The government sent Parliament a decree with the objective of resolving the controversy unleashed around the taxation of the Social Security Assistance Tax (IASS) which was interpreted as the establishment of an “inheritance tax” in Uruguay.
The beginning of the year had some controversial episodes regarding tax initiatives promoted by the government through decrees, something that is not constitutionally permitted. One of them had to do with an application of the IASS on the capital accumulated in the Private Savings Fund Administrators (AFAP) even if the person dies before receiving his or her retirement, which could be interpreted as a tax on an estate, an “inheritance tax” that does not exist in the country.
To solve this problem, and after the Ministry of Economy and Finance (MEF) asked to postpone the appearance in Parliament requested by the deputy of the Colorado Party Conrado Rodríguez, The Executive Branch sent a project that exempts from IASS the two items reached by the withholding amount in the December decree.
In this way, the AFAP savings that are transformed into inheritance assets When the person dies they will not be taxed by the IASS. Nor will the amount that, according to the provisions of the social security reform approved last year, those who delay their retirement for more than three years can collect.
In both cases it is also clarified that they will not be taxed either. Personal Income Tax (IRPF)because the 2007 tax reform established that those items that were not taxed by IASS should be taxed by that tax.
Why had the MEF not been presented in Parliament?
On March 20, the director of Tax Consulting of the MEF, Pía Biestro, should have appeared in front of the Finance Commission of the Chamber of Deputies, at the request of Rodríguez. However, it was postponed at the request of the portfolio led by Azucena Arbeleche.
At that time, the argument was that the issue was still being analyzed by the Ministry’s technical services, so the necessary explanations could not be given either. However, the decree that established the withholdings was published in December, and on previous occasions members of the MEF They had defended him publicly. An example of this occurred at the end of
the MEF accountability conference, in February, and was the undersecretary Alejandro Irastorza who answered the question of the journalist who consulted about it: “Here what we maintain is the criteria of the entire pension system and taxes and discounts. That criterion is exonerated, exonerated, taxed. Obviously you are exempt at the beginning when you work because you have the deductions, the AFAP are exempt because (your income) is exempt and you are taxed at the end with the IASS,” she explained.
In that sense, he pointed out that the new taxed capital is passivities or similar items and that, therefore, it was correct that they be reached by the IASS. Finally, the government reversed this provision.
Source: Ambito
