The Executive Power of Uruguay submitted to Congress for consideration the 2016 Accountability Bill on 20 June 2017. The Bill includes provisions on Internet services and the software industry. The bill would also modify the Free Zones (FZ) law. If enacted, the provisions of the bill would apply as of 1 January 2018.
According to the bill, net Uruguay-related revenue from the production or distribution of cinema movies and tapes, broadcasting services relating to cinema movies and tapes and television transmissions and other similar means of transmission would no longer be determined on the basis of the remuneration received for use in Uruguay. The bill would treat such income as Uruguayan sourced and, therefore, taxable. The bill would also address the income of non-resident companies providing services directly through the Internet, technological platforms, computer applications or similar means as total Uruguayan sourced income for income tax purposes.
Income received from mediation and intermediation in the supply and demand of services rendered through the internet, technological platforms, computer applications or similar means would be 100% Uruguayan sourced when the supplier and the acquirer of the service are located in Uruguay. The income would be considered as 50% Uruguayan sourced if either the supplier or the acquirers of the service are located abroad.
The Bill would consider services as located in a Uruguayan territory when the services are paid through electronic methods of Uruguay, including electronic money instruments, credit or debit cards, bank accounts, or other similar payment options established through regulations in the future.
In case of value added tax, income gained from mediation and intermediation services associated with supply and demand of services made through the internet, technological platforms, computer applications or other similar means would be considered as Uruguayan-sourced income and, therefore, would be subject to VAT when both parties are located in Uruguay.
According to the Bill, software amortization would be deductible only if the general deductibility requirements for corporate income tax (CIT) purposes are met and this would include the counterparty rule requirement by which expenses are deductible only if the counterparty is subject to income taxation in Uruguay or abroad at the rate of at least 25%. Taxpayers would no longer be able to deduct 1.5 times the actual amount of expenses incurred from software services rendered by taxpayers subject to the CIT. Income obtained from the performance of logical support and related services would be exempt from income tax subject to certain conditions.
Also, income gained from the use of intellectual property and other intangible goods would be exempt from income tax subject to the condition that the goods are the result of research and development activities within free trade zones and other requirements are met.
Companies in free trade zones would be able to provide services to taxpayers subject to CIT outside of the free trade zones, as long as the amount of those services does not exceed 5% of the other services provided within the fiscal year. Additional compliance regulations, such as regulations regarding revocation of the users’ agreement, information to be included in the users’ request and maximum period of the users’ agreement would be added.
According to the bill, a two- to eight-year prison sentence for tax fraud would be imposed when invoices or other equivalent documents used for documenting transactions were, totally or partially, ideologically or materially false.
