Uruguay Tax: Deducting Foreign Expenses Gets Harder for Taxpayers IN Uruguay

Additional authorizing documents are now required for Uruguay taxpayers to qualify for a tax deduction on foreign expenses. The Uruguay tax control has announced a change in the requirements for foreign expense tax deductions, resulting in taxpayers providing a couple of documents obtained from the authorities or a well-known audit company in the foreign country.

Current tax law in Uruguay allows foreign expenses to be deducted under the following conditions:

- The expense is taxed at a rate which is at least equal to the corporate income tax rate of Uruguay (which is 25% as of writing) or taxed at a higher rate in the foreign country,
- If the tax rate in the recipient's country are progressive, a tax deduction is allowed corresponding to the highest tax bracket,
- If the tax rate in the recipient's country are not progressive, a tax deduction is allowed corresponding to this tax rate,
- In the case the recipient is a nonresident taxpayer in Uruguay (which is currently taxed at the 12% nonresident tax rate), the tax rate in the foreign country has to be higher than 13% for the expense to be deductible in full.

After the change, Uruguay taxpayers will have to obtain some extra authorizing documents to qualify for deduction of their foreign expenses:

- The Uruguay taxpayer must obtain from the tax authority of the foreign country an authorizing document showing the tax rate applicable to the company receiving the payment, if the country is a low-tax jurisdiction or no-tax jurisdiction. Also required documents are:
- A certificate that contains personal and corporate income tax rates in the foreign country,
- A description which shows the receiving company is subject to those taxes,
- A description showing that a tax credit for nonresident tax paid in Uruguay will not be allowed in the foreign country.

Read more about Uruguay Tax.