Guest post from our friends at Bergstein Abogados
Uruguay requires online companies incorporated abroad, with no presence in Uruguay, to pay taxes in Uruguay whenever their clients are located within Uruguayan territory. Online services providers (such as Netflix and Spotify) are subject to VAT at the rate of 22 percent, plus Non-Residents Income Tax (so-called IRNR) at the rate of 12 percent, both assessed over the sales price. Online services intermediaries (such as Airbnb) are subject to the same taxes, except that IRNR is assessed only over 50 percent of their sales where one of the parties of the ultimate transaction (the supplier or end-user) is based abroad.
In May this year, Uruguay’s Executive Branch issued a regulatory decree, summarized below, clarifying aspects of the tax law; and a few days ago, the Tax Office issued a special resolution spelling out certain implementation details.
Regulatory Decree of 22 May 2018
The recently enacted Decree introduced the following clarifications:
- The above taxation will only apply to online companies engaged in the transmission of audiovisual content. These are broadly defined as any content based on sounds, images or moving images (either combined or separated).
- Clients are deemed to be located in Uruguay where any of the following requirements are met: (i) the IP address of the computer, cell phone or relevant device is located in Uruguay; (ii) the billing address is located in Uruguay; or (iii) the credit card to be used is administered by a Uruguayan financial institution.
- Where just one of the ultimate transaction parties is based in Uruguay (whether the supplier or the end user), VAT on online services intermediaries would be also assessed only over a reduced tax base of 50 percent of the sales.
Tax Office Resolution of 16 July 2018
A recently issued Tax Office Resolution spells out the following practical requirements applicable to foreign online companies (with no legal presence in Uruguay). The company:
- Must be registered before the Tax Office.
- Is not required to appoint a local representative before the Tax Office, provided it has registered a local domicile.
- Must submit annual tax returns.
- May issue any kind of receipts/invoices as long as they are in full compliance with the formal requirements imposed in the respective jurisdictions.
- Must provide its customers in Uruguay with a monthly report indicating the accrued VAT amount.
The Resolution has established the following timetable for tax payments:
- Taxes accrued between January and June 2018 must be paid by May 2019.
- Taxes accrued between July and September 2018 must be paid by October 2018.
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