Uruguay
This report analyses the implementation of the AEOI Standard in Uruguay with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Overall findings
AEOI legal framework
Uruguay’s legal framework implementing the AEOI Standard is in place but needs improvement in order to be fully consistent with the requirements of the AEOI Terms of Reference. While Uruguay’s international legal framework to exchange the information with all of Uruguay’s Interested Appropriate Partners (CR2) is consistent with the requirements, its domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) has a deficiency significant to the proper functioning of an element of the AEOI Standard. More specifically, the rules to prevent persons or intermediaries from adopting practices intended to circumvent the due diligence and reporting procedures are insufficient in scope.
Overall determination on the legal framework: In Place But Needs Improvement
Effectiveness of AEOI in practice
Uruguay’s implementation of the AEOI Standard is on track with respect to the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. This includes ensuring Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1) and exchanging the information in an effective and timely manner (CR2). Uruguay is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
Overall rating in relation to the effectiveness in practice: On Track
General context
Uruguay commenced exchanges under the AEOI Standard in 2018.
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Uruguay:
enacted Decree 77/017, as amended by Decree Nº 243/2018 and Decree Nº 74/022;
published Frequently Asked Questions, which are not legally binding; and
made reference to Law 19.484 for purposes of the identification of Controlling Persons under the AEOI Standard.
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2017. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2017 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2018.
Following the initial Global Forum peer review, Uruguay made various amendments to its legislative framework to address issues identified, the last of which was effective from 3 March 2022.
With respect to the exchange of information under the AEOI Standard, Uruguay is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2018.
Table 1 sets out the number of Financial Institutions in Uruguay that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). It also sets out the number of Financial Accounts that they reported in 2021. In this regard, it should be noted that Uruguay requires the reporting of Financial Accounts held by all non-residents and domestic residents and some accounts may be required to be reported more than once (e.g. jointly held accounts or accounts with multiple related Controlling Persons), which is reflected in the figures below. These figures provide key contextual information to the development and implementation of Uruguay’s administrative compliance strategy, which is analysed in the subsequent sections of this report.
Table 2 sets out the number of exchange partners to which information was successfully sent by Uruguay in the past few years (including where the necessary frameworks were in place, containing an obligation on Reporting Financial Institutions to report information, but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to Uruguay’s exchanges in practice, which is also analysed in subsequent sections of this report.
In order to provide for the effective implementation of the AEOI Standard, in Uruguay:
the General Taxation Directorate (the tax authority) has the responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions and for exchanging the information with Uruguay’s exchange partners;
technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place by providing an online portal to file reports; and
the Common Transmission System (CTS) is used for the exchange of the information, along with the associated file preparation and encryption requirements.
It should be noted that the review of Uruguay’s legal frameworks implementing the AEOI Standard concluded with the determination that Uruguay’s domestic legal framework is In Place But Needs Improvement and its international legal framework is In Place. This has been taken into account when reviewing the effectiveness of Uruguay’s implementation of the AEOI Standard in practice and where particular identified gaps in Uruguay’s legal frameworks directly impact its implementation in practice, these are mentioned below.
Findings and conclusions on the legal frameworks
The detailed findings and conclusions on the AEOI legal frameworks for Uruguay are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Determination: In Place But Needs Improvement
Uruguay’s domestic legislative framework is in place and contains most of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures, but it needs improvement in one area relating to the framework to enforce the requirements (SR 1.4). More specifically, the rules in Uruguay’s legislative framework to prevent persons or intermediaries from adopting practices intended to circumvent the reporting and due diligence procedures are insufficient in scope as they do not cover all relevant persons and circumstances.
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
Uruguay has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
Uruguay has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
Uruguay has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
Uruguay has a legislative framework in place to enforce the requirements in a manner that is largely consistent with the CRS and its Commentary. However, a deficiency has been identified. More specifically, Uruguay’s legislative framework does not include rules to prevent all relevant persons or intermediaries from adopting practices intended to circumvent the reporting and due diligence procedures as required. This is a key element of the required enforcement framework and is therefore material to the proper functioning of the AEOI Standard.
Uruguay should amend its domestic legislative framework to include rules to prevent all Financial Institutions, persons and intermediaries from adopting practices intended to circumvent the due diligence and reporting procedures, rather than just those on whom the AEOI Standard imposes an obligation.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
Uruguay’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Uruguay’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Uruguay and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
Uruguay has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
Uruguay put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
Uruguay’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for Uruguay are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.
Uruguay’s implementation of the AEOI Standard is on track with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures and are therefore reporting complete and accurate information. This includes ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5), and collaborating with exchange partners to ensure effectiveness (SR 1.6). Uruguay is encouraged to continue its implementation process to ensure its ongoing effectiveness.
SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:
an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:
i. be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);
ii. include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;
iii. include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and
effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;
effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;
strong measures to ensure that valid self-certifications are always obtained for New Accounts;
effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and
effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.
In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, Uruguay implemented all of the requirements in accordance with expectations. The key findings were as follows:
Uruguay implemented an overarching strategy to ensure compliance with the AEOI Standard developed after conducting a risk assessment that took into account a range of relevant information sources, such as tax compliance performance and questionnaire responses. Uruguay’s compliance strategy facilitates compliance and incorporates a credible approach to enforcement. Uruguay intends to keep its compliance strategy and risk assessment under review to ensure its effectiveness on an ongoing basis.
Uruguay has worked effectively to understand its population of Financial Institutions, including relevant non-regulated entities, utilising various relevant information sources, such as business activity information in its tax records, contacting financial intermediaries, and cross-checking against the Foreign Financial Institution list for FATCA purposes. Uruguay is taking action to ensure that Reporting Financial Institutions are classifying themselves correctly under its domestic rules and reporting information as required. Uruguay intends to keep its understanding of its Financial Institution population up to date on a routine basis.
The institution responsible for implementing Uruguay’s compliance strategy appears to have the necessary powers and resources to discharge its functions. With respect to resourcing, Uruguay has assigned the equivalent of 3 full time and 13 part time staff to monitor and ensure compliance by Reporting Financial Institutions, which have access to IT systems and tools to conduct risk assessments. Overall, they appear to have effectively implemented an operational plan to verify compliance with the requirements, incorporating appropriate compliance activities.
It appears that Uruguay effectively enforces the requirements, including through the inspection of records of Reporting Financial Institutions and the application of dissuasive penalties and sanctions for non-compliance. Uruguay has conducted six verification audits and two onsite audits and plan to conduct more audits. During the verification audits Uruguay has taken an effective action to ensure self-certifications are obtained as required and to follow up on undocumented accounts. Uruguay has a plan to follow up in cases of circumvention involving Financial Institutions, although it is unclear whether it is able to take effective action to address circumvention of the requirements, by requiring the correct information to be reported in all circumstances where circumvention is detected. This reflects its lack of a legal basis to prevent persons or intermediaries, other than Financial Institutions, from adopting practices intended to circumvent the reporting and due diligence procedures.
Uruguay has developed plans or procedures to keep its jurisdiction-specific lists of Non-Reporting Financial Institutions and Excluded Accounts under review to ensure they continue to pose a low risk of being used for tax evasion purposes.
Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.
With respect to the Financial Account information collected and sent by Uruguay, the presence of the key data points of the Tax Identification Numbers and dates of birth appeared to be in line with most other jurisdictions, as did the level of undocumented accounts. More generally, many of the exchange partners that received a significant number of records from Uruguay indicated that they achieved a success rate when matching the information received from Uruguay with their taxpayer database that was broadly equivalent to, or better than, what they usually achieve.
Based on these findings it was concluded that Uruguay is fully meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. Uruguay is encouraged to continue its implementation process accordingly.
SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires jurisdictions to:
use all appropriate measures available under the jurisdiction’s domestic law to address errors or non-compliance notified to the jurisdiction by an exchange partner; and
have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the jurisdiction of the exchange partner.
In order to collaborate on compliance and enforcement, it appears that Uruguay implemented all of the requirements in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent) in accordance with expectations. While no such notifications have yet been received, Uruguay has the necessary systems and procedures to process them as required. It also appears that Uruguay will notify its partners effectively of errors or suspected non-compliance it identifies when utilising the information received.
Based on these findings it was concluded that Uruguay is fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. Uruguay is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating and transmitting it in accordance with the AEOI Standard.
Uruguay’s implementation of the AEOI Standard is on track with respect to exchanging the information effectively in practice, including in relation to sorting, preparing and validating the information (SR 2.4), correctly transmitting the information in a timely manner (SRs 2.5 – 2.8) and providing corrections, amendments or additions to the information (SR 2.9). Uruguay is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).
Feedback from Uruguay’s exchange partners did not raise any specific concerns with respect to their ability to process the information received from Uruguay and therefore with respect to Uruguay’s implementation of these requirements. More generally, 1 of Uruguay’s exchange partners reported rejecting more than 50% of the files received due to the technical requirements not being met. This is a low amount when compared to other jurisdictions. It was noted that Uruguay has contacted the exchange partner to address the issue.
Based on these findings it was concluded that, Uruguay is fully meeting expectations in relation to sorting, preparing and validating the information. Uruguay is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.
In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, Uruguay linked to the CTS.
Based on these findings it was concluded that Uruguay is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. Uruguay is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.
Feedback from Uruguay’s exchange partners did not raise any concerns with respect to timeliness of the exchanges by Uruguay and therefore with respect to Uruguay’s implementation of this requirement.
Based on these findings it was concluded that Uruguay is fully meeting expectations in relation to exchanging the information in a timely manner. Uruguay is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.
Feedback from Uruguay’s exchange partners did not raise any concerns with respect to Uruguay’s use of the agreed transmission methods and therefore with Uruguay’s implementation of this requirement.
Based on these findings it was concluded that Uruguay is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. Uruguay is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.
Feedback from Uruguay’s exchange partners did not raise any concerns with respect to Uruguay’s receipt of the information and therefore with Uruguay’s implementation of these requirements.
Based on these findings it was concluded that Uruguay is fully meeting expectations in relation to the receipt of the information. Uruguay is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.
Uruguay appears ready to respond to notifications and to provide corrected, amended or additional information in a timely manner and no such concerns were raised by Uruguay’s exchange partners and therefore with respect to Uruguay’s implementation of these requirements.
Based on these findings it was concluded that Uruguay appears to be meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. Uruguay is encouraged to continue to ensure the ongoing effectiveness of its implementation.