New requirement to disclose ultimate beneficial owners of Uruguayan resident and non-resident entities
Wednesday, 1 February, 2017
Uruguay's Law on International Tax Transparency, the Prevention of Money Laundering and Terrorist Financing was approved by its Parliament on December 29, 2016, and became effective on January 1, 2017.
Ultimate beneficial owners
One of the requirements of the new law is that entities must now disclose their ultimate beneficial owners (UBOs) to the Central Bank of Uruguay.
Resident entities and non-resident entities that have a permanent establishment or their place of effective management in Uruguay, or that own local assets valued above approximately USD300,000, are now required to disclose the identity of their UBOs (individuals who, directly or indirectly, hold at least 15 per cent of the entity's capital or voting rights, or otherwise have control over the entity).
The law imposes severe penalties for the failure to comply with these reporting obligations, says law firm DLA Piper – including fines of approximately USD23,000, a prohibition on the distribution of dividends and profits, and the suspension of the certificates issued by the Tax Office.
Entities using inadequate legal forms that "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 USD230,000", says DLA Piper.
Automatic exchange of information
KPMG explains that a further obligation under the law is aimed at Uruguay's financial entities (and subsidiaries of non-resident financial entities based in the country). They must now provide information about their resident and non-resident clients to the Uruguayan tax authorities on an annual basis.
Discouraging the use of low or nil-tax jurisdictions
The new law introduces measures to discourage the use of foreign entities located in low tax jurisdictions or that benefit from low tax regimes, mainly by increasing the taxes on those entities. For example, real estate properties owned by offshore companies are subject to a wealth tax, which has increased from 1.5 percent to 3 percent with the new law.