Law 19,942, enacted by the Uruguayan government on 26th March this year, establishes a support package for small businesses in light of the health crisis caused by COVID-19 which has hit the small business sector especially hard.
The regulations establish a series of tax waivers for small and medium sized businesses. One of these is the 50% exemption of employer contributions to social security for retirement funds between the period of 1st January 2021 and 30th June 2021 for the industrial and commercial sectors, as well as the transport, tourism, events, and entertainment industries. To qualify, companies are required to have had at least 19 employees during 2020 with earnings of less than 10,000,000 UI [Index Unit] before this law comes into force.
Incentives were also introduced for those starting activities as of 1st January 2021 and who contribute to the Unitax system, with the following rates to be applied during the first three years of activity: 25% in the first 12 months, 50% in the following 12 months, and the full 100% as of the last three months of the final 12 month period. Furthermore, to not leave companies with excessive debts, failure to pay the payment for over 12 months will result in the automatic termination of the company.
Corporation Taxpayers (IRAE in Spanish), who during the tax year ending prior to the law coming into force did not having earnings of over 915,000 UI will not have to make the monthly payments provisioned for in article 93 of Title IV of the TO [Amended Text] 1996 between January and June.
Likewise, the law enhances the capacity of the Executive Power to provision the percentage reduction of the Net Worth Tax (IP in Spanish), with the power to decide on a general percentage for all taxpayers who may enjoy a reduction or be fully exempt from said tax, based on the type of activity, income, or other objective indexes.
The Banco de Previsión Social (BPS) will have the power to introduce simple debt payment arrangements for both individual taxpayers and employers.
In regard to the former, this includes National Health Fund contributions, ranging from 1st May 2018 until the enacting of said law, granting the facilities foreseen in article 1 of Law 17,963. In the case of employer rates, specifically the National Health Fund contributions specified for the period mentioned above, arrangements will be made to pay any outstanding debts in 72 monthly instalments, in Uruguayan Pesos, with a 2% annual interest, until the debt is settled. There is also the option to delay the debt payment by a further 12 months, however, in this case the beneficial period will be reduced to 60 months.
Arrangements will also be made to make it easier to pay BPS the taxes owed under the Unitax system.
In the case of the Internal Revenue Service (DGI in Spanish), the law will also provide for simpler payments for those tax liabilities foreseen in articles 11 and the following articles of the Law 17,555 for any outstanding tax debts from between 1st March and the date that the national state of emergency is declared as having ended, being able to consider the type of activity, the loss of earnings, and other records that may be related.