Uruguay has implemented a bearer share identification system to bring its bearer share regime into compliance with OECD requirements. The government announced on September 18 that Uruguay will move on to Phase 2 of the OECD peer review as originally scheduled (that is, in the first semester of 2014).
Why the Changes?
In October 2011 the OECD Global Forum on Transparency and Exchange of Information issued its Phase 1 peer review report for Uruguay. The report, published on October 26, advised against proceeding to the Phase 2 review until Uruguay acted on the recommendations to improve its regulatory framework.
One of the main objections raised by the report was that Uruguay did not comply with the terms of reference regarding availability of ownership and identity information for all relevant entities.
To address this issue, the executive branch on December 27, 2011, sent to parliament a bill to create a bearer shareholder identification system. The bill was passed as Law 18,930 in July. It entered into force on August 1. The government was confident that with the changes to the bearer shares regime and the advances in negotiations of tax information exchange agreements with Argentina and Brazil, the country would be able to proceed with the Phase 2 review. (For prior coverage, see Tax Notes Int'l, Jan. 9, 2012, p. 120, Doc 2012-2, or 2012 WTD 2-4; see also Tax Notes Int'l, Jan. 2, 2012, p. 35, Doc 2011-26692, or 2011 WTD 245-7.)
What the Changes Entail
Law No. 18,930 modifies the traditional Uruguayan bearer shares regime and implements an identification system administered by the Uruguayan Central Bank (BCU). Registered and book entry shares will be unaffected by the new regime.
Who Must Report to BCU?
The following entities must report to BCU:
- Resident entities: any Uruguayan resident legal entity (that is, corporation or joint stock company) whose equity participations are represented by bearer certificates. Legal and other entities incorporated under Uruguayan legislation are considered resident entities for this purpose.
- Foreign entities operating in Uruguayan territory through a permanent establishment or having their management in Uruguay (that is, management and control of their activities) for the purpose of engaging in business activities in the country or abroad.
- Foreign investment funds whose administrators reside in Uruguay and foreign trusts whose trustees or administrators are Uruguayan residents.
The above entities are only required to report direct ownership of the equity participations, not the identity of the beneficial owner of the shares.
The following entities are not required to report to BCU:
- entities issuing registered or book entry shares;
- entities whose shares and other securities are listed on the stock exchange, if the securities are immediately available to be sold or acquired in the market; and
- entities that convert their participations to registered securities within a 60-day term beginning August 1, through an abbreviated procedure for amendment of bylaws.
The Corporate Oversight Authority is the agency in charge of supervising compliance with obligations arising from the law and applying the pertinent penalties. It is likewise empowered to report noncompliance to BCU and the Revenue Service (DGI). The following penalties are provided for those with reporting obligations:
- for shareholders and other holders of participations:
— suspension of corporate rights (for example, voting at meetings, collection of profits); and
— fines of up to UYU 475,000 (about $22,500); and
- for issuing entities (companies):
— a fine of up to UYU 475,000;
— if dividends, redemptions, withdrawals, or assets remaining upon liquidation or any similar items are paid, a fine up to a maximum equivalent to the amount unduly distributed; and
— suspension of the tax payment certificate issued by the DGI and disqualification for registering legal acts with the General Registry Office.
Access to Information Held by BCU
The information received by BCU will not be publicly available. In order to access this information, the DGI will need to prove that it is conducting an audit regarding a specific taxpayer or that it has received a grounded request from a foreign country with which Uruguay has a tax treaty or TIEA in force. The information will also be available if requested by a criminal court or in alimony or child support proceedings, and for anti-money-laundering purposes.
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