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12.4.2. Specific TP Issues

The domestic law does not specifically provide for transfer pricing rules or special measures for determining the arm’s length price for transactions involving intra-group services, intangible property or financial transactions. However, the general transfer pricing rules under the domestic law and its regulatory decree apply for determining the value of such transactions.

Management Fees

In general, management fees are deductible as long as they are incurred in the production of taxable income and are shown to be necessary for a business.  However, such fees must be taxable under Uruguay's income tax on non-residents or an effective income tax imposed aboard. If the overall rate of tax is less than the Uruguayan income tax on economic activities (IRAE), then the deductibility of the fees will be proportional.

Permanent Establishment (‘AOA Approach’)

Under the Authorized OECD Approach (AOA), the OECD has published guidelines for the allocation of profits to permanent establishments. Currently, there are two tax treaties of Uruguay that have incorporated the latest Authorised OECD Approach (AOA) which is based on Article 7 of the OECD Model Tax Convention. Uruguay can apply the OECD approach in the context of a DTA only if it has the new version of Article 7.