Legislation provides a new form of corporation, and offers tax relief for sole proprietorships that convert their business in to a simplified stock company.
The legislation (Ley N° 19.820) is intended to promote entrepreneurship by establishing a “simplified stock corporation” (sociedad anónima simplificada—SAS).
The SAS is a new type of commercial entity that has characteristics in common with corporations (as governed by Law No. 16.060). The SAS can be formed by a single person, and does not require certain approvals or publication of notices. The SAS will be jointly and severally liable for the obligations of the owner of the sole proprietorship prior to the conversion and derived from the activity of the sole proprietorship. There are rules governing the treatment of certain debts and liabilities.
Specifically concerning taxes, a temporary tax exemption regime applies when certain conditions are met, including:
The exemption from tax is available for certain direct taxes (includes the impuesto a las rentas de las actividades económicas (IRAE) or impuesto a la renta de las personas físicas (IRPF)) realized from the transfer and for value added tax (VAT) with regard to the assets or capital transferred.
If, however, within two years of the conversion into an SAS, the shares of the SAS are partially or completely transferred, the tax exemption is forfeited, and the taxes resulting from the transfer must be re-liquidated and paid to the tax administration (DGI) within the following month.
Read an October 2019 report (Spanish) prepared by the KPMG member firm in Uruguay
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