Corporate Taxation
Permanent Establishment (PE) in Uruguay, some hypotheses:
- Developing activities by means of a fixed place of business in Uruguay.
- Construction/installation and supervision: when they last more than 3 months in Uruguay.
- Other services rendered during a period of more than 6 months in Uruguay
The above mentioned hypotheses are applicable under the Uruguayan general regime. If the foreign entity is resident of a country that has signed a Treaty to avoid Double Taxation (DTT) with Uruguay, such hypotheses may be different.
Foreign entities without PE in Uruguay should under certain conditions be registered before Tax/Social Security Offices, and are subject to the non-resident's tax regime.
Local companies and foreign ones with PE in Uruguay
- Companies and their employees must be registered before Tax/Social Security Offices and will be subject to the general tax regime.
- Could apply for Free Zone user status under certain conditions. Please refer to Free Zone section.
Non Residents Income Tax (IRNR):
IRNR will be applicable on the Uruguayan source income of the foreign company and will be withheld by the local contracting company (UPM or other).
Tax rate: 12% (Grossing-up rule could be applicable). The IRNR rate applicable to entities domiciled in low or non-tax jurisdictions (“BONT” entities) is increased to 25%. Uruguay provides a list including the jurisdictions considered as BONT.
Net wealth Tax (IP) withholding
Is applicable on balances owed to non-residents entities as of December 31 of each year (tax rate: 1.5%, some exemptions apply). The IP rate applicable to BONT is increased to 3%.
Equipment rental and services regarded as “technical services”
Are exempted from IRNR and IP withholdings if they are rendered to a Free Zone User.
(*) Corporate taxation described in this slide may vary if the foreign entity is resident from a country that has signed a DTT with Uruguay.
VAT:
General Tax Rate 22%.
Not applicable, among others, on services that are rendered necessarily and exclusively within a Free Zone (FZ)
VAT will be paid to the Tax Office by way of withholding to be done by the contracting party to the extent that this latter is a Uruguayan resident entity or a PE of a non-resident one.
Customs Duties and VAT on imports:
Not applicable on goods coming from abroad with a place of destination being the Free Zone (in transit regime).
Social Security Contributions (CESS)
Are mandatory for both, the employer and the employees (some exemptions may apply under CESS Treaties).
Availability of tax credit
In the non-resident entity´s country for the tax obligations paid in Uruguay should be investigated case-by-case.
Corporate Income Tax (IRAE):
25% applicable on the Uruguayan source net income.
Net Wealth Tax (IP):
1.5% applicable on net taxable assets as of 31 December or closing balance sheet.
VAT:
General tax rate 22%. Not applicable, among others, on the transfer of goods within a FZ and on services that are rendered necessarily and exclusively within a FZ.
Input VAT paid on local purchases or withheld could be offset if it is associated to taxable/exports activities and some conditions are met.
Custom Duties:
Not applicable for goods coming from abroad with a place of destination being Free Zone territory (in transit regime).
Non Resident Income Tax (IRNR) withholdings on payments made to non-residents subjects (without PE) for, among others:
- Dividends and profits (7%)
- Technical services rendered in Uruguay or abroad (12% / 25% to BONT entities)
- Other services rendered in Uruguay (12% / 25% to BONT entities)
- Equipment rental in Uruguay (12% / 25% to BONT entities)
- Activities combining capital and labor in Uruguay (12% / 25% to BONT entities)
(*)Withholding taxes described in this slide may vary if the foreign entity is resident from a country that has signed a Double Tax Treaty with Uruguay.
IP withholding:
Applicable on balances owed to non-residents as of December 31 of each year (1,5% / 3% to BONT entities).
Social Security Contributions (CESS):
Residents Income Tax (IRPF) or Non- Residents Income Tax (IRNR) will apply on residents and non-residents employees. Employer must withhold the employee CESS and pay them to the CESS Office, together with its own CESS obligations.
Low or No tax Jurisdiction countries (BONT ):
Countries, jurisdictions or special regimes should be deemed as "low or no-tax jurisdictions“ provided they comply with the following conditions simultaneously:
i) Uruguayan source income - derived from activities developed, goods situated or rights economically used in Uruguay - would be subject to taxation at an effective rate lower than 12%; and
ii) No Tax Exchange of Information Agreement or a Double Tax Treaty (with a wide clause of exchange of information) with Uruguay is in force, or the Agreement is not fully applicable to all taxes covered.
Accordingly, the Tax Office issued Resolution Nbr. 1/2020, in which the jurisdictions/countries that should be considered as BONT jurisdictions at this moment are listed:
| 1) Angola | 15) Pacific Islands | 29) Puerto Rico |
| 2) Antigua and Barbuda | 16) Fiji Islands | 30) Kingdom of Tonga |
| 3) Ascension Island | 17) Maldives Islands | 31) Republic of Yemen |
| 4) Brunei | 18) Falkland Islands | 32) Saint Martin (former member of the Netherlands Antilles) |
| 5) Commonwealth of Dominica | 19) Palau Islands | 33) Saint Pierre and Miquelon |
| 6) Grenada | 20) Solomon Islands | 34) Sultanate of Oman |
| 7) Guam | 21) US Virgin Islands | 35) Svalbard |
| 8) Guyana | 22) Jamaica | 36) Swaziland |
| 9) Honduras | 23) Jordan | 37) Tokelau |
| 10) Cocos Island (Keeling Island) | 24) Kiribati | 38) Tristan da Cunha |
| 11) Christmas Island | 25) Labuan | 39) Tuvalu |
| 12) Saint Helena Island | 26) Liberia | 40) Djibouti. |
| 13) Norfolk Island | 27) Niue | |
| 14) Pitcairn Island | 28) French Polynesia |
Double Tax Treaty (DTT) signed by Uruguay
DTT in force
| Hungary | Ecuador | Vietnam |
| Mexico | Malta | United Kingdom |
| Spain | South Korea | Luxemburg |
| Germany | Finland | Singapore |
| Switzerland | India | Belgium |
| Liechtenstein | Rumania | Chile |
| Portugal | United Arab Emirates | Paraguay |
DTT in process
Japan - Parliament approval and exchange of notes is still pending
Brazil - Exchange of notes is still pending
Italy - Exchange of notes is still pending.
Malaysia, Russia, Netherlands, Ireland - Under negotiation