The Double Taxation Agreement (DTA) between Luxembourg and Uruguay entered into force on 11 January 2017. The agreement applies from 1 January 2018. From this date, the new treaty generally replaces the Uruguay-Luxembourg Income and Capital Tax Treaty (1990).
According to the treaty the maximum rate of withholding tax on dividends is 10%. However, if the beneficial owner of the dividends is a company (other than a partnership) and holds a direct holding of at least 10% of the share capital of the company paying the dividends for an uninterrupted period of at least one year, the treaty provides for a 5% rate. Withholding rate of interest is 10%. For royalties, 5% is applicable for the use of industrial, commercial of scientific equipment and 10% is applicable for others.
The treaty generally follows the OECD Model. Luxembourg applies the credit and exemption-with-progression methods for the avoidance of double taxation whereas Uruguay applies the credit method for the avoidance of double taxation.
