Uruguay: Business Environment

Company Tax

25%

Tax Rate For Foreign Companies

Uruguay applies a territorial system of taxation, hence resident and non-resident entities are subject to taxation on their income realised in Uruguay. A company is considered resident if it is established according to Uruguayan law.
A 12% withholding tax is imposed on Uruguayan-sourced income obtained by non-residents, except in cases where the income is obtained through the operations of a permanent establishment in the country.

Capital Gains Taxation

Capital gains are taxed as ordinary income at the corporate tax rate of 25%.
Bearer title transfer and nominative titles capital gains are subject to a 12% tax rate, applicable to a notional 20% of the transfer price (20% of the market value of the titles transferred if there is no price).

Main Allowable Deductions and Tax Credits

Documented expenses necessary to obtain and preserve gross taxable income are generally tax-deductible.
Depreciation (using the straight-line method) is deductible at variable rates depending on the nature of the asset. On the other hand, goodwill cannot be deducted for tax purposes. Start-up costs can be amortised over a period of three to five years (to be determined by the company). Interest charges and bad debts (for debts not recovered within 18 months or longer) are generally deductible.

Donations to charities give rise to deductions at variable rates depending on the recipient organisation. Donations to certain types of organisation (educational services, health, youth support) are deductible up to 25% of the amount, the rest is converted into a tax credit.

Fines and penalties paid are not tax-deductible. Taxes are generally deductible, except for corporate income tax and net wealth tax.

Tax losses can be carried forward up to five years (up to 50% of net taxable income for tax years beginning on or after 1 January 2017), once adjusted for inflation. However, as of 2021 the aforementioned cap has been eliminated. The carryback of losses is not permitted.

Other Corporate Taxes

Employers are required to withhold payroll taxes on behalf of their employees at rates ranging from 18.1% to 23.1% (depending on the employee's family status). Employers contribute 12.625% of the salary.

A property tax is levied by municipalities on real estate at variable rates. Property transfer taxes are payable by both the seller (2%) and the buyer (2%).

All enterprises are required to pay a wealth tax of 1.5% (which applies only to property and securities domiciled in Uruguay). At the moment of incorporation, companies are required to pay a flat tax at a rate of 1.5% on the basis of a notional amount updated every year (ICOSA tax - UYU 44,777 in 2022). Furthermore, the tax is also due annually for corporations at the end of each fiscal year at a rate of 0.75% on the basis of the same notional amount.

If a company does not distribute net taxable income after three fiscal years, such amounts are treated as a deemed distribution and are subject to a 7% deemed dividend tax.

Other Domestic Resources

General Tax Administration (DGI)

Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Tax Rate

Allowable Deductions and Tax Credits

Deductions are allowed for contributions to social security, a small fixed amount per minor child and his/her education, feeding, health, and housing, certain payments on mortgage loans. Taxpayers with a monthly income lower than 15 BPC ("Base de Prestaciones y Contribuciones" - UYU 77.460 in 2022) will be able to deduct 10% of the deductions, while the individuals whose income is greater than 15 BPC will only be able to deduct an 8% rate of the total deductions.
Certain bad debts, intermediary commissions, renewal and subscription fees, real estate tax, and contributions are deductible from real estate income originated in real estate leases.

Self-employed individuals can enjoy an income reduction of 30% for expenses calculated on a notional basis.

Special Expatriate Tax Regime

Both resident and non-resident individuals are taxed on income derived from activities developed in, property located in, or rights economically used within the Uruguayan territory.
An individual is considered resident if he/she is in Uruguay for more than 183 days in the calendar year or if his/her economic or centre of vital interests is in Uruguay.

The income tax on non-residents individuals (IRNR) is generally at 12% (25% for income obtained by entities resident, domiciled, or located in a low-tax jurisdiction).

Individuals who became tax residents before 2020 could opt for a six-year tax holiday on foreign-source income. Individuals who become tax residents from 2020 may opt for an 11-year tax holiday on foreign-source income or a permanently reduced tax rate of 7% on that income.