VOLUME 15, NUMBER 9 >>> September 2014
transactions with a non-resident counterpart. In addi-
Uruguay
Update on Transfer Pricing
The Tax Office was recently the recipient of enquiries
regarding the application of transfer pricing rules to
financial transactions between a Uruguayan branch
and its head office or other branches abroad, when
such transactions are the only operations of the
branch with related companies.
The Tax Office concluded that the above financial
transactions are not subject to transfer pricing rules.
The Tax Office grounded its conclusion on the fact
that financial transactions between a foreign entity
and its Uruguayan branch are deemed to be capital
accounts (cuentas de capital), which generate nei-
ther an income nor an expenditure. Therefore, to the
extent there is no income at stake, the Tax Office
cannot adjust the value of such transactions.
The law which regulates the transfer pricing in Uru-
guay was passed in December 2006, following the
OECD Guidelines and introducing rules similar to
those in place in other Latin American countries.
The main objective of transfer pricing regulations is
to verify that transactions effected between related or
presumably related entities, are consistent with stan-
dard market prices.
If the Tax Office finds that this is not the case, it may
estimate the value of such transactions would have
had if they had been conducted between independent
entities, and thus make the appropriate adjustments
to charge taxes on that value.
In Uruguay, the transfer pricing rules apply when a
Uruguayan company (or an individual that obtains
income from personal services rendered outside of a
dependence relationship and has the option or the ob-
ligation to pay Corporate Income Tax) carries out
2 09/14 Copyright 2014 by The Bureau of National Affairs, Inc.
tion, both subjects must be under the direction or con-
trol of the same person or entity.
When these transactions are agreed with a non-
resident counterpart located in a country or jurisdic-
tion with nil or low taxation, the transfer pricing rules
also apply, regardless whether both parties of the
transaction are under the direction or control of the
same persons or not. In this case, the law presumes
both subjects are related.
The law also presumes both subjects are related
(and therefore transfer pricing rules are applicable)
when the counterpart is an entity that operates in a
free zone or other custom exclave, and benefits from a
special regime of nil or low taxation. In this case, it
does not matter if it operates in Uruguay or abroad.
Uruguay has elaborated a list of 33 countries and re-
gimes with nil or low taxation (amongst others
Cayman Islands, BVI, American Virgin Islands,
Panama, Belize, Gibraltar, Dutch Antilles), which may
be broadened by the Tax Office.
The Tax Office is also authorized to enter into Ad-
vance Price Agreements (APAs) with taxpayers,
which have a validity of three fiscal years.
The five adjustment methods recognized by the
Uruguayan transfer pricing rules are:
s comparable price between arms length parties
method;
s resale price between arms length parties method;
s cost plus method;
s profit split method; and
s transactional net margin method.
Guzman Ramirez
Bergstein Attorneys-at-law
Tax Department
gramirez@bergsteinlaw.com
TPIJ ISSN 2042-8154