martes, 14 de febrero de 2017

Uruguay expands tax incentives for shared services centers

A decree that applies as from 24 October 2016 modifies and broadens the scope of the tax incentive regime applicable to new shared services centers (SSCs) established in Uruguay that provide services to nonresident related parties. The decree expands the list of services eligible for the SSC regime and introduces a new category of tax incentives available for SSCs.

Eligible services: 
To qualify for the tax incentive regime, an SSC generally must provide services only to foreign related parties, and the services must be exclusively used abroad (however, the incentives may apply where less than 5% of total services are provided to resident related parties). Previously, the services eligible for the regime were limited to advice and data processing relating to activities developed, goods located or rights economically used abroad. The decree expands the list of eligible services to include the following:
• Management and administration (including strategic planning, business development, publicity, administration and training);
• Logistics and storage;
• Financial administration; and
• Research and development support.

New tax incentives: 
An SSC carrying out eligible services also must meet certain thresholds relating to the number of new employees it hires and the amount it invests in training to qualify for the tax incentive regime. The decree reduces the thresholds to qualify for a new category of incentives, but the benefits available also are reduced in some cases (the original incentives remain available for entities that meet the higher thresholds):

  • At least 100 new employees (reduced from 150) must be hired during the first three years of the SSC, and maintained until the end of the fifth year. The employees’ remuneration must be equivalent to a “qualified direct work position” (defined in terms of remuneration) and at least 75% of the workforce must be Uruguayan citizens; and
  • A minimum investment of approximately USD 550,000 (reduced from about USD 1.1 million) must be made in training the workforce of Uruguayan citizens during the first three years of the SSC.

An SSC that meets the relevant thresholds will be granted the following tax benefits:

  • A corporate income tax exemption for 70% of the income derived from the activities of the SSC during its first five years of operations (compared to the original incentives that offer a 90% exemption for five years, or for 10 years if 300 new employees are hired by the end of the fifth year, a minimum of approximately USD 2.2 million is invested in training and certain other conditions are fulfilled);
  • A net worth tax exemption for assets allocated to the SSC activities for the same exemption period that applies for corporate income tax purposes (the same benefit that is available under the original incentives); and
  • Only dividends derived from income that is not covered by the corporate income tax exemption and that are paid to a nonresident are subject to withholding tax, at a 7% rate, during the corporate income tax exemption period (the same benefit that is available under the original incentives).

The new category of tax incentives does not include a reduced withholding tax rate on technical service fees paid to a nonresident during the corporate income tax exemption period (compared to the 0.6% rate that is available under the
original incentives); the normal 12% rate will apply unless the higher thresholds under the original incentives are met.

Source: Deloitte

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