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Uruguay: Income tax treaty with Brazil

Uruguay: Income tax treaty with Brazil

A new income tax treaty between Uruguay and Brazil is pending ratification.


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The treaty is intended to eliminate double taxation, generally by means of a tax credit system. The treaty also includes rules for the withholding of tax on payments of dividends, interest, and royalties.

  • Dividends would be subject to a withholding tax at a rate of 10%, provided the recipient of the dividends directly has a 25% interest in the capital of the company paying the dividends.
  • Payments of interest would be subject to a withholding tax at a rate of 15% (the general rate of tax on interest payments in Uruguay is 12%).
  • Royalties generally would be subject to a withholding tax at a rate of 10% unless the royalty is related to the use or grant of a trademark, in which case the withholding tax rate would be 15%.

Fees for technical services would be subject to tax not only in the country of residence of the provider of such services, but also subject to tax in the country where the company that made the payment is located, subject to a cap of 10% of the gross amount of the fees.

The treaty includes rules for the taxation of capital gains (in general, certain relief measures from capital gains taxation on the transfer of shares when real estate is not more than 50% of the assets underlying the disposed shares for a 365-day period prior to the share disposal).

Under the rules for the taxation of business income, there are provisions in the treaty addressing when there is a permanent establishment involved in one of the countries. 

Effective date provisions

The treaty will enter into force 15 days after the date of receipt of the notification of ratification by the last of the two countries to ratify the treaty. Ratification in Uruguay requires the approval of parliament (which has not yet happened). If ratification of the treaty is completed during 2019, the treaty’s provisions will be effective from 1 January 2020.

Read an August 2019 report (Spanish) prepared by the KPMG member firm in Uruguay

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