With effect January 2018, Law 19.535 determined that the following services were subject to tax:
• Mediation or intermediation services conducted through electronic means
• Audiovisual digital services directly provided to Uruguayan customers
For both VAT and Income Tax/Withholding tax, the user is considered to be 50% sourced from Uruguay when the service provider is foreign.
A recent Decree of May 24th 2018 provides additional guidance to apply the taxation from a direct and indirect perspective, in concepts like:
Factors used to determine the service usage location:
• The internet protocol (“IP address”) of the device used for contracting or purchasing the service
• The invoicing address of the client
If neither of these factors is verifiable, the service is considered Uruguayan if paid via electronic means from Uruguay.
Definition of “mediation” and “intermediation” digital services:
• Those that are automated, require minimum human intervention, and are not feasible without information technologies
• Those that imply direct or indirect interaction between the supply and the demand of the service being provided.
Obligation to withheld in Corporate Income Tax: In the case of Audiovisual services (streaming etc…) the obligation is maintained, but in the Mediation and Intermediation platform services the withholding obligation of the law has been for now suspended.
Any foreign taxpayer that is responsible for taxes must be registered locally for tax purposes through upcoming simplified procedures.
Regardless the clarifications and assistance for application introduced by the Decree, the most interesting aspect of the Uruguayan approach continues to be the “in parity” deemed source taxation allocation (50/50%) when the service provider is not established at all in the country.