Uruguay Taxes: A Breakdown for Individuals and Companies

Uruguay’s tax system operates on a territorial principle of taxation, which means that for the most part, only income generated from activities within Uruguay is subject to tax. This approach simplifies financial obligations for many foreign nationals and international companies, as income sourced from outside the country is not taxed. This makes Uruguay an appealing location for those looking to establish residency or conduct business. For companies, this means a corporate tax on local profits, while individuals benefit from a system that distinguishes between income earned in Uruguay and that earned abroad. This territorial focus is a characteristic of the nation’s financial landscape.

Establishing Tax Residency in Uruguay

An individual is considered a tax resident if they are present in the country for more than 183 days during a calendar year. If an individual spends more than half the year in Uruguay, they are brought into the national tax system for that year.

Beyond physical presence, tax residency can also be established through economic or personal ties. A person may be deemed a resident if their primary center of economic interest is located in Uruguay. This could mean their main source of income or significant business activities are based in the country. Similarly, having one’s “center of vital interests” in Uruguay, which refers to the primary and habitual residence of a spouse and children, can also confer tax residency status.

Uruguay offers a special tax regime for new residents, often referred to as a “tax holiday.” Under this program, new residents can choose to be exempt from taxes on their foreign-source income for a 10-year period starting the year after they become a tax resident. Alternatively, they can opt for a permanently reduced flat tax rate of 7% on certain foreign-source income, such as dividends and interest.

Economic investment provides another pathway to residency. Making a real estate investment above a certain value, or investing in a company that generates a specified number of jobs, can qualify an individual for tax residency. These options are structured to encourage direct investment into the Uruguayan economy.

Taxes on Personal Income

The taxation of individuals in Uruguay is governed by two separate taxes, depending on residency status. For those who qualify as tax residents, the Personal Income Tax, or IRPF (Impuesto a la Renta de las Personas Físicas), applies. Non-residents who earn income from Uruguayan sources are subject to the Non-Resident Income Tax, or IRNR (Impuesto a la Renta de No Residentes).

IRPF for residents is applied differently to income from labor versus income from capital. Income from employment and pensions is taxed at progressive rates, meaning the rate increases as income rises. These brackets range from 0% for the lowest earners to a maximum of 36% for those with the highest incomes.

Capital income for residents, which includes items like rent and interest, is taxed at a flat rate of 12%. For residents, IRPF mainly applies to Uruguayan-source income. However, there is an exception for certain types of foreign-source passive income; specifically, dividends and interest earned from abroad are taxed.

For non-residents, the IRNR is applied to any income they derive from sources within Uruguay. The IRNR is a flat tax, with a general rate of 12% on most types of Uruguayan-source income, such as royalties or technical service fees. In specific situations, particularly involving entities in low-tax jurisdictions, this rate can increase to 25%.

Corporate and Business Taxation

Business taxation in Uruguay is centered on the Corporate Income Tax, known as IRAE (Impuesto a la Renta de las Actividades Económicas). This tax applies to the net income of all legal entities operating within the country, including both resident companies and the permanent establishments of non-resident companies. The IRAE is levied at a single flat rate of 25% on taxable profits.

The IRAE adheres to the territorial principle and is levied exclusively on income generated from activities conducted, assets located, or rights economically used within Uruguay’s borders. This means that profits a Uruguayan company earns from its operations in another country are not subject to IRAE.

The calculation of taxable income for IRAE purposes includes revenue from sales, services, and other economic activities, from which operational costs and other permissible deductions are subtracted. For smaller enterprises, the Uruguayan tax system provides simplified regimes designed to ease the administrative and compliance burden on businesses that fall below certain revenue or operational thresholds.

Wealth and Consumption Taxes

Beyond income, Uruguay levies taxes on both accumulated wealth and the consumption of goods and services. The primary tax on wealth is the Impuesto al Patrimonio (IP), which translates to Wealth Tax. This tax is applied annually to the net worth of both individuals and corporations, but only on assets that are located within Uruguay. For individuals, the tax is progressive, with rates increasing as the value of their assets rises, and it only applies after a certain non-taxable minimum is exceeded. For corporations, the IP is a flat 1.5% on their net fiscal assets in Uruguay.

The most significant consumption tax is the Value Added Tax, or IVA (Impuesto al Valor Agregado). IVA is applied to the sale of most goods and services within the country, as well as to the importation of goods. It functions as an indirect tax, ultimately paid by the end consumer but collected by businesses at each stage of the supply chain.

Uruguay’s IVA has a standard rate and a reduced rate. The standard rate is 22% and applies to the majority of products and services. A reduced rate of 10% is applied to a specific list of essential goods and services, such as basic foodstuffs and medical services. Exports are subject to a zero-rate regime, which allows exporters to recover any IVA they paid on their inputs.

Tax Administration and Filing Obligations

Compliance with Uruguay’s tax system is managed by the national tax authority, the Dirección General Impositiva (DGI). The tax year in Uruguay aligns with the calendar year, running from January 1st to December 31st. This standardizes the reporting period for all taxpayers.

Filing deadlines for the primary income taxes differ. Individuals subject to the Personal Income Tax (IRPF) have deadlines in the middle of the year, around June or July, to file their annual returns for the preceding calendar year. For corporations, the deadline for filing the Corporate Income Tax (IRAE) return is within four months following the close of their fiscal year, which for most companies means filing by the end of April.

The process of filing returns and making tax payments is largely digitized. The DGI provides an online portal where taxpayers or their registered accountants can submit the required forms and documentation electronically. Payments can also be made through this system or via authorized banks.