Uruguay

General Information

information.

Cooling-off Period
No legislation.

Pyramid Schemes
No legislation.

Multi-Level Marketing
No legislation.

Prohibition on Products
NNo legislation prohibiting sale of products / services exclusively to direct sellers. Nevertheless, there are some products which can only be sold in specific stores (ie, sunglasses in optician’s shops, vitamins in drug stores).

Credit Restrictions Country
No legislation.

Money Collections
No legislation.

Licenses
No legislation.

Status of Direct Sellers
Under Article 2 of Law 14625 of 4 January 1977 it is assumed that manufacturers and importers distribute their own products. They are thereby subject to the requirements of Social Security and taxation as set out in the special regulations governing each of these subjects. The same provision also applies to requirements under industrial accident insurance.

Article 4 of the same law excludes independent salespeople from its provisions. To qualify as such they must fulfill the following requirements:

1. They receive no instructions from the manufacturer or distributor regarding methods of selling, conditions and selling price of the items they sell.
2. They sell the merchandise directly to the customer.
3. They assume all risks of sale.

Independent direct selling (ie, without any employee relationship between salesperson and company) may be effected by an individual or by a company and may take the following forms:

1. Retail Merchant (the most common form) – a person who makes the sale by acquiring and reselling the merchandise being remunerated by the difference between the sale price (usually recommended by the manufacturer) and the price paid for the goods. They trade on their own account as individually or corporately.
2. Commission Merchant – a person who sells as intermediary between the purchaser and the manufacturer, being remunerated by commission based on percentage of the sale price. Persons effecting the sale can act in the name or as representative of the manufacturer (which makes them agents) or act on their own behalf (which makes them commission merchants).

Earnings Claims
No information.

Taxes and Fees

Individual Merchant Direct Sellers, as defined in Section IX on Status of Direct Sellers, are liable to two types of taxes:

1. Income Tax (IRAE) which taxes net income from Uruguayan sources earned by persons from capital and work at the rate of 25%. They can choose if paid the tax on a “real method” (Real Income – Real expenses) and a tax rate of 25% or 12% of all the Income.
2. Value Added Tax (VAT) which is levied on (among other items) the sales of goods within the country, at the rate of 22%.

There are exemptions from both taxes if the gross income is below a certain amount (in 2007 – approximately US$ 20,000). Nearly all direct sellers come within this exemption. Direct sellers exempt from the two taxes are subject to a single small companies tax (amounting to approximately US$ 40 per month in 2007).

Individual Commission Merchant Direct Sellers are liable to:

1. Income Tax, they can choose a tax rate of 12% for all the income or at the 70% of the income a plicate a progressive rate (0% – 25%), and
2. VAT at the rate of 22%, which is the same rate as sales services taxes.

Corporate Income Tax

Corporations: all kind of society (SA (Inc) or SRL (Limited Responsibility)) are levied with 25% Income Tax payable to the DGI (Internal Revenue Service). Dividends paid to shareholders are levied with 7% income tax.

Value Added Tax (VAT)

Applies on the internal circulation of goods, on the supply of services inside Uruguayan territory and the importation of goods to the country (there are few exceptions). The tax is applied at two different rates: a general rate of 22% and a minimum rate of 10% on specific goods and services which include primary food and medical products. The bigger part of products sold by direct selling companies is levied with 22% VAT.

Decree 186 / 94 of 3 May 1994 – Direct Selling companies must act as VAT and INT (Income Net Tax) collect agents of the sales reps.

Resolution 174 / 94 of the Internal Revenue Service (DGI) dated 27 May 1994 – The INT deduction was cancelled out and it was established that a coefficient 0.65 had to be applied to the VAT (22%) in such a way that the VAT paid by the sales reps is 22% x 0.65 = 14.30%.

Individuals (Sales Persons)

All individual sales persons must register in the DGI except direct selling representatives:

• Companies with sales over US$ 20,000 apply the same levies applied to SA (Inc) and SRL (limited responsibility)
• Companies selling under US$ 20,000 have to pay a monthly amount of US$ 40

Payment of Commission to Salespersons

This case applies to persons who do not buy products or services for themselves. They have to register in DGI and must invoice their services with 22% VAT and they can choose for different situation for Income Tax a tax rate of 12% for all the income or at the 70% of the income a plicate a progressive rate (0% – 25%).

Social Security
Both Commission Merchant and Agent Direct Sellers must pay Social Security contributions at the rate of 30.5% on a monthly notional salary of approximately US$ 130. Law 16.713 of September 3 1995 – Art. 175 (Exception): Are excluded of the Social Security Regulation:

“those persons that developing an activity which it is not specifically included do not fulfill the usual professional and main nature requirements ….”

In terms of this article of the Social Security Law, our legal advisers understand that the activity of our sales reps has not to be levied. In the case that the sales reps are not included within the exception (Art. 175) they would have to enroll in the Social Security Office and pay approximately US$50 per month.

Law 16.713 (9 / 95) requests that a service contract has to be signed between the company and the individual persons. These contracts have to be registered in the BPS (Social Security Office). If the BPS understands that here is a dependent status, the contract is cancelled and the individual is considered as dependent sales person. If the BPS accepts the contract, the individual will have to register in the BPS and pay approx. US$50 per month. Direct Selling industry position is that this procedure has not to be applied to their sales persons

Others
No information.