On September 23, 2024, the Parliament of the Oriental Republic of Uruguay approved Law No. 20,367, which ratified the agreement between Uruguay and the Republic of Colombia to eliminate double taxation on income and wealth taxes, as well as to prevent tax evasion and avoidance.
The agreement will enter in force once both countries have completed their respective internal legal ratification procedures. From that point onward, the provisions of the agreement will begin to apply to taxes corresponding to future fiscal periods.
The main purpose of these agreement is to prevent the same income or wealth from being taxed both in Uruguay and Colombia, establishing an excessive tax burden for taxpayers who have operations in both countries. This measure reduces the fiscal barriers that could negatively impact mutual investments and trade. Nonetheless, the agreement establishes mechanisms to overcome tax evasion and avoidance practices, improving transparency and cooperation between both tax administrations.
The Key Points of the agreement are as follow:
- Eliminate double taxation: It is established that income and wealth taxes levied in one of the two jurisdictions will not be taxed again in the other, protecting individuals and legal entities from double taxation.
- Exchange of Information: this agreement facilitates the exchange of information between the tax administrations of both countries, enabling better oversight of cross-border economic and fiscal flows. Fiscal cooperation will be key to detecting and combating tax evasion practices.
- Prevent Tax Avoidance: the agreement establishes clear rules in order to prevent aggressive tax planning strategies that seek to evade tax payments. Restrictions are imposed on the use of intermediary entities and other tax planning strategies that aim to take advantage of the differences between the tax regimes of both countries.
- Benefits for Business and Investors: with the elimination of double taxation, Uruguayan and Colombian companies will be able to operate with greater certainty and fiscal predictability, enhancing the conditions for direct investment between both countries. Additionally, the agreement is expected to foster a more attractive business environment, as it will reduce the fiscal costs associated with international investment.
- Non-discrimination Clause: The agreement ensures that nationals of one of the contracting states will not be treated less favorably than nationals of the other state, eliminating discriminatory barriers in investments and cross-border operations.
Beneficiaries of the agreement:
This agreement will benefit both individuals and legal entities residing in Uruguay and Colombia that engage in transnational economic activities. Among the main sectors that could be favored are trade, infrastructure investment, and finance, as the elimination of double taxation provides direct fiscal incentives.
The tax experts at Carlos Picos Consultora can advise companies and taxpayers in general on the details and implications of this agreement.
For more information, please do not hesitate to contact us.
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