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Uruguay - Indirect Tax Guide

Uruguay - Indirect Tax Guide

Explore the requirements and rules that apply to Indirect Taxes in Uruguay.

Explore the requirements and rules that apply to Indirect Taxes in Uruguay.

Girl riding bicycle by the beach Uruguay

General

Types of indirect taxes (VAT/GST and other indirect taxes).

VAT.

Are there other indirect taxes?

Excise tax, Impuesto Específico Interno (IMESI): applies to the first transaction carried out by manufacturers or importers of certain goods in the domestic market.

What supplies are subject to VAT?

The Uruguayan value-added tax (VAT) is based on the value-added method.
All business undertakings that are income taxpayers are defined as VAT payers. VAT also applies to self-employed individuals and legal entities in general (including foreign ones) rendering personal services in Uruguay.

VAT is due on:

  • the sale by VAT taxpayers of movable property located in Uruguay
  • services, specified in the law, provided they are performed in Uruguay
  • the final importation of movable property
  • and the aggregate value generated through real estate construction.

For VAT purposes, the concept of taxable “sale” includes:

  • sales and other transfers for consideration of movable property located in Uruguay (payment in kind, allocation of property on the liquidation of a company)
  • transfers of movable goods attached to the soil at the time of the transfer, provided they have their own individuality and represent goods in trade for the taxpayer
  • the removal of movable property by the owner for personal use or consumption
  • transactions carried out by commission agents, consignees and others who sell or buy personal property in their own name on behalf of third parties.

Under the VAT system, tax is levied at each stage of the manufacturing and distribution process on a non-cumulative basis. The accumulation of tax is avoided through the deduction of VAT invoiced to the entity. The entity pays VAT on the total amount invoiced in each monthly tax period (output VAT) but is entitled to recover the input VAT incurred during the same period (input VAT). If, in any tax period, the balance of input VAT is higher than the amount of output VAT, the entity is not entitled to a refund (except in the case of exporters, which may request credit certificates for their input VAT), but the difference is carried forward and can be credited against future VAT liabilities.

What are the standard or other rates (i.e. reduced rate) for VAT/GST and other indirect taxes?

  • VAT standard rate is currently 22 percent.
  • A reduced rate of 10 percent applies to certain goods and services such as basic food items, medicines and services rendered by hotels.
  • IMESI: Rates vary for each item and they are generally fixed by the government. Goods subject to higher rates are: alcoholic beverages, tobacco, gasoline, fuel, lubricants and other petroleum products. The maximum rates are 80 percent for alcoholic beverages and 70 percent for tobacco. Petroleum products are taxed on their selling price at different rates. The rate can be as high as 133 percent, as in the case of high-grade gasoline. Other taxable commodities are alcohol, soft drinks, cosmetics and motor vehicles, which attract rates varying from 10 to 30 percent.

VAT/GST registration

Who is required to register for VAT/GST and other indirect taxes?

Those who engage in commercial, industrial, agricultural or independent professional activities in Uruguay must register at the Tax Office for tax purposes. The VAT or IMESI registration procedure in Uruguay is the same as for other local taxes (corporate income tax, capital tax, etc). In order to develop a commercial activity in Uruguay, a foreign company must register for all tax purposes (not just for VAT), as it would need to set up a permanent establishment.

Electronically supplied services (ESS)

As of January 2018, new rules took effect for foreign companies that provide certain services by electronic means (including Internet, technological platforms, informatics apps, etc.) and which will be totally or partially subject to VAT (also to Non-Resident Income Tax - IRNR) even if performed outside Uruguay territory. The ESS covered by the new rules are:

  • Audiovisual services directly provided from abroad by electronic means to entities or individuals located in Uruguay;
  • Fees for the mediation or intermediation by electronic means between the supply and the demand of services when one or both parties of the core service are located in Uruguay (e.g. transportation, housing, etc.). In the case of mediation/intermediation services 50 percent of the price will be taxable by VAT when only one of the parties to the core service is local and 100 percent if both parties to the core service are located in Uruguay. For taxable mediation/intermediation activities no withholding agents have been appointed, and for audiovisual services only local businesses subject to Corporate Income Tax (IRAE) have been appointed as withholding agents.

Is voluntary registration for VAT/GST and other indirect taxes possible for an overseas company (e.g. if the annual turnover is below the relevant VAT/GST and other indirect taxes registration threshold)?

No, under Uruguayan VAT legislation, it is not possible for a non-resident entity to voluntarily register in Uruguay and act as an established entity.

Are there any simplifications that could avoid the need for an overseas company to register for VAT?

As a general rule, VAT registration is not possible without a permanent establishment in Uruguay. If the company (permanent establishment) performs activities in the country, VAT registration is mandatory.

In the case of foreign electronic-service suppliers that became taxable under the new rules mentioned above, registration in Uruguay will be required even if no activities are performed locally and no permanent establishment exists in our country. For the moment, a simplified registration procedure has not been established, except for relief from appointing a local representative (see below).

Does an overseas company need to appoint a fiscal representative?

In the case of foreign electronic-service suppliers that provide taxable services, it will not be necessary to appoint a local fiscal representative, it being enough to declare an address in Uruguay that will be used for purposes of communications with the Tax Office.

Which forms and supporting documentation does an overseas company need to submit for VAT/GST and other indirect tax registrations?

In the case of foreign companies that provide taxable electronically supplied services, according to the general registration requirements, the following forms and documents should be presented:

  • form 0351 “Inscripción y actualización” in three copies
  • form 0352 “Personas físicas vinculadas” or 0353 “personas jurídicas vinculadas”, as appropriate
  • two copies of the identification documents of the individual that would sign the forms on behalf of the company (they do not have to be Uruguay nationals since relief from this obligation was provided)
  • notarial certification, with two copies and the following information:
    • Signature of the representative(s)
    • Name(s) of representative(s), identity documents, civil status, nationality, legal capacity, private address (if the representative does not have an address in Uruguay it must indicate one for communication purposes), legal status, address of the company abroad, address of the company declared in Uruguay for tax purposes, type of activity that it develops.

A local address should also be declared only for purposes of communications with the Tax Office (normally the address of local advisors could be used for that purpose).

Is grouping* for VAT/GST and other indirect taxes possible?

No.

VAT/GST compliance

How frequently are VAT/GST and other indirect tax returns submitted?

Monthly.

What are the exchange rate rules in your country?

Tax returns must be presented in pesos. The Central Bank of Uruguay – Banco Central del Uruguay (BCU) – regulates and provides all exchange rates. The exchange rate of the day previous to the transaction applies.

International Supplies of Goods and Services

Exports – Goods

How are exports of goods treated?

Exports of goods and services are included in the scope of VAT but they are zero rated. This means VAT is not levied on the output but VAT paid on inputs may be recovered through tax refunds, which the taxpayer may request after shipping the goods.

Goods supplied and services performed abroad are not subject to tax.

Exports –- Services

How are exports of services treated for VAT/GST purposes?

Exported services receive the same treatment as exportation of goods for VAT purposes (i.e. zero rated, with the possibility to recover input VAT by means of credit certificates), but only certain listed activities qualify as such.

Imports – Goods

How are goods dealt with on importation?

When goods are imported into Uruguay, import VAT and customs duties must be paid before the goods are released from customs’ control.


Imports – Services

How are services brought in from abroad treated for VAT purposes?

Services rendered by foreign entities are only subject to VAT when performed in Uruguay territory (services provided abroad are not taxable).

VAT/GST recovery

Can an overseas company recover VAT/GST and other indirect taxes if not registered for VAT/GST locally?

No.

Are there any exemptions with the right to recover or deduct input VAT?

Exports of goods and services are zero-rated, with the effect that VAT is not computed on the net amounts invoiced, with the possibility for the taxpayer to recover the input tax.
Sales of farming products by qualified taxpayers are also zero-rated, with the effect that VAT is not computed on the net amounts invoiced if the supplier is entitled to a VAT refund.

Are there any restrictions to the deduction of input VAT?

Certain products are exempt from VAT, such as: fruits, vegetables, foreign currency, precious metals, real estate, agricultural machinery and accessories, fuel derived from oil (except fuel oil), milk, agricultural inputs, potable water, books, newspapers, magazines, educational material, etc. Where VAT relates to both taxable and exempt supplies, it requires an apportionment (pro-rata rule).

There is also an exemption for the rendering of certain services, including interest on public and private securities and deposits, rental of real estate, banking operations and personal remunerations for services related to cultural activities (e.g. VAT on services rendered by bars, restaurants or hotels is not recoverable).

Tax points

When is VAT/GST due on a supply of goods or services?

VAT is due when goods are delivered or when the services are provided (presumed to take place at the date of the invoice).

Advance payments are not taxable. In the case of continuous services (e.g. insurance, etc.) the taxable event is considered to take place monthly.

Invoices

Is a business required to issue tax invoices?

Taxpayers are required to document their operations related to taxable activities by means of invoices, sales slips, notes of credit, notes of debit or other similar commercial documents that must comply with certain formalities established by applicable regulations.

In the case of taxable foreign electronic-service suppliers, it will be enough for invoices issued by the taxpayer to comply with the formal requirements established by its country of origin, provided the name of the taxpayer and the amount of the invoice are included in the commercial document.

Is it possible/mandatory to issue invoices electronically?

Law 18.600 and applicable regulations contemplate a progressive plan for the implementation of an electronic invoice regime, comprobante fiscal electrónco (CFE). Based on their annual revenues, the plan contemplates different dates for the incorporation of taxpayers to this regime, which by December 2019 should cover most companies except small taxpayers.

Is it possible for the vendor to issue an invoice (i.e. self-billing)?

No.

Record-Keeping Requirements

How long must records and invoices be retained?

The books, accounting records and invoices shall be stored as long as the tax is not prescribed. The statute of limitations period is five years and can be extended to 10 years in case of fraud.

Can the invoices be stored abroad?

No.

Audits

Do tax audits take place on a regular basis?

Tax audits take place regularly as needed. The scope of the audit is determined by the tax authorities and taxpayers have the obligation to provide all relevant commercial and fiscal information and documents.

Are audits done electronically in your country (e-audit)? If so, what system is in use?

No.

What penalties can arise from non-compliance?

There are certain penalties for failing to fulfill formal obligations. The penalty or fine for failing to pay VAT due varies between 5 and 20 percent of the unpaid VAT.

In the case of fraudulent practices, besides fines ranging from 1 to 15 times the unpaid taxes, imprisonment can be imposed in certain cases. Compensatory interest is applied (approximately 1 percent monthly), capitalized every four months.

Special Indirect tax rules

Are there any special rules for the sale of a company by one taxpayer to another where VAT is not due on the sale?

Under Uruguayan law number 16906, a VAT exemption could be granted by the executive power for mergers and transactions related to business reorganizations. Such an exemption does not operate automatically. It must be requested by the company to the executive power who analyzes the requests on a case-by-case basis.

Are there unique specific indirect tax rules that you would not expect to find in ‘standard’ VAT jurisdictions?

An aspect to be considered is that not all services provided from Uruguay to foreign entities are considered exports. In order for them to qualify as export services, they must be included in a list established by the executive power.

Does a reverse-charge mechanism apply for goods or services?

Yes.

Are there indirect tax incentives available (e.g. reduced rates, tax holidays)?

Movement of goods inside Uruguayan free zones or port areas (areas of the national territory subject to a special tax regime) are not subject to VAT.

Services provided inside the free zones or port areas are considered exports, provided they are exclusively and necessarily developed in those areas.

Rulings

Are rulings and decisions issued by the tax authorities publicly available?

Yes, rulings are available on the Tax Office website.

For further information please contact

Gustavo Melgendler
Partner
KPMG in Uruguay
T: +598 29024 546
E: gmelgendler@kpmg.com

Footnote

*By ‘grouping’ we mean: either a consolidation mechanism between taxpayers belonging to the same group (payment and refund are compensated but taxpayers remain distinct) or a fiscal unity for VAT/GST purposes (several taxpayers are regarded as a single taxpayer).

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