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11100 Montevideo
Uruguay
Business Tax Advisory
Inés Eibe
Lucia Giagnacovo
Piero De Los Santos
A. At a glance
Corporate
+598 (2) 902-3147
Fax: +598 (2) 902-1331
+598 (2) 902-3147
Email: ines.eibe@uy.ey.com
+598 (2) 902-3147
Email: lucia.giagnacovo@uy.ey.com
+598 (2) 902-3147
Email: piero.de.los.santos@uy.ey.com
Income Paid to Entities from Low or Nil Tax Jurisdictions or Benefiting from Low or Nil Tax Regimes
Net Operating Losses (Years)
(a) This tax applies to nonresident corporations and individuals and resident individuals. Nonresident corporations are corporations not incorporated in Uruguay.
(b) See Section B.
(c) Under Accountability Law No. 19,438, notional dividends are taxable, effective from 1 March 2017. For the purposes of this law, notional dividends are determined considering the net taxable income of the company that is more than three years old, less certain items (equity participation investments in other resident entities and investments in fixed and intangible assets, among others), subject to certain limits.
(d) From 1 January 2023, the following rates apply to interest from deposits on local financial institutions, interest from obligations and other debt titles issued by local entities, and yields of capital from the holding of certificates of participation on financial trusts, issued by local entities according to public procurement procedures and listed on the Uruguayan stock exchange:
• In national currency with a nominal fixed rate: 5.5% at a year or less, 2.5% from more than one and up to three years and 0.5% for more than three years
• In national currency with a readjustment clause: 10% at a year or less, 7% from more than one and up to three years and 5% for more than three years
or if 18 months have elapsed since the obligation to pay the debt became due.
Depreciation. A depreciation deduction may be taken on tangible assets based on their useful lives using the straight-line method. The following are some of the applicable rates.
(a) The 2% rate applies to buildings in urban areas; the 3% rate applies to buildings in rural areas.
(b) This is the usual rate. The rate for a particular asset depends on its estimated useful life.
For some assets, the units-of-production method may be used. Goodwill may not be depreciated.
Intangible assets must be amortized based on their expected useful life. If it is not possible to determine the expected useful life, they should be amortized at an annual rate of 10%.
Tangible assets must be revalued according an index determined by the government. Intangible assets and goodwill cannot be revalued.
Relief for losses. Under Accountability Law No. 19,924, for fiscal years ended from 31 December 2020, the offset of tax losses allowed for a specific fiscal year has no limit. As a result, losses can be carried forward for five years and deducted from income without limit.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature
Value-added tax (VAT), on the sale of products and most services and on imported goods
on basic foodstuffs and pharmaceuticals
Net worth tax, on corporate net worth, computed using values used for tax purposes; for some companies, up to 50% of this tax may be credited against corporate income tax (the current discount is 1%)
(The rate applicable for entities subject to low or nil taxation that do not have a permanent establishment in Uruguay is 3%.)
Social security contributions, on salaries and wages; imposed on Salaries and wages up to approximately USD6,570;
and
(The salary threshold for social security contributions is updated in February of each year.)
E. Miscellaneous matters
Foreign-exchange controls. Uruguay does not impose foreignexchange controls. No restrictions are imposed on inbound or outbound investments. The transfer of profits and dividends, loan principal and interest, royalties and fees is unlimited. Nonresidents may repatriate capital, together with accrued capital gains and retained earnings, subject to applicable withholding taxes and company law considerations (for example, the requirement that companies transfer a portion of their annual income to a reserve).
Import and export operations are transacted at a free rate determined by the market.
Debt-to-equity rules. No specific debt-to-equity rules apply in Uruguay.
Transfer pricing. Transfer-pricing regulations are included in the corporate income tax law. Transfer pricing in Uruguay is based on the arm’s-length principle and is in many aspects consistent with the transfer-pricing guidelines of the Organisation for Economic Co-operation and Development (OECD). Every corporate income taxpayer that has operations with related parties must perform a transfer-pricing analysis.
F. Treaty withholding tax rates
The maximum withholding tax rates under Uruguay’s double tax treaties are set forth below. The withholding tax rates can never exceed those under domestic law. The withholding tax rates in the treaties can be applied only if the nonresident is the effective beneficiary of the income.
Since June 2020, the agreement covered by the Multilateral Instrument (MLI) has been in force, and since January 2021 it has begun to have effects with respect to several double tax treaties entered into by Uruguay. Therefore, when analyzing a double tax treaty, the MLI should be taken into account to determine possible tax consequences.