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Uruguay

Country Name: Uruguay
Currency: Uruguayan Peso (UYU)
Primary Tax Authority: Dirección General Impositiva (DGI) – General Tax Directorate
Key Legislation:

  • Income Tax Law (Ley de Impuesto a la Renta)
  • Value Added Tax Law (Ley de Impuesto al Valor Agregado – IVA)
  • Corporate Income Tax Law (Impuesto a las Rentas de las Actividades Económicas – IRAE)

Fiscal Authority Allocation

Centralized Fiscal System:
Uruguay operates under a centralized tax system. The General Tax Directorate (DGI) is responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), and value-added tax (VAT). Local governments have limited taxing authority, primarily collecting property taxes and minor fees.

Corporate Income Tax (CIT)

Standard Rate: 25%
Uruguay levies a corporate income tax rate of 25% on the net taxable income of resident companies. Non-resident companies are taxed on income sourced from Uruguay.

Corporate Forms and Taxation:

  1. Limited Liability Company (Sociedad de Responsabilidad Limitada – SRL): The most common corporate form, subject to a 25% CIT rate.
  2. Corporation (Sociedad Anónima – SA): Typically used by larger businesses, taxed at the standard 25% rate.
  3. Branches of Foreign Companies: Subject to the same CIT rate as resident companies, with tax applied on Uruguay-sourced income.

Exemptions and Incentives:

  • Free Trade Zones: Companies operating in Uruguay’s free trade zones enjoy exemptions from corporate income tax, VAT, and customs duties.
  • Investment Incentives: Tax incentives are available for investments in key sectors such as renewable energy, agriculture, and infrastructure. These include CIT exemptions and accelerated depreciation for qualifying investments.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 22%
Uruguay applies a VAT rate of 22% on most goods and services. A reduced VAT rate of 10% applies to certain essential goods, such as basic foodstuffs, pharmaceuticals, and hotel accommodations.

Exemptions:
Exports, certain financial services, and education are exempt from VAT. Exports are zero-rated, allowing businesses to recover VAT on input costs associated with exported goods and services.

Personal Income Tax (PIT)

Progressive Rates:
Uruguay has a progressive personal income tax system that applies to both residents and non-residents on their Uruguay-sourced income:

  • Up to UYU 183,876: 0%
  • UYU 183,877 – UYU 262,680: 10%
  • UYU 262,681 – UYU 525,360: 15%
  • UYU 525,361 – UYU 787,920: 24%
  • UYU 787,921 – UYU 1,050,480: 25%
  • Above UYU 1,050,481: 30%

Dividends:
Dividends paid to resident and non-resident shareholders are taxed at a flat rate of 7%.

Additional Mandatory Contributions

Social Security Contributions:
Both employers and employees are required to contribute to Uruguay’s social security system, which funds pensions, healthcare, and unemployment insurance.

  • Employer Contribution: 7.5% – 12.5% of gross salary, depending on the sector.
  • Employee Contribution: 18% of gross salary, which covers pension, healthcare, and social benefits.

Withholding Taxes

  • Dividends: 7%
  • Interest: 12%
  • Royalties: 12%
    Withholding taxes may be reduced under Uruguay’s double taxation agreements (DTAs).

Transfer Pricing Rules

Uruguay follows OECD guidelines on transfer pricing. Transactions between related parties must comply with the arm’s-length principle, and companies are required to maintain transfer pricing documentation for cross-border transactions.

Special Tax Regimes

  • Free Trade Zones (Zonas Francas): Companies established in Uruguay’s free trade zones benefit from CIT, VAT, and customs duty exemptions, provided that at least 75% of their business is with non-residents.
  • Agriculture and Renewable Energy Incentives: Uruguay offers tax incentives for agricultural enterprises and renewable energy projects, including CIT exemptions and tax credits.

Other Taxes

  • Real Estate Tax: Property taxes (Contribución Inmobiliaria) are levied by local governments, with rates ranging between 0.25% and 1.2% of the property’s cadastral value, depending on its location and use.
  • Capital Gains Tax: Capital gains are generally taxed at the same rate as ordinary income, depending on the individual or corporate income tax rate (25% CIT or progressive PIT).
  • Excise Duties: Uruguay imposes excise duties on certain goods, such as alcohol, tobacco, and fuel.

Double Taxation Agreements (DTAs)

Uruguay has signed over 20 double taxation agreements (DTAs) with countries including Spain, Germany, and the United Kingdom. These treaties reduce withholding tax rates on dividends, interest, and royalties, and prevent double taxation.

Local Taxes

Local municipalities in Uruguay are responsible for collecting property taxes and some additional municipal fees. However, income and VAT are centrally managed by the General Tax Directorate.

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed by June 30th of the following year. Personal income tax returns must be filed by the same date. The tax year in Uruguay coincides with the calendar year.

Penalties for Late Filing:
Penalties for non-compliance or late filing include interest and fines, with interest rates typically set at 2% per month on overdue tax amounts.

Recent Developments

Digital Services Tax:
Uruguay recently implemented a digital services tax (DST) on foreign companies providing digital services within Uruguay. This tax aims to capture revenue from digital platforms that previously fell outside the traditional tax framework.

Environmental Taxes:
Uruguay has introduced tax incentives for green energy projects and has imposed environmental taxes on carbon-intensive activities as part of its commitment to reduce greenhouse gas emissions.

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