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Domestic Help – BPS

Posted by urufish on March 22, 2008

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When you hire a person to work for you your household, you are supposed to subscribe them into the BPS (Social Insurance) scheme in Uruguay.  The heading for cleaning staff is ‘Servicio Domestico’.

The fees have changed in the past several months–upwards.  Our cleaning lady works for us 3 days a week.   We listed her total monthly income from working for us as UYP5300/month.  We pay her contributions to the BPS.  They’re UYP2600/month – about half of her salary again. 

It’s very important that you do this for 2 reasons.  The first is an ethical one.   These people make very little money, even by Uruguayan standards.  Paying for their BPS entitles them to a better health program (well, it used to before the reform – not sure what it means now), and to a pension when they retire.  Many Uruguyan domestics aren’t enrolled and when they’re old and cant work any more, they wont have this pension.   The 2nd reason is CYA.   If your employee reports you, especially after years of neglect, you’ll be backbilled, with fines.  No matter how wonderful the relationship is with your employee, times change.  In this case, not subscribing an employee really is a fool’s game. 

This is a copy of what the monthly bill looks like, complete with all the various deductions and what they’re for.   Double click to be able to read the details. 

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Posted in Business, Taxes | 3 Comments »

Domestic help additional costs

Posted by urufish on June 20, 2007

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This is a very ‘taxing’ week.  Every time we turn around, I learn of another fee we’re supposed to be paying.   We better be careful or people will stop coming to the blog for fear of more bad news.  We’ll search for more optimistic material next week 🙂

For 25 years, (more or less) we had a cleaning lady for the 3 months of the summers.  2 years ago, the last time we got to use the summer house on a regular basis, we were paying her UYP300 per day.  Since we started living here, we have the same cleaning lady.  She takes the bus from Piriapolis 3 days a week.  /Recently we increased her daily pay to UYP400 plus bus fare.  

2 days ago, she told us she wanted us to pay her holiday pay, but she didn’t want to take holidays.  She just wanted the money.  She didn’t demand it.  She told us to check with our lawyer to make sure we were doing it the right way, paying her only what she is entitled to under the law.   We had no idea such a thing exists because she’s a casual employee, working freelance a few days a week.  Tonight we met with our lawyer and she explained our responsibilities.  

There are 2 issues.  The first, supposedly exists only in a few left leaning (or perhaps social conscience) countries like Mexico, Argentina and Uruguay.  It’s called the Aguinaldo (Christmas gift).  Find out all about it here:  http://es.wikipedia.org/wiki/Aguinaldo.   In North America, this roughtly translates into Christmas bonus, but here it is compulsory for wage earning employees and equal to one months wages.  You pay it twice a year, end of June and end of December.  At the end of June you pay the person a half month of earnings and you do this again at the end of December.  In total, it’s the equivalent of a month’s pay.   In our case, she averaged UYP4000 per month, so she is entitled to a bonus payment of UYP2000 on June 30th and again on December 30th.

The 2nd is  the equivalent of a northerner’s vacation pay with an interesting twist.  If you work 5 days a year, all year long, it would total 20 days, roughly 3 weeks holidays.  In our case, she works 60% of the workweek, so she would be entitled to 12 days paid vacation pay per year, but she doesn’t want the time off, she wants the money instead.  So for the month we pay her the holiday pay, she will make double for 12 days. 

Our lawyer created forms to use for this past year (see attached).  We’ll modify this for next year, etc. 

domestic-help-deductions.jpg domestic-help-deductions-summary.jpg

Since our lady started working full time in January 2006, I’d say we’re just over a year behind, so we need to pay her for the full year’s back pay up to Dec 31/06 and for her first Aguinaldo payment the end of this month.  In total, we should owe her UYP7,200 at the end of June.  

But she told my wife that she feels bad about this and she only wants it for 2007.  So we will pay her the UYP2000 on July 1st and again on December 31st, (increased by 33% because of the increase in base pay).  At some point in 2008, she will ask for her vacation pay and we will pay it at that time. 

Something you should keep in mind when budgeting for domestic help. 

Posted in Taxes | 16 Comments »

Profit tax on property sales (a trip to the dentist)

Posted by urufish on June 19, 2007

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Last week I went to the dentist because one of my caps had a run in with a toffee candy and the cap lost.  He said the tooth broke off in the cap and I would need a pin, but first, a root canal.  We agreed to have it done today.  I took my wife with me this time because I felt an accurate translation was needed, just in case.  That started out well but it didn’t turn out quite the way I expected it to.

He put in the freezing and after a few minutes, started to drill away.  In my previous life, my dentist would yap away with his assistant and with other employees as they came and went out of the room.  Sometimes, he would decide to talk to me and I would do the ‘hmmmmm’ and ‘ummmmm’ thing… sometimes interjecting with hand movements.  This was a whole different ball game.

A few minutes into the drilling, he started talking to my wife and from that point, pretty much ignored me for the next 30-40 minutes.  I was quite aware of the fact he was working on me cognitively.  I thought of two things.  He’s so dammed good and he’s done this so many times, he can do it by feel or he’s going to realize at some point, that he’s drilling the wrong tooth.  Turned out it was the former, but that was something I wont forget for a long time.

What was he talking about?  He was talking about the new property taxes.  I really tried hard to understand what he was saying, but it was fast.  He was pretty worked up and there was no way I could keep up.  I figured I was lucky if I picked up half the nouns and strung together enough questions to ask my wife to fill in the blanks later on when the rubber mouth wore off. 

Turns out he was talking about his house–the place we were at.  He has an office in the front of the house that he uses for Montevideo patients.  In the city, most of his time is spent teaching at the university but he has a small, old office in the house for his ‘favourite’ city patients.  He was saying that he bought the house many years ago for USD$20K.  He has to put about USD$30K into it to fix it up if he wanted to sell it.  It would sell for around USD$140K.  He would have to pay tax on USD$120K, the difference between what he paid for it and what he could sell it for.  He said they dont let you deduct money you spend on improving the property.  It’s black and white.  Selling price minus purchase price.  He told his wife they’re going to have live there until they die because there’s no way he can afford to sell it now.  

Posted in Taxes | 7 Comments »

Income tax reform…

Posted by urufish on June 18, 2007

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I was going to start this with a snappy title, but I dont think that’s appropriate considering the mood of the content. 

 Yesterday was the first day I saw pain in the eyes of a Uruguayan–a friend of ours for many years.  About a week ago, she told us she found the taxes in the paper that she would have to pay on her property rentals.  She said it was a flat 12% on rental income.  She said she could deduct taxes (real estate, primaria, etc.)  She didn’t say anything about repairs.  She knew it was coming and she’d already resigned herself to it.  Keep in mind that many Uruguyans live right on the edge.  A lot of people will suffer under this new law.  I could never figure out why there wasn’t an outrcry months ago when it was announced.  From what I see going on this week, it looks like it’s a delayed reaction. 

Yesterday, she was totally depressed.  I guess she either didn’t know or didn’t put 2 and 2 together, but the tax on profits on the sale of real estate and cars, kicks in.  I had never much concerned myself with those because the few properties we own, we either use or get income from.  We have no intention of selling them.  But this lady has had her apartment up for sale since December.  Because she didn’t sell it before, she says she’s now subject to tax on the difference between what she bought it for 10 years ago and what she’ll sell it for.   The apartment appreciated 30%, so she has to pay taxes on about USD$25K.  I dont know if she’s right, but that’s what she thinks.  I’m going to meet with my acocuntant some time this week and go over all this stuff with him and get it straight.   It’s good for me to know and at the same time, I’ll post the details here with some examples of how it would apply to expats buying property… residents and non-residents.   

The truth is, based on the average Uruguayan’s ability to avoid taxation, I expect we’ll see a large drop in the price of the average property sale, as officially reported.  

Today, a doctor from downstairs was visiting at our friends place.  She was also depressed.  On July 1st, her salary drops $7K overnight.  Since she was just making ends meet before, ( no car, no vacations, modest lifestyle), she was trying to figure out what she could cut to make up for the instant loss.  I asked the question ‘so what are you getting in return?’.  The sober answer was ‘nothing’.  Then I asked what is the government going to do with this ‘mountain’ of money it will be getting.   I’m sure her answer was the typical Uruguayan’s…  these new government people will get very rich, very quickly. 

I’m still trying to figure out how the government can tax the profit on the sale of a car.  I’ve never personally met anyone who made money selling a used car.  But maybe it targets car dealers.  It’s very common here for a car dealer, new or used, to sell you the car personally.  I always assumed they did this to get around the taxes a car dealer company would have to pay.  Maybe the government figures the same thing?   

Posted in Taxes | 18 Comments »

The BPS

Posted by urufish on June 4, 2007

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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.

    Posted in Taxes | 12 Comments »

    Tax enforcement

    Posted by urufish on May 26, 2007

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    This is a new concept in Uruguay.  I’m familiar with tax collection, but enforcement, no.  It’s getting a lot colder here and it isn’t the weather.  Today, the government announced it was sending 150 inspectors into the ‘field’ to knock doors to find IP (wealth tax) evaders.  Here’s the deal.  If a house or apartment looks like it’s worth more than $200K, there’s probably IP to be paid.  So they will knock on your door and ask for the paid receipt from the previous year, (or any year for that matter).  This will be their primary tool for locating malingerers…   I wonder what happens if you dont answer the door? 

    Where are they starting?  Where else!!!  Punta del Este and Pocitos.  I assume they’ll start at the top of the food chain and work their way down. 

    And you all thought you’d get away from the IRS eh?  Hahh… no such luck.   Beware of the DGI man. 

    Posted in Taxes | 2 Comments »