Learning Uruguay

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The BPS

Posted by urufish on June 4, 2007

imgcabezalbpsfinal.gif

Anyone planning on living here in the future should become aquainted with the BPS.  Even if you’re very lucky and never have to do business with them, it’s still a good thing to know what they do, how they work, and whether or not you are, or are likely to become, someone they will want to get to know better.   If you end up renting out an apartment, you will have to pay income tax.  Guess who collects income tax?  

Let me start by saying I’m no expert on the BPS.  This blog will be of a cursory nature, representing my perceptions, limited knowledge and I think, most importantly, how an immigrant, without a strong command of the language, has worked with them on a couple of different fronts. 

When I talk about the BPS here, I often say DGI, DGI/BPS or BPS.  My wife and most of my Uruguayan friends refer to them as DGI.  For purposes of this post, I did some research with my limited Spanish and the relationship appears to be the following. 

DGI stands for Direccion General Impositiva, Ministerio de Economica y Finanzas.  You can find them here:  http://www.dgi.gub.uy/.   To me this sounds like the equivalent of the IRS or CRA.  The top of the tax food chain.  This is the place you get your RUC from.  It seems to me that’s the main thing they do.  Collect the sales tax from retailers.  If you plan on running a business here, you will need a RUC (Registro Unico de Contribuyentes).  It’s your official tax number.  You use this to remit and exempt yourself from the IVA (the 23% Value Added Tax that’s charge on most things you pay for here).  How’s your headache so far?  The BPS on the other hand seems to concentrate on collecting from employers and paying for social services like pensions.   You will find these happy folks here:  http://www.bps.gub.uy/

You will find references to DGI/BPS everywhere..  por ejemplo..

  • Unico DGI-BPS “Solicitud de Inscripción y Actualización”(color amarillo) en 3 vías firmado por titular.
  • If you do a renovation or construction, LEGALLY, you must establish the equivalent of a company with the BPS for the purposes of remitting payments.  These payments are for the future pensions of the people working on your site.  It doesn’t matter if these people contract directly to you or through a third party.  For example, if you hire a GC and he in turn hires an albanil company which in turns employs a dozen albanils, you, not them, pay for the workers pension contributions.  The law requires the owner of the site upon which the worker works to pay the BPS contributions.  For example, if a carpenter works in the taller (shop) and makes a door for you, the owner of the carpentry shop pays the BPS.  But if that same employee makes that door on your property, working on site, you pay. 

    When you get your BPS account, you will be given a black book.  This book looks like something you buy in a stationery store, but it’s not quite what it seems.  The BPS officially stamps/signs this book before you get it and you had better guard it with your life.  You must record every person who works on your site in this book, with the days/times they work and the total hours they work.  Each person’s cedula must be recorded by their name.  Inspectors will come to your site repeatedly and veirfy that the people there that day are in that book.  If you fail to do this, they have the power to fine you and shut you down or both.  If the BPS shuts down a site, the police will enforce the order.  This isn’t a joke.  They dont play games. 

    When you propose a project, be it a reno or a new structure, your architect will submit the plans to the BPS and they will decide how much the charges will be.  For instance, you cant have 2 sets of books.  One where you show you’re paying the trades less and the other with what you really pay them.  Well, you could have 2 sets of books, but what’s the point?  The BPS will look at the scope of your work and tell you what you will pay based on their experience with what it should cost for the work you want to do. 

    Every month, you (or your designate) must go to the BPS and show them how much of the work has been done.  They will calculate how much you owe them that month and print you a bill on the spot.  You will also get another bill from them.  This is for the month regardless how much work is done. 

    If you’re running a business, even a small one man shop, like mine, you still have to have a BPS number and pay pension for yourself.  If you hire more people, you will declare them on your monthly remittances and your bill will be higher than the one you see below.  A person in Uruguay can only get their pension when they reach the retirement age (or become disabled), if they pay into the system.  This is similar in concept to the Canada Pension.  So if a person works under the table their whole life, they get nothing, (or more or less nothing) when they hit retirement age.  I know of a few ‘smart’ Uruguayans who did deals with employees who agreed to work under the table, only to have this unravel when the employee wanted their pensions.  I’ve also heard of it going the other way.  Unscrupulous employers supposedly deducting or paying BPS for employees and then folding up the business and it’s found out later, when the employee goes to claim for pension, that nothing was paid. 

    Below are 3 BPS invoices.  The first is for a one man, unipersonal company.  This is what you will pay if you set up a owner operated and solely employed business.  The 2nd represents a BPS invoice for the regular monthly fee paid on an account that’s sole purpose is to represent a renovation/construction project.  The 3rd invoice represents a month’s worth of labour fees for a renovation/construction project.

    bps-unipersonal.jpg bps-construction.jpg bps-month-of-construction.jpg  Couple of things worthy of note..

    The purple stamps are from the Abitabs.  Thats where I go to pay all the bills that I cant put on autodebit.  BPS is one of only 2 bills you can pay at an Abitab with a cheque.  That’s what I used.  Supposedly you can put BPS on autodebit, but I never did that for the consruction project.    Notice there is no mention of your cedula.  Notice there is no mailing address on the construction invoices.  Notice that they include a fee for medical insurance on the unipersonal company bill.    They print on the invoice when your next invoice will be coming.  You get 13 days to pay on unipersonal companies.  For construction, you get more time.  If you dont pay your BPS construction bill on time, you do not pay a 10% penalty.  It’s significantly less.. More like interest.  Unlike the unipersonal invoices, construction invoices dont carry a balance forward.  If you dont pay it, you must take the invoice with you to the BPS office and pay it on the spot.  If you miss paying a unipersonal, you can wait for the next one which will show the total you owe, including the previous month’s balance.  If you dont pay BPS invoices by the due date ‘fecha de vencimiento’ the shops that accept payment wont.  You have to go to BPS HQ.

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    12 Responses to “The BPS”

    1. Brazzie said

      Thanks Irv for another excellent article. This is a topic that was not on my radar screen and I found it very interesting, especially the relationship between BPS and construction.

      By the way, I remember reading a while back that the retirement age in Uruguay was pushed back to 70, for men and women. And that you need to have contributed for at least 15 years, but I need to double check that.

      If I interpreted your exhibit A correctly, you are paying around USD 900 per year in BPS related costs on your unipersonal. But I assume you will be getting some benefits in return such: a possible pension at 70 and possibly free basic health care coverage at some point. Or am I wrong in assuming that?

    2. Enzo said

      Thanks for the great scans and information.

    3. urufish said

      Remember how I ended up applying for my residency. I called a friend and she said, dont worry, I do everything.
      She decided to do me as a business owner/entrepeneur or something like that, getting paid the minimum per month.. I think it’s around $500. We created this company to qualify.
      I believe when I have my permanent residence, I can dismantle it. My pensions from Canada, (like the US), are far more substantial than what is offered here. Public medical care (unless they make a huge change in the future), isn’t something a northerner would appreciate.

      By the way, you really have to get your head around this way of applying for residency. Imagine if you could set up a company in the US or Canada yourself and invite yourself to work there and say you’re going to be paid ‘n’ dollars and the immigration officer bought it. Whoa…

    4. urufish said

      Oh and one more thing worth stating. I’m still not sure if it’s the BPS or DGI that’s collecting the income tax. Brazzie, your spanish is way better than mine… Maybe you can pick it off the website… The way people speak here, (or at least the crowd I socialize with), they trade DGI/BPS back and forth like it was one in the same. I remember the head of the BPS quit a month or so ago, supposedly over the income tax. So that was a plus in favour of the BPS.. But when I look at the structures of the organization, it would seem that DGI would be closer to an income tax type thing. The next time I hear it on the news or read it in the paper, I will be more tuned to what to look for.

    5. Brazzie said

      In my mind they are two very distinct things. The DGI is the equivalent of the IRS in the US. The BPS is the equivalent of the Social Security. The new personal income tax will be payable to the DGI, so is the Impuesto al Patrimonio.

      To make the distinction clearer, think of the DGI a gimme, gimme sort of organization. They only take money from you.

      The BPS is more like a forced insurance plan that covers retirement, disability, unemployment, basic healthcare and few other social benefits. It is deducted from your pay, but you are entitled to benefits. Even so the BPS does not provide healthcare, it takes payments and distributes them to whatever mutualista you select (not sure of the mechanics). That’s my understanding of the system. Please correct me if I got something wrong. Cheers

    6. urufish said

      You are right about the income tax collector. It’s the DGI, not the BPS. The word on the street is the recent director resigned because he has politicial aspirations and he thought being head of the agency that taxes the average Uruguayan would be a political liability. Good call.

    7. Art said

      Hi Urufish,

      Your site was recommended to me by a fellow Canadian as part of my research into living in Uruguay–great site and thanks for your efforts.
      My desire is to give up Canadian residency and relocate to a jurisdiction in Latin America, for tax/lifestyle/climate reasons and to use as a base for traveling abroad. I have heard many positive things about Uruguay, so this is where I am currently focusing my research.
      My intention is to manage and trade a stock portfolio online (as I currently do in Canada) with the understanding that with (for example) Uruguayan residency, I will be able to do this without being levied tax by Uruguay on any dividend, interest or capital gains income derived offshore.
      Are you aware of this possibility for Uruguay or anywhere in Latin America for that matter, where one can legally be free of such tax burdern, operating in the manner that I described?

      Thanks for your time and best regards,

      Art Kernaghan
      Guelph ON.

    8. Jens said

      Hi Urufish,

      one short question: Now that you have your final residency have you dismantled your One-Man-Company? How was the paperwork? I am thinking of doing the same, but I am worried I cannot get rid of it afterwards.
      What was the minimum amount you had to tell BPS and how did you find out? Is that the same you state in the sworn declaration?

      BTW: Great site and great info.

      Cheers,
      Jens

    9. Anonymous said

      I dismantled the one man company in July or August 2007.
      The cost to dismantle it was about the same as one month’s BPS fees.

      I set up the unipersonal company with a ‘fantasy’ name. Where I come from, we call it DBA (doing business as).
      The fantasy name was the same as the company I worked for.

      My story was that I was opening up a subsidiary for this company. To prove income, I showed them my government income tax deduction form. I used the one I just received for the 2005 calendar year. In Canada, it’s called a T4. I think it’s a W5 in the US. The name on the form matched the fantasy name of the company I opened up. The sworn amount was the same. That satisfied them.

    10. Jens said

      Hi Anonymous,

      thanks for the info. Could you tell me what they asked for when you opened the company? How long does it take? Did you open a “pequeña empresa”?

    11. urufish said

      I didn’t open the company. I paid an accountant to do it. $100USD.
      Same thing for the immigration process. I just followed the instructions of my lawyer. She decided which category she wanted to put me in and told me to open a business.
      I didn’t know how the system worked here so I asked my wife’s best friend for an accountant and she volunteered her newphew, who was just graduating that year. He gave me some forms to sign and gave me a short list of what I needed which of course included a photocopy of my passport and probably, a copy of my entry document. I had get a letter from the local police. Cant remember exactly what it was about but it included my address and something about me not having a local, criminal record.

      I dont recall exactly how long it took but it was less than a month.

    12. Paula said

      Hi Urufish,

      Great article and I found it very usefull. I am working on opening a church in Uruguay and liked the idea of couting with an accountant in Uruguay, can you refer someone you know?

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