On 19 September 2024, Law No. 20.351 ratifying the Agreement between the Oriental Republic of Uruguay and the United States of America for the Exchange of Information on Tax Matters, signed on 24 October 2023 in Montevideo, was approved.
The rule will enter into force one month after Uruguay notifies the United States in writing of the completion of its domestic procedures.
The tax information exchange agreement between Uruguay and the United States is a key instrument in the fight against international tax evasion and the increase of financial transparency. This agreement, which is part of global efforts to improve tax cooperation between countries, allows the tax authorities of both countries to share relevant information on the income and assets of their respective tax residents.
This agreement, in addition to promoting transparency, reinforces Uruguay’s commitment to align with international standards set by the OECD and other global organisations on tax cooperation.
Currently, the agreement facilitates the exchange of information upon request, i.e. when one of the countries requests specific data on a taxpayer. However, this mechanism could evolve into a system of automatic exchange in the future, as is the case in other international agreements. This would mean that financial information would be shared regularly between the two countries without the need for a prior request.
The agreement also provides for the exchange of information on a spontaneous basis, where the information is sufficiently relevant to fulfil the purpose and scope of the agreement.
The agreement covers the exchange of information on natural or legal persons.
What are the implications of the Tax Information Exchange Agreement between Uruguay and the United States?
Tax Transparency and Anti-Avoidance The agreement allows both countries to access information on income and assets of their tax residents, which facilitates the detection of possible tax evasion. This translates into an environment of greater transparency and accountability for taxpayers, both at the personal and corporate level.
Impact on Investments and Financial Accounts Tax residents in Uruguay with assets or accounts in the United States, and vice versa, should be aware that this information may be shared between the tax authorities of both countries.
Protection of Information and Confidentiality While the agreement promotes transparency, it also establishes strict confidentiality rules to protect taxpayers. The information exchanged can only be used for tax purposes, and its disclosure is strictly regulated.
Effects on Multinational Enterprises Multinational enterprises operating in both countries face increased tax compliance requirements.
Compliance and Penalties Taxpayers that fail to comply with their tax obligations in either Uruguay or the United States face penalties. These penalties can range from administrative fines to, in more serious cases, criminal liability. In the United States, penalties for tax evasion can include heavy fines and prosecution.
Harmonisation with International Standards Uruguay is moving ever closer to international standards of tax transparency. This agreement with the United States reinforces its reputation in the global financial arena, facilitating the attraction of foreign investment and improving its competitiveness in international markets.
Carlos Picos Consultora’s team of tax experts can advise you on the impacts that this Tax Information Exchange Agreement between Uruguay and the United States has on your particular case.
For more information, do not hesitate to contact us.
