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12.4.1. Main Rules

Uruguay requires that transactions with non-resident related parties and parties in low tax or no tax jurisdictions be conducted in accordance with the arm’s length principle. If a transaction is deemed non-compliant the tax authorities are empowered to make an adjustment.

The transfer pricing rules are based on the OECD guidelines.

Definition of Related Parties

For transfer pricing purposes, related parties are generally defined as when one party directly or indirectly participates in the management and control of the other party through capital participation, credit rights, or functional or contractual influences. The rules also apply to transactions with foreign subsidiaries, branches, permanent establishments or other related foreign entities. Parties will also be considered related when a third party directly or indirectly participates in both parties.

There is generally no prescribed threshold for participation. However, when looking solely at capital participation, the threshold is at least 10%.

Uruguay's transfer pricing rules also apply to parties located in no or low tax jurisdictions (see Sec. 12.5.), and parties located in Uruguay free zones. Non-related parties located in no or low tax jurisdictions are generally excluded from the rules if the jurisdiction has entered into a tax information exchange agreement with Uruguay, and the jurisdiction has no banking or other types of secrecy or privacy laws.

Applicable TP Methods

The transfer pricing methods allowed by the Uruguayan tax authorities are in line with OECD guidelines and include the following:

  • Comparable uncontrolled price (CUP) method;
  • Resale price method;
  • Cost-plus method;
  • Transactional net margin method (TNMM);
  • Profit split method; and
  • Any other method as may be prescribed by the tax authorities from time to time.

An additional method is used in the case of transactions dealing with the import and export of commodities that have well known prices in a transparent market. For such transactions the price should be based on the goods’ quotation in the transparent market on the date of a registered contract or the bill of lading date for non-registered contracts. Aside from the use of the additional method for commodities, there are no preferred methods and the best method should be used.

Use and Availability of Comparables

Taxpayers are generally not limited in their use of comparables and foreign comparables are allowed if sufficient local comparables are not available. The geographical market conditions are taken into account to carry out comparability. There are no rules concerning the source of comparables. There is no restriction on the use of secret comparables.