Every year-end, both in Argentina and Uruguay, each Financial Institution must prepare the information to send to the Tax Administrations within the framework of the Exchange of Financial Information for Tax Purposes (CRS, for its acronym in English). “All of this is especially important this year 2022 in the framework of relations between Uruguay and Argentina due to the large landing of companies from the neighboring shore and individuals living in Uruguay,” says Diego Vuille, Public Accountant, Postgraduate in Law International Tax and Master in Tax Law from the University of Montevideo and partner of Vuille Lafourcade.
– What is the financial information that Uruguay automatically sends to Argentina?
First of all, to answer this question we must identify if the account at the financial institution is a business account or an individual account. The regulations establish that the only accounts that will be exchange targets will be those domiciled in Uruguay of natural persons with residence in Argentina or those of legal persons defined as Non-Financial Passives whose final beneficiaries have residence in Argentina. It is therefore important to understand the concept of “Passive Non-Financial Entity”. These entities are those where 50% or more of their income is obtained from passive income (leases, dividends, interest, among others).
– And what is the case of Non-Resident Legal Entities?
It is not entirely frequent, but in some cases we see companies that settle in Uruguay under the figure of a foreign branch, which is why they are registered in our tax system as a non-resident entity. For this type of figures, the regulations establish a threshold of a minimum balance of USD 250,000 for the report to operate.
– What is meant by owner or beneficiary of an account?
Financial entities required to report must follow due diligence procedures to detect or recognize the beneficial owners and beneficial owners of the account.
– How are holders for the benefit or account of other people considered?
It is important to clarify that those persons who are holders for the benefit or on behalf of another person (representative, custodian) will not be considered as account holders. Beneficiary shall be understood in these cases as the persons for the benefit or on behalf of whom the account is maintained.
What information does the Financial Institution send to the DGI?
The name, tax identification number and address of the financial entity obliged to report are sent; Identification data of the person subject to communication of information; Account number or its functional equivalent; Balances, values, annual averages and income for all types of financial accounts, in their currency of origin. Although all this information is received by the DGI, when making the shipment abroad, the information on the averages is excluded from the report.
– What is the role of tax residence?
It is vitally important to clarify that tax residence is not a “commodity” but rather that it is a tailored suit where you have to analyze it on a case-by-case basis. For the purposes of the CRS, determining residence plays an important role, but as on some occasions we have clarified, from the strictly point of view of paying the tax, if I do not cease to be a tax resident in my country of origin, few effects going to have obtaining a new residence.
– What would be your recommendation as a tax specialist?
As every year, prior to the cut-off date for the generation of the CRS, December 31, it is advisable to ensure that the Financial Institution has the entity well cataloged in order to identify whether it is a Passive Non-Financial Entity or not. . For this, it is key to periodically send the accounting information (Financial Statements) to the institution to justify the correct qualification. Along with this, if there were changes in the beneficial owners, communicate immediately, since beyond the corporate implication that this entails, it directly affects the information to be reported. Finally, although it is not the subject of this note, to begin to analyze the implications that the progress in exchanges between Argentina and the US may have within the framework of FACTA and how Uruguay may be a jurisdiction that offers important mechanisms for good estate planning. .
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by CEDOC
