On December 29, 2016, Uruguayan Parliament passed so-called “Tax Transparency Act” (the “Act”). The Act entered into force on January 1, 2017, and introduced several innovations, namely:
(i) The obligation of Uruguayan banks to provide to the Tax Office (Dirección General Impositiva -- DGI) information regarding their clients’ accounts (no matter the clients resides in Uruguay or not).
Such information shall include the balance of the corresponding account at the end of the calendar year, the annual average of the deposited moneys and the interests accrued during such year.
According to press sources, such information will be provided in relation to those accounts which would exceed the following thresholds: US$ 50,000 for residents (either individuals or legal entities); US$ 250,000 for non-resident individuals; and US$ 1,000,000 for non-resident legal entities.
The Act also authorizes the Executive Branch to establish that, under certain situations of high tax risk, the banks shall be required to report the Tax Office who the beneficial owners of their accounts are. For instance, where the holder of the account is a legal entity whose passive income --dividends, interests, royalties, real estate rents-- exceeds the 50% of its total income.
The banks must report the tax residence of the accountholders. In order to comply with such obligation, such entities must follow due diligence proceedings which will be determined by the Government.
The Executive Branch will set the compliance terms. However, such terms will not exceed the following dates: September 30, 2017, for Uruguayan companies with bearer shares and foreign companies with permanent establishment or head office in Uruguay; and June 30, 2018, for Uruguayan companies with nominative shares and partnerships.
Those banks which fail to comply with their reporting duties, shall be subject to fines ranging between approximately US$ 110,000 and US$ 220,000.
(ii) The creation of a registry --in the framework of the Uruguayan Central Bank (Banco Central del Uruguay -- BCU)-- with the names of the beneficial owners of companies operating in Uruguay (i.e., the names of those individuals who, regardless of their nationality and/or residence, ultimately and effectively control such companies).
Those foreign companies which have assets in Uruguay with a tax value higher than US$ 300,000, should also identify their beneficial owners.
The Government was authorized to exclude certain entities from the obligation to identify their beneficial owners, considering that --due to their legal nature and capital structure-- they present low risk in matter of money laundering and tax evasion.
In order to guarantee the compliance with the obligation to identify the names of the beneficial owners, the Act imposes severe penalties: (i) Fine of approximately US$ 23,000; (ii) Prohibition to distribute dividends and profits; and (iii) Suspension of the certificate issued by the Tax Office.
Entities using inadequate legal forms which mislead or hinder access to the knowledge of the identity of the beneficial owners, will be subject to a fine in the approximate sum of US$ 230,000.
In addition, those entities issuing nominative shares will start to report also the names of their shareholders. Up to now, only the names of holders of bearer shares were informed to the Central Bank.
The public bodies which will have access to the information provided to the Uruguayan Central Bank, will be: (i) the Tax Office, (ii) the Anti-money Laundering Office, (iii) the Judicial Branch, and (iv) the Public Transparency Office.
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