Legislation paving the way for electronic financial products

On April 4, 2014, the Uruguayan Parliament approved Law No. 19, 210. The new ruling aims to promote electronic means of payment such as debit cards, credit cards, electronic money instruments and electronic funds transfers.

Items to be paid for electronically
The law sets out a list of items that should gradually start being paid using electronic means. It includes:

• Salaries and any other salary item paid in cash to employees
• Professional fees
• Payment to self-employed workers who provide personal services
• Retirement, pensions
• Social benefits, family allowances, wage supplements, subsidies, temporary compensation and permanent disabilities income
• Provision of food that is not provided in kind
• Sale of goods or services for approx. USD 5,000 (today’s value) and more
• Leases, subleases, and credit use of real property larger than approx. USD 4,600 (today’s value) or its monthly equivalent
• Payment of national taxes, unless the amount is less than USD 1,250 (today’s value)

Tax provisions
The law includes regulations on Value Added Tax (VAT), Personal Income Tax and Corporate Income Tax.

Value Added Tax
Regarding this tax, the law recently approved establishes an exemption to interests derived from loans granted by credit entities and reductions on tax rates for certain transactions provided that the payment is made using debit cards, electronic money instruments or similar instruments.

Personal income tax
There will be changes in terms of the computation of tax credit of for-lease properties, as well as lease expense; in this case, leases have to be paid by accreditation in bank accounts.
There also is a new constraint for the computation of the value of acquisition when calculating the taxable result of the sale of immovable property: the value at the moment of acquisition needs to have been paid by electronic means.

Corporate income tax
The law establishes new limitations for deductions of expenses in the settlement of the tax. It now requires certain expenses such as leases, freight services and professional fees to have been paid by electronic means or through accredited bank accounts.

Other considerations
When offering payment services for wages, fees, pensions, social and other benefits, financial intermediation institutions – as well as institutions issuing electronic money – must provide such services to all workers, pensioners and beneficiaries who request them and provide said services as a minimum, with certain basic conditions and, moreover, may not charge any fee for the provision of such services.

Conclusion
Apart from contributing to the improvement of general security in Uruguay by reducing the volume of cash circulating in the market, this law also creates an opportunity for a segment of the population that, until the ruling was approved, had limited or no access to electronic financial products.

Author
Montserrat González
montserrat.gonzalez@ecovis.com