Earlier this week, the Brazilian Official Gazette published the Double Taxation Treaty entered into between Brazil and Uruguay in 2019 and enacted by the Brazilian Congress earlier this year (“the Treaty”).
Main provisions of the Treaty are summarized below:
(i) Dividends: Can be subject to a withholding tax at the source – i.e., where the company distributing the dividends is based (the “Company”) – at a maximum rate of 10%, provided that the dividends’ recipient directly owns at least 25% of the Company’s stock. Otherwise, the maximum rate can be increased up to 15% (in Uruguay, standard rate for dividends distribution is 7%).
(ii) Interests: Can be subject to a withholding tax where the paying entity is based, at a maximum rate of 15% (in Uruguay the standard rate over interest payments is 12%).
(iii) Royalties: Can be subject to a withholding tax where the paying entity is based, at a maximum rate of 10%. Where the royalty is related to trademarks, the withholding rate can be increased up to 15% (in Uruguay, the general rate on royalty payments is also 12%).
(iv) Technical services/assistance: Fees for technical services can be taxed in the country where the paying entity is resident, at a maximum rate of 10%.
Along with the several platforms offered by the Uruguayan jurisdiction -including free trade zones, free ports and tax holidays for new Uruguayan tax residents-, the Treaty is scheduled to become a valuable mechanism to promote business between Brazil and Uruguay.
The above communication has been prepared just for information purposes. It cannot be construed as legal advice provided by Bergstein Abogados. Should you have any further questions, please feel free to contact Dr. Guzmán Ramírez (email@example.com) and/or Dr. Domingo Pereira (firstname.lastname@example.org).