Dr. Andrés Blanco, tax consultant at VLL, shares with us on this occasion the general framework for succession planning in Uruguay.

1. Non-tax legal aspects

Given one or more natural persons, Uruguayan or foreign, who concentrate their personal assets in a Uruguayan company (for example, a public limited company), the following legal effects could be obtained:

• In Uruguay, agreements between shareholders are admissible both for decision-making (obligation to have special majorities for certain types of decisions that are deemed appropriate), and also for the “blocking” of the sale of shares (obligation to offer existing shareholders existing shareholders the shares before selling them to third parties), with terms that can be very flexible; For example, a predetermined form of valuation of the shares for the internal offer can be agreed, mechanisms for increasing the other shareholders in case one or more do not wish to buy, etc.

  These agreements are transferable to successors, so in the event of the death of a shareholder, their successors will continue to be bound to it during its validity. This is a way to avoid the immediate dispersion of ownership of an estate in the event of death.

• By concentrating the assets in a company, in the event of the death of one or more owners, it is only necessary to carry out a succession process in Uruguay, since in principle there is only one type of asset, shares, which are legally located at the domicile of the entity that issues them. This can be an advantage since it eliminates the need to initiate as many succession procedures as there are States in which assets are located.

2. Tax aspects

In the case of concentrating assets located in several States in Uruguay, to the extent that the conditions for this are maintained, passive income from foreign sources will not be covered by the IRAE and, at the same time, for non-resident shareholders, the dividends paid by the company will not be taxed by the Non-Resident Income Tax (IRNR).

In the event of the death of one of the shareholders, to date there is no general inheritance tax in Uruguay but only the Property Transfer Tax (ITP) on real estate, so the transfer by succession of shares of a corporation is not covered by any tax.

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