8 GLOBAL TAX BRIEFING
eficial owner of the entity abroad, recipient of these remittances;
(2) the proof of operating ability of the individual or legal entity
abroad to carry out the transaction; and (3) the documentation
supporting the payment of the price and the receipt of goods,
rights or use of service.
7
Brazilian rules related to transfer pricing, thin capitalization, and
to deductibility of any remittances made to beneficiaries under
privileged tax regimes.
8
One of the most criticized matters by the U.S. is the Brazils position
to tax at source any and all types of income. On Brazils side, the U.S.
is criticized as it does not agree with the inclusion of the so-called
matching credit or tax sparing clauses in the Tax Treaty (such
clauses aim at stimulating transactions between the Contracting
States through the granting of deemed or fictitious credits to the
beneficiary of the income, in its country of residence).
9
Pursuant to the Brazilian Federal Constitution, the Executive
Copernican Changes to the Uruguayan Tax System
by Guzmn Ramrez, Ferrere, Montevideo, Uruguay
The government shook the local market upon announc-
ing its intention to make two changes that would set
aside two state policies in Uruguay. The first prospective
policy change would impact banks, and bank secrecy
vis--vis the tax authorities, resulting in the elimination
of bank secrecy for tax purposes. The second prospec-
tive change announced by the government would have
a significant jurisdictional impact on the application
of Uruguayan taxes only on income and assets located
in Uruguay. According to the announcement, global
investment income of individuals residing in Uruguay
would be subject to tax. The bill was remitted to Parlia-
ment on June 7, 2010, and it is expected that changes
will take effect on January 1, 2011.
The End of Bank Secrecy
The Uruguayan tax authority does not have, under the
current system, access to bank accounts of taxpayers
subject to audit. Furthermore, the taxpayers duty of
collaboration with the tax authority does not compel the
taxpayer to show the tax authority or grant it access to
bank accounts maintained by the taxpayer. Therefore, the
taxpayer may refuse access to its banking information, and
the taxpayers refusal to show the details and movements
of its accounts cannot be interpreted as bad faith, since
the refusal implies the legitimate exercise of a taxpayers
2010 CCH. All Rights Reserved.
Measures that increase taxes shall only produce effects in the
subsequent year to the one when the law resulting from the
Executive Measure is published.
10
Pursuant to the Brazilian Federal Constitution, the Executive
Measures that increase social contributions shall only produce
effects 90 days as from their publication date.
11
Please note that the regulation of the PRL 60 set in Normative
Instruction 243/02 is not in full agreement with the provisions
of Law 9430/96. This has generated substantial controversy,
as taxpayers argue that the rules of Normative Instruction
243/02 are illegal because they increased taxation without legal
grounds. However, tax authorities still carry out assessments
based on the provisions of Normative Instruction 243/02 and
claim that such rules are merely an interpretation of the word-
ing of Law 9430/96 and are, therefore, legal. Until the present
date, no final decision has been issued on the matter.
right. The proposed reform would, however, completely
eliminate bank secrecy in favor of the tax authority.
Under the proposed reform, the tax authority would
be allowed to judicially request and obtain an order
lifting secrecy each time the tax authority wishes to
verify the veracity of the taxpayers declaration, as
stated in the bill. The expression, to verify the ve-
racity of the taxpayers declaration, is so broad that
its justification relegates the judges involvement in
rendering the order a mere procedural formality and
it is unlikely that the taxpayer could challenge the
lifting of banking secrecy practically in any case.
Changes to bank secrecy and Tax Information
Exchange Agreements (TIEAs)As of April 2009,
Uruguay had signed eleven Tax Information Exchange
Agreements, which are at different stages of approval.
These agreements were signed to avoid serious sanc-
tions by the OECD, as the OECD threatened sanc-
tions against countries that would not enter into
TIEAs lifting bank secrecy in favor of at least twelve
foreign tax authorities.
The bill sets out the judicial procedure through
which bank secrecy would be lifted, based on the tax

information requirements of tax authorities from coun-
tries with which TIEAs were executed. The procedure is
relatively quick and affords the taxpayer an opportunity
to challenge access to banking information.
Per state policy and tradition, Uruguay will not deliver
banking information to foreign tax authorities with
which Uruguay has no executed TIEAs in effect. Let us
not forget that Uruguayan criminal law judges do not
even cooperate with foreign criminal courts in criminal
tax fraud cases. This is because Uruguay considers tax
crimes to be true political crimes. Uruguayan state
policy has invariably been to not cooperate in criminal
tax fraud investigations, and less still in tax infringements
carried out in third countries. To date, international
criminal cooperation treaties executed by Uruguay in-
variably exclude tax crimes. The country only cooperates
with tax crime investigations if two conditions are met:
(1) the case involves tax fraud; and (2) the tax fraud is
carried out to conceal money derived from another crime
that is included in the treaty being executed.
Worldwide Taxation of Personal Income
Proposed amendments to the Personal Income Tax
(IRPF) imply a significant departure to the Uruguayan
tradition of only taxing income generated in Uruguay.
Pursuant to the reform, interest on deposits and place-
ments in foreign banks and other entities that are not
domestic Uruguayan entities, as well as dividends
received from foreign corporations, will be subject to
Regulations Approved in Panama
by Javier Said Acua and Ral Gonzlez Casatti, Rivera Bolivar y Castaedas, Panam
The Panamanian legislature recently adopted Law
No. 33 to adequately regulate compliance with treaties
or agreements executed to avoid international double
taxation. Specifically, Chapter IX was added to Title
I of Book IV of the Tax Code, entitled Adjustment
Rule to comply with the Treaties for the Avoidance
of International Double Taxation.
CCH Global Tax Briefing
September 30, 2010 9
IRPF at a rate of 12%, provided that the owner or
recipient is an Uruguayan resident for tax purposes.
Net worth tax on assets held by Uruguayan citizens
residing in Uruguay but located abroadCurrently,
a net worth tax is levied on the net worth of individuals
located in Uruguay with rates ranging from 0.7% to
2%. The proposed amendments prescribe that loans
made to persons abroad, foreign placements, and shares
or stakes in non-resident companies shall be subject to
the net worth tax. These assets will be taxed at 20%
of their value.
What is peculiar is that these assets will only be subject
to tax if the owner is an Uruguayan citizen residing in
Uruguay. That is to say, foreign residents in Uruguay
that have not acquired citizenship do not have to pay a
net worth tax on assets located abroad. Foreign persons
living in Uruguay are not obligated to seek Uruguayan
citizenship, regardless of how long they have resided in
the country. Foreign persons who obtain Uruguayan
citizenship can lose same if such naturalized citizen
subsequently obtains citizenship of another country,
for example, citizenship obtained through marriage.
No changes for off-shore companiesThe first draft
of the proposed amendments required Uruguayan
companies to pay a net worth tax on assets located
abroad. However, this was later modified by the gov-
ernment. The Minister of Economy declared that no
changes are planned in the companies tax regime.
For several years, Panama had indicated its willingness
to adopt the transparency principles and execute
the Tax Information Exchange Agreements promoted
by the Organisation for Economic Co-operation and
Development (OECD). Panama, at the request of the
OECD, signed a letter of intent that committed the
country to legislative reforms seeking an exchange of