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Uruguay - Annihilation of banking secrecy

The new year 2017 has started for Uruguay with much less privacy that the previous one. In December 2016 Uruguay’s Parliament approved the Fiscal Transparency Bill, which, on the one hand, eliminates bank secrecy for fiscal purposes and, on the other hand, puts an end to the anonymity of corporations and other legal entities.

Taking into account that international standards are strongly influenced by fiscal transparency and anti-money laundering, these changes are not surprising. The growing demand for global transparency and control of capital flows anticipated this bill, non-collaboration with the international system would mean isolation on several fronts.

Starting from the 1st of January 2017 the local tax authorities are receiving from the financial institutions information on the savings and investments of their clients, residents and non-residents of Uruguay. This information will serve for their own use, which is tax calculations and investigations and improvement of tax collection. In case of non-residents, the information will be passed on to the tax authorities of cooperating countries.

The fiscal database will be completed with annual reports provided by banks and other financial institutions, such as Savings and Loans Associations, trusts, investment funds, brokers, etc. Insurance companies are also required to report with respect to those clients who hold an annuity contract or whenever they recognize a savings component in the insurance contract.

The gathered information will relate to the balance of the client’s account, financial assets held in custody or in investments on behalf of third parties and any gain or return generated by the balances or securities on the bank account and / or financial assets. The information shall correspond to the close of the calendar year. The average annual balance of the accounts will also be reported.

Anonymity of public limited companies and other legal entities has also been terminated. The new bill approved modifications that will allow to know who is the final beneficiary, that is, the true owner behind the legal entity. In addition to corporations, the law is applicable to mutual funds and trusts. The final beneficiary means any person who brings at least 15% of the company’s capital or holds the equivalent voting rights, or, in the absence, the natural person that by any other means exercises the final control over the legal entity. The measure also reaches final beneficiaries of investment funds and foreign trusts whose administrators or fiduciaries reside in Uruguay. The only exceptions are limited liability companies, agrarian societies, de facto partnerships and civil societies, provided that the partners are natural persons.

This information will be incorporated in the registry that is already maintained by the Central Bank of Uruguay.

The end of anonymity also applies to non-resident entities, such as companies incorporated in other countries, provided that they maintain close ties with Uruguay, such as a branch or investments in Uruguay.

 

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