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Uruguay

Financial Year – 1st January to 31 December
Currency – Uruguayan peso

Corporate Tax Summary

Residence – Legal entities are considered residents if they are incorporated in Uruguay according to national laws. Foreign legal entities will be considered residents if they establish a formal address and finish all the formal procedures required according to the law.

Basis of Taxation – Resident companies pay tax only on income derived from Uruguayan sources. Nevertheless, there are certain exceptions for specific foreign income that can also be taxed.

Residents and permanent establishments pay the Corporate Income Tax known locally as IRAE and non-residents will pay the Corporate Income Tax for Non Residents known locally as IRNR.

Uruguay subscribes to the concept of permanent establishment according to the OECD.

Reference
Corporate Income Tax Rate (%) 25% Taxable income is determined by making the difference between incomes and expenses, both terms accrued during the fiscal year. Regarding expenses, the law requires other conditions in order to be deductible, such as:
• they have to be duly documented,
• they have to be necessary for obtaining the taxable income, and
• the expense has to be, for the counterpart, an income subject to IRAE, IRPF, IRNR or to an income tax applicable in a foreign country in case the expense was incurred with a foreign entity.
An inflation adjustment has to be included in the calculation of the taxable income in case the inflation rate accumulated in the last three years is over 100%. Fiscal losses can be carried forward for five fiscal years up to 50% of the taxable income of the fiscal year under determination.
Transactions with foreign related parties are subject to transfer pricing rules according to OECD guidelines, and the same for transactions with entities domiciled in low tax jurisdictions no withstanding if the parties are related or not.
Non-resident legal entities have a rate of 12% of corporate income over net income. When the beneficiary resides in a country with low or no taxation, the rate is increased to 25% (except for dividends which applies a rate of 7%).The tax is collected through a withholding made by the local companies that pay the service involved.In case there is no withholding agent appointed, the non resident taxpayer must register a Uruguayan representative and pay the tax directly.
Branch Tax Rate (%) 25%
Withholding Tax Rate:
Dividends – Franked 7% Such withholding applies when the beneficiary is an individual resident or non-resident either individual or legal entity.
Dividends – Unfranked 0
Dividends – Conduit Foreign Income 12%
Interest 3% to 12% 12% non-residents. In case of interest on bank accounts the rate varies between 3-12%
Royalties from Intellectual Property 12%
Fund Payments from Managed Investment Trusts 12%
Branch Remittance Tax 7% When paying dividends
Net Operating Losses (Years)
Carry back
Carry forward Fiscal losses can be carried forward for five fiscal years up to 50% of the taxable income of the fiscal year under determination.

Individual Tax Summary

Residence – Individual residents in Uruguay who obtain their income from Uruguayan source are taxed by the Individual Tax known locally as IRPF.

Natural persons are considered as residents: if they comply with one of the following conditions:

  • Remain more than 183 days in Uruguayan territory.
  • Have their main activity or vital and economic interest in Uruguayan territory.It is understood that a natural person has a vital interest when his spouse or children of minor age who depend on him reside in the country. It is understood that a natural person has an economic interest when the individual has an investment in property of more than USD 1.600.000, or participated directly on a business with a value of more than USD 4.700.000 and has engaged in projects or activities declared of national interest according to Law Nº 16.906 of Investment Promotion.

Basis of Taxation – There are two categories of income: capital and labor. Capital income includes earnings obtained from holding movable and immovable assets and capital gains derived from the transfer of assets, movable or real estate. Despite source criteria, an extension applies of such principle, and income derived from holding movable assets outside Uruguay is subject to IRPF. As a general rule the tax rate applicable to capital income is a flat rate of 12% with some exemptions which are taxed at lower rates. Labor income refers to earnings obtained from rendering personal services as an employee or as an independent. Under this category it also applies an extension of the source criteria and income obtained by resident individuals derived from rendering services outside Uruguay is subject to IRPF when the payer of the salary or the fees is an IRAE tax payer.

The tax is levied at a progressive rate that vary from 0% to 36% depending on the total annual gross income.

Filing Status – In some cases, there is no need to file a tax return. In other cases, taxpayer must file a separate return each financial year; and joint returns are permitted under certain circumstances.

Personal Income Tax Rates

Taxable Income Tax Payable – Residents Tax Payable – Non Residents
From UYU 0 to UYU 31.633 0 12%
From UYU 31.633 to UYU 45.190 10% 12%
From UYU 45.190 to UYU 67.785 15% 12%
From UYU 67.785 to UYU 135.570 24% 12%
From UYU 135.570 to UYU 225.950 25% 12%
From UYU 225.950 to UYU 338.925 27% 12%
From UYU 338.925 to UYU 519.685 31% 12%
From UYU 519.685 36% 12%

Rates applicable to capital income apply differently according to type of income. The rates vary from 3% to 12%. In case the non resident is domiciled in a BONT jurisdiction the rate could be 30.25%

Goods and Services Tax (GST)

Rate 22% or 10%
Taxable Transactions VAT is a tax that levies the internal circulation of goods and services within Uruguayan territory, the import of goods and the value added originated from the construction of real estate. The exports are levied at a rate of 0%. Basic VAT rate is 22% and there is a minimum rate of 10% applicable to basic necessity goods and medicines, as well as on goods and services exempted of this tax.
Registration All companies must register. A tax return must be filed, except on very few cases of activities with low economic dimension.
Filing and Payment Payment is made on a monthly basis. Certain companies (due to their specific activity or budget billing amount) must also file on a monthly basis the tax return. All other taxpayers have to file its tax return annually.
On a general basis, payment is calculated by the difference between sales VAT minus the included VAT in purchases and expenses.

Other Taxes Payable

Tax Reference
Payroll Tax Tax payed by the employer over the nominal wage is composed by:
7.5% as retirement deduction
5% as healthcare coverage and other benefits
0.125% others
On the other hand, employees must pay the following over their nominal wages:
15% as retirement deduction
3 to 8 % as healthcare coverage. The rate relies on family composition.
0.10% others
Payroll Tax Transfer tax levies the property transfer and the rights associated to property that are located in the country. The rate is as following:
a) 2% transferor and 2% purchaser, c) 4% all other taxpayers, except the heirs and legatee in a direct ascendant or descendent line with the testator, which is a rate of 3%.
Land Tax There is an annual tax which levies on urban, suburban and rural properties in order to finance expenses and investments made by the Elementary Education Council.
The sum levied is destined to feeding programs, transport, school equipment as well as for repairing, maintenance and cleaning of schools.

The IP is an annual tax levied on the net worth adjusted for tax purposes of, inter alia, IRAE taxpayers, corporations, joint stock companies, individuals and families.
The taxable net worth is computed as the difference between assets and liabilities, adjusted for fiscal purposes according to certain rules provided for in the tax regulations.
In principle all assets located, placed, or economically used in Uruguay are subject to this tax and, accordingly, this tax is not levied on assets located outside Uruguay.
For legal entities, the applicable rate amounts to 1.5% on the taxable net worth as at the close of the fiscal year. In particular, for banks and other financial entities the tax rate is 2.8% and 3% for entities resident in low or no tax jurisdiction without a permanent establishment in Uruguay.

IP is also applied as a withholding on the balances owed to foreign persons as at December 31 every year.

There is, however, a wide exemption available in this connection, covering the balances deriving from imports, loans, and deposits of non-resident foreign individuals or legal entities.

For individuals and families applies a progressive tax rate ranging from 0.5% to 0.8% applicable on the net worth as at December 31 of each year. There is a non-taxable minimum of approx. USD 130.000 which is duplicated in case of families.

Last updated: 26.05.2020