated in Uruguayan legislation, in Article 38 of Chapter VII, Title IV of the 1996 Ordinance and amendments thereto.
The aforementioned article states that transactions carried out by taxpayers with related entities will be considered as transactions among independent parties, when all their services are in accordance with normal market practices.
Transfer Pricing Application Scope in Uruguay
The Article 39, Chapter VII, Title IV, Article 39, of the 1996 Ordinance in accordance with Article 1 of Decree No. 56/009, as amended, establishes under what cases the linkage is configured for the Transfer Pricing regime in Uruguay.
Therefore, the following will be within the scope of said rules, provided that both are subject to control by the same individuals or legal entities or that they have decision-making power due to their capital participation, by exercising functional influence or any other type of influence, as follow:
- Taxpayers who carry out transactions with related entities residing abroad.
- Taxpayers who obtain income from personal services, without a relationship of dependence, subject to the Income Tax on Income from Economic Activities with regarding to related entities abroad.
- Taxpayers who carry out transactions with entities incorporated, domiciled, resident or located in countries with low or no taxation or that are benefited by a tax regime of low or no taxation. Likewise, transactions with entities operating in customs exclaves are included in this section.
Definition of Related Parties in Uruguay
According to Resolution No. 2,084/009, issued by the General Directorate of Taxes (GDI), which regulates the provisions of Article 39 quoted in the preceding paragraph, related entities shall be taken to mean as related entities, provided that any of the cases indicated below are verified:
- When an entity owns 10% or more of the capital of another entity.
- In case an entity exerts functional influences on another.
- When two or more entities have indistinctly:
- A common entity that owns in both equal or more than 10% of its capital.
- An entity that owns in one or more entities equal to or more than the percentage indicated above and has functional influence in one or more of the other entities.
- A common entity that has functional influences on these simultaneously.
- An entity with enough votes to form the social will.
- The existence of a common entity that has the necessary votes to form the social will.
- An entity is an agent, distributor, exclusive supplier of another.
- The existence of a common entity which sets business policies in two or more companies.
- An entity assumes the losses or expenses of others.
An entity resident or domiciled in countries or jurisdictions with low or no taxation or preferential regimes is also considered a related party in accordance with Article 40 of Title IV.
Transfer Pricing Methods in Uruguay
In order to establish whether transactions carried out among related entities are in line with market prices, the legislation in Uruguay has established 5 methodologies.
According to Article 41 of Title IV, of the 1996 Ordinance, incorporated by Law 18,083, the following adjustment methods shall be taken into consideration:
- Uncontrolled Comparable Price Method.
- Resale Price Method.
- Cost plus Benefit Method.
- Profit Splitting Method.
- Net Transaction Margin Method.
The taxpayer shall choose the most appropriate method for the type of transaction performed.
Transfer Pricing Affidavit and Documentation in Uruguay
Articles 14 and 15 of Decree No. 056/009 state that taxpayers within the scope of the Transfer Pricing rules in Uruguay must file an Affidavit and a Documentation of the transactions carried out with related parties, respectively.
Law No. 19484, enacted in 2017, establishes the obligation to file the Master File and Country-by-Country Reports (Cbc Report), in accordance with the guidelines set forth in Action 13 of the BEPS Plan.
Transfer Pricing Affidavit
Pursuant to Article 14 of the aforementioned Decree and Article 10 of Resolution No. 2,084/2009, taxpayers who carry out transactions with related parties must file an Informative Affidavit stating these transactions.
Those who comply any of the following conditions shall be obligated to do so:
- Those in the Large Taxpayers Division.
- Transactions performed under this regime for an amount exceeding UI 50,000,000 (fifty million indexed units) in the corresponding fiscal period. Transactions carried out by Free Trade Zone users, as indicated in Law No. 15,921, are exempted from this paragraph, provided not being subject to the Income Tax from Economic Activities.
- They have been notified by the RA (Revenue Agency).
Such Affidavit will be elaborated through Form N°3001, and must be filed to the Tax Administration up to the ninth month, counted from the fiscal closing date, which will depend on the last digit of the taxpayer’s TIN (Taxpayer’s Identification Number).
Law 19484, enacted in 2017, establishes amendments to the valuation rules in Uruguay, whereby new special affidavits are established.
Thus, Article 46 of Title IV of the 1996 Ordinance, as amended by the aforementioned law, states that conforming taxpayers of a Multinational Group must file the Master Report.
A group of two or more entities resident in different jurisdictions that are linked, directly or indirectly, by the control of the same natural or legal persons, by their capital participation or by functional influence that allows them to have decision-making power, are considered as such.
The report shall contain at least the organizational structure of the Multinational Group, a description of its business, an indication of the group’s intangible assets, financial activities among group entities and its financial and tax position.
Country by Country Report
The Country-by-Country Report will be subject to the taxpayer who is part of a high economic importance Multinational Group, provided that the established linkage case is configured as in the preceding paragraph.
A Multinational Group of large economic dimension shall be as such considered, according to Article 5 of Decree No. 353/018, when its total consolidated revenues are equal to or exceed the 750,000,000 euros or its equivalent in local currency.
It shall be exempted from filing this Report when the same must be filed by a Group entity resident in a country with which Uruguay has an agreement to exchange tax information.
The content of the report will indicate the identification of each of the entities’ group, as well as the performed activities, consolidated gross income, discerning those obtained from related and independent entities, income before taxes, taxes paid, among others.
Regarding the filing deadline, as well as the Master Report, it must be filed within 12 months following the end of the fiscal year, in accordance with Article 9 of Decree No. 353/018.
Technical Transfer Pricing Study
Article 10 of Resolution No. 2,084/2009 states that taxpayers who carry out transactions with related parties must file a Transfer Pricing Study along with the Informative Affidavit.
For this purpose, the taxpayers will be the same as those established to file an Affidavit.
The minimum content of this report includes identification of the taxpayer, the activity, risks, assets used, identification of related parties, details of the transactions and analysis methodology.
Sanctions for Transfer Pricing Non-Compliance in Uruguay
The Transfer Pricing regime in Uruguay has specific sanctions related to non-compliance with Transfer Pricing obligations.
Thus, Article 46 bis of Title IV, of the 1996 Ordinance, states that non-compliance with the formal duties of said regime shall be sanctioned in a graduated manner, in accordance with Article 100 of the Tax Code of Uruguay, under the fine regime of the fourth paragraph of Article 469 of Law No. 17,930, in the redaction of Article 68 of Law No. 18,083.
The latter article states that the fine will be up to one thousand times the maximum fine per violation established in Article 95 of the Tax Code. Said article, as amended by Decree No. 355/19, states a penalty per violation ranging from $480 to $8,970.
Therefore, the fine related to these may amount to $480,000 up to $8,970,000.
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