Ecovis Germany

Invest in Uruguay: Increase in Tax Benefits for Investment Projects

The Uruguayan government recently approved an increase in the tax benefits granted through the Investment Law (Law 16.906). Under this law, taxpayers could qualify for significant tax exemptions by submitting an investment project that is declared by the executive powers to be in the national interest.

Companies investing in Uruguay in the future can expect a number of tax breaks. These include, for example, new regulations for corporation tax or tax concessions in property tax, VAT and customs duties.

Corporate Income Tax Exemption

1. The tax exemption amount is limited to a percentage of the investment that is committed to being undertaken. This percentage varies according to a score that is assigned to the project based on an indicator matrix (such as job creation, increase in exports, decentralisation, and clean technologies). In addition, depending on the investment project’s sector of activity, businesses can select a sector indicator, explain the Ecovis consultants.
   The increase in tax benefits means that all investment projects executed between 1 April 2020 and 31 March 2021 can be counted as 150% of the amount invested. Furthermore, the percentage assigned by the indicator matrix will be increased by 20%. For example, if an investment of USD 1,000,000 obtained an exemption score of 30%, with the increase in the tax benefits the project can exempt up to 36% of USD 1,500,000.
   These increases to 150% and 20% only apply to projects that have effectively executed at least 75% of the total investment by 31 December 2021.
2. The tax exemption amount is limited to the effective investment carried out, as opposed to what was committed. The planned investment amount could vary and be less than was initially intended. For example, if the approved committed investment was USD 1,500,000 but the amount effectively executed ended up as USD 1,490,000, the tax benefit applies to USD 1,490,000 and not to USD 1,500,000.
3. The tax exemption in each financial year cannot exceed 60% of the tax calculated prior to the exemption. For new businesses, this can be increased to up to 80%. This means that all businesses must pay at least 20 to 40% of the corporate income tax determined for the fiscal year.

The Uruguayan government has launched a series of tax breaks for investments. This strengthens the economy and makes the country attractive to foreign investors.

Montserrat González, Tax Partner, ECOVIS Uruguay, Montevideo, Uruguay

Entitled Investments

The entitled investments include those which undertake the construction of immovable property and the acquisition of movable assets required for the operation of the promoted activity, say the Ecovis experts, who can support companies in the development and evaluation of investments.

Duration

Businesses have a minimum term of three fiscal years to account for the tax exemption.

For further information please contact:

Montserrat González, Tax Partner, ECOVIS Uruguay, Montevideo, Uruguay
Email: montserrat.gonzalez@ecovis.uy

Ecovis is now offering legal services in Argentina

Beside our existing partners ECOVIS ARGENTINA RAMOGNINO, de ALBALADEJO & ASOCIADOS our network now also offers legal services to our clients. We would like to send a warm welcome to our new partners from Estudio Peebles – Member of ECOVIS International in Argentina.

Estudio Peebles – Member of ECOVIS International started its business in October 2012. Carlos Eduardo Peebles, managing partner of the firm, leads a team of four professionals. The firm is client oriented and dedicated to the advice on business law in general including corporate matters (mergers and acquisitions, due diligence), commercial law, contracts, antitrust matters, labour, compliance and real estate law.

Welcome to the Ecovis family!

Government Assistance for Small and Medium Enterprises in the COVID-19 Recovery Period

Ecovis in Shanghai

The Chinese Government has implemented various measures to help small and medium-sized enterprises (SMEs) during the Coronavirus pandemic, including tax, social security, financial, scientific and technological support. The main preferential policies available to SMEs are outlined below.

Tax:

1. Value-added tax
Enterprises which provide certain services, including the transport key materials for epidemic prevention and control, public transportation services, living services, or express delivery services of daily necessities for residents, shall be exempt from value-added tax (VAT). Items donated to help fight against the pandemic will also be exempt from VAT and consumption tax. By 31 December 2020, VAT regarding taxable sales revenue will be reduced from 3% to 1% for small-scale VAT taxpayers located outside Hubei Province. Those located within the Hubei Province will be exempt from or receive a suspension of prepaid VAT.

2. Enterprise income tax
Regarding tax losses incurred in 2020, the carry-over period has been extended from five to eight years for those enterprises affected by the epidemic. Donations of cash and articles for epidemic response made by public welfare organizations or the people’s governments at or above the county level, and their departments, can be deducted in full before the calculation of enterprise income tax or individual income tax. These donations will be exempt from tax until 31 December 2020. For the small low-profit enterprises, payment of enterprise income tax for the current period can be postponed until the first reporting period of 2021.

Social insurance:

1. Periodic reduction or exemption of payment by enterprises for pension, unemployment and work-related injury insurance.

From 1 February 2020 to 31 December 2020, micro, small and medium-sized enterprises (MSMEs) shall be exempt from social insurance payments required by employers. From 1 February to 30 June 2020, large enterprises (excluding government authorities and public institutions) will only be required to pay 50% of their social insurance contributions as employers. Enterprises experiencing severe difficulties in production and operation due to the epidemic may apply for deferred payment of social insurance contributions to 31 December 2020, and not incur late fees during this time.

2. Refund of unemployment insurance
Employers and employees who paid unemployment insurance premiums in the previous year will be refunded 50% of the total amount.

3. Payment of social security contributions delayed
The start and end date of 2020 social insurance payments from municipal employees were adjusted to commence July 1 and end June 30 of the following year. The requirement for 2019 social insurance payments from municipal employees was postponed to June 30 2020.

4. Extension of payment period for social insurance contributions
Enterprises which are adversely affected by the epidemic should report to the social insurance office in Shanghai to receive an extension. Payments will then not be required until three months after the epidemic crisis is deemed to be over. There will be no late fees payable.

5. Periodic reduction of basic medical insurance contributions
From February 2020, contributions to employee basic medical insurance required by enterprises will be halved for a period of up to five months. Enterprises experiencing difficulties may defer these payments for up to six months, during which time no overdue fines will be incurred.

6. Lower Medicare rates
From February to December 2020, the rate of basic medical insurance for employees in Shanghai (including maternity insurance) will be reduced by 0.5 %.

7. Periodic reduction of social insurance premiums in Shanghai
Regarding enterprises located in Shanghai, large enterprises were only required to pay 50% of their usual contributions for endowment insurance, unemployment insurance and work-related injury insurance, from the period of February to April 2020. SMEs were exempt from February to June 2020. Regarding basic medical insurance (including maternity insurance), from February to June 2020, the employer’s contribution was reduced to 5.25% (normally 10.5%). From July to December 2020, the employer’s contribution will become 10% (a reduction of 0.5% of the pre-epidemic rate). Employees will still need be paid.

8. Training subsidy
Enterprises located in Shanghai which are affected by the epidemic may receive a subsidy of up to 95% of out-of-pocket costs for providing online vocational training to their employees (including labour dispatch personnel working in enterprises) during the lockout period.

9. Additional support
Other support available may include rent reduction, prime rate loans for SMEs, financing concessions for technology enterprises and cloud service innovative enterprise support.

Please note: foreign residents of China

Individuals who reside in China for 183 days or more in a calendar year are considered a resident for tax purposes. However, due to the epidemic, any foreigners who normally reside in China but are currently abroad cannot return. This will have a significant impact on the personal income tax declaration of these individuals, with regard to the calculation of their monthly salary and bonuses in 2020. Anyone affected by this situation should seek the advice of their tax professional to discuss their specific circumstances.

By Pingwen Hu and Cao Yi