Uruguay is currently undergoing a presidential election, and a widely discussed topic is the requirement set forth by the Organisation for Economic Cooperation and Development (OECD), of which Uruguay is a member. All member entities of a multinational group with consolidated income of more than 750 million euros that do not have substance in the country will pay Income Tax on Economic Activities (IRAE) at a rate of 15% on passive income generated by assets abroad. The agreement includes more than 130 countries.
On the other hand, the country grants tax reductions to encourage investment. The Investment Incentives Law regulates their application. These exemptions are aimed at the manufacturing and construction sectors, as well as the purchase and maintenance of real estate.
Experts comment that this new agreement makes it challenging to maintain incentives for foreign investment. As a result, reducing the state’s revenue through incentive schemes could become an issue. It is estimated that the most likely scenario is that all proceeds could be transferred to another country that decides to apply the global minimum tax.
The main objective of this tax framework is to protect the tax revenues of capital-exporting countries and to prevent multinationals from diverting profits to low-tax or no-tax jurisdictions. According to the OECD, this phenomenon has cost public coffers billions of euros every year since the 1990s.
Auxadi is a company with an accounting, payroll and taxes expertise from Uruguay to more than 50 jurisdictions. So, if you want to expand your entity, don’t hesitate to contact us.
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