Newsletters/Accounting & Tax

COVID-19 Practical Legal Guide

With the aim of providing clear and concise responses, Bergstein has prepared a practical legal guide with most frequently asked questions about COVID-19. The guide discusses hot topics on employment law, contracts and taxations.

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2017: A Transparent Year

The end of year is often surrounded by tax news: the desire to close the year, the commitments undertaken with third parties (in this case, the OECD) or even the imminent summer break, tend to encourage such phenomenon. This year has not been any exception. On December 29, 2016, Uruguayan Parliament passed so-called “Tax Transparency Act” (the “Act”), which introduces three (3) of the main innovations of the Act are: (i) The obligation of Uruguayan banks to provide to the Tax Office (Dirección General Impositiva -- DGI) information regarding their clients at the end of calendar 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 Uruguayan residents, either individuals or legal entities; US$ 250,000 for non-resident individuals; and US$ 1,000,000 for non-resident legal entities. (ii) The creation of a registry with the names of the beneficial owners of companies operating in Uruguay (i.e., the names of those individuals who ultimately and effectively control those companies). (iii) Several amendments to the tax treatment on those non-resident legal entities domiciled in null or low taxation jurisdictions (the “Offshore Companies”). Such amendments tend to discourage the use of Offshore Companies sharply increasing their taxation. But not only work is important. Therefore, Bergstein Abogados wishes you all happy holidays. ___________________ The above communication has been prepared just for information purposes. It cannot be construed as legal advice provided by Bergstein Abogados. Should you have any further questions, please feel free to contact Guzmán Ramírez (gramirez@bergsteinlaw.com) and/or Sebastián Guido (sguido@bergsteinlaw.com).

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The Return of the Black Lists

Tax Transparency Bill -- Issue #2 In our previous issue, we announced that we would dedicate upcoming editions of this Newsletter to the bill recently submitted by the Executive Branch (the “Bill”) in order to discourage the use of non-resident companies, located in jurisdictions of low or null taxation (“Offshore Companies”). The Bill does not provide any list of those jurisdictions which would be deemed as jurisdictions of low or null taxation. However, as of today such list already exists and includes: American Virgin Islands, Anguilla, Antigua and Barbuda, Aruba, Bahamas, Bahrain, Belize, Bermuda, British Virgin Islands, Cayman Islands, Cook Islands, Cyprus, Dominica, Island of Jersey, Island of Man, Island of Montserrat, Island of Guernsey, Gibraltar, Grenada, Malta, Mauritius, Nauru, Netherlands Antilles, Niue, Panama, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, Seychelles, Turks and Caicos Islands, and Vanuatu. As of today, the list is the source of debate, because the same does not include the so-called “limited liability companies” (LLCs) based in the State of Delaware (USA). Some of the most relevant amendments provided in the Bill, are listed below: (i) A higher Wealth Tax (Impuesto al Patrimonio -- IPAT) rate. All foreign companies are obliged to pay Wealth Tax over their assets located in Uruguay at the end of each fiscal year. Such companies currently pay Wealth Tax at a rate of 1.5%. The Bill proposes that Offshore Companies begin to pay Wealth Tax at a rate of 3%. (ii) A higher Non-residents Income Tax (Impuesto a las Rentas de los No Residentes -- IRNR) rate. Offshore Companies currently pay Non-residents Income Tax at a rate of 12%. Once the Parliament passes the Bill, such companies will begin to pay Non-residents Income Tax at a rate of 25%, with the exception of dividends received from Uruguayan companies (which will be taxed at a rate of 7%). ___________________ The above communication has been prepared just for information purposes. It cannot be construed as legal advice provided by Bergstein Abogados. Should you have any further questions, please feel free to contact Guzmán Ramírez (gramirez@bergsteinlaw.com) and/or Domingo Pereira (dpereira@bergsteinlaw.com).

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Tax Transparency Bill -- Issue #3

The bill which we have been discussing from this Newsletter (the “Bill”) --aimed to discourage the use of offshore companies in the domestic market (“Offshore Companies”)-- includes several provisions which, precisely in that line, shall raise the tax burden on real estate properties owned by such Offshore Companies, namely: (i) Taxation on rent shall raise When an Offshore Company leases a real estate property located in Uruguay, currently pays Non-residents Income Tax (Impuesto a las Rentas de los No Residentes -- IRNR) at a rate of 10.5% over the rent. Once the Bill is passed, the same Offshore Company shall pay the same tax (Non Residents Income Tax) at a rate of 30.25%. (ii) Taxation on selling shall raise Nowadays, when an Offshore Company sells a real estate property located in Uruguay, pays Non-residents Income Tax at a rate of 1.8% over the selling price. In the future, the same Offshore Company shall pay Non-residents Income Tax at a rate of 25% over the balance between the selling price and the purchasing price. (iii) Taxation on value shall raise As of today, real estate properties owned by Offshore Companies are subject to Wealth Tax (Impuesto al Patrimonio -- PAT) at a rate of 1.5%. Once the Bill is passed, such tax rate shall raise to 3%. The Executive Branch expects that the Bill would enter into force before December 31, 2016, except the tax increase on selling --item (ii) above-- which would enter into effect on January 1, 2018. In order to facilitate the restructuring of Offshore Companies with real estate properties in Uruguay, the Bill establishes an exemption. The selling of real estate properties settled by Offshore Companies no latter than June 30, 2017, shall be 100% tax exempted, provided that: (i) the selling Offshore Company shuts down its businesses in Uruguay --before the Tax Office (Dirección General Impositiva -- DGI) and before the Social Security Office (Banco de Previsión Social -- BPS)--, and (ii) the buyer is not another Offshore Company. ___________________ The above communication has been prepared just for information purposes. It cannot be construed as legal advice provided by Bergstein Abogados. Should you have any further questions, please feel free to contact Guzmán Ramírez (gramirez@bergsteinlaw.com) and/or Sebastián Guido (sguido@bergsteinlaw.com).

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Tax Transparency Bill -- Issue #4

Every Taxpayer Is Presumed Guilty? Such a question would seem to stem from the bill which we have been discussing from this Newsletter (the “Bill”) and --as reported-- includes a chapter aimed at discourag the use of offshore companies incorporated in jurisdictions of low or null taxation (the “Offshore Companies”). The Bill is based on a premise --although evidence to the contrary would be admitted--, namely: local companies --corporate income taxpayers in Uruguay (the “Taxpayers”)-- tend to over-invoice or under-invoice their sales. Both when Taxpayer sells goods to an Offshore Company (i.e., export) and when the Taxpayer buys goods from an Offshore Company (i.e., import), the Bill presumes that such an Offshore Company belongs to the Taxpayer. Therefore, in the first scenario there would be an under-invoicing, and in the second scenario an over-invoicing. All this with the aim of evading Corporate Income Tax (Impuesto a las Rentas de las Actividades Económicas -- IRAE). Based on such a premise, income stemming from the sale of goods by an Offshore Company to a Taxpayer, will be taxed by Non-residents Income Tax (Impuesto a las Rentas de los No Residentes -- IRNR) at the rate of 25%. That said, such a tax will be assessed over a tax base of 50% percent of the price paid by the Taxpayer to the Offshore Company. Income stemming from the resale --by an Offshore Company-- of goods previously sold by a Taxpayer, will also be taxed at the rate of 25% over a tax base of the 50% of the price of such a resale. How the Administration will be able to make effective the collection of such Non-residents Income tax? Simple: The Taxpayer will be deemed jointly liable. ___________________ The above communication has been prepared just for information purposes. It cannot be construed as legal advice provided by Bergstein Abogados. Should you have any further questions, please feel free to contact Domingo Pereira (dpereira@bergsteinlaw.com) and/or Sebastián Guido (sguido@bergsteinlaw.com).

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