Personal Income Tax
Individual income tax is levied on income obtained by resident and non-resident individuals.
The source principle for levying taxes includes income derived from activities developed in, property located in, or rights economically used within the Uruguayan territory. However, there are specific cases where (under certain conditions) income generated outside of Uruguay is subject to tax.
- Resident Individuals Income Tax (IRPF)
- Non Residents Income Tax (IRNR)
Resident Individuals Income Tax (IRPF)
Earned income stemming from work (i.e. wages, salaries, etc.) is subject to progressive rates ranging from 0% to 36%. Only a few expenses are allowed as deductions so almost the whole gross income is subject to this tax.
Remunerations that employees derive from personal services rendered outside Uruguay to local taxpayers are subject to IRPF at progressive rates ranging from 0% to 36%. Those employees of Free Zone individual can opt to be subject to Non Residents Income Tax (IRNR) or IRPF.
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.
Non Residents Income Tax (IRNR)
If the non-resident individual obtains income from a Uruguayan source of any kind, then the local Corporate Income Tax (IRAE) payer must withhold IRNR on the corresponding payment.
Although IRNR follows the source principle, technical services (defined as services rendered in the fields of management, technical, administration, or advice of any kind) rendered by non-residents (not under a related relationship) outside of Uruguay, but associated to taxable income for IRAE purposes, are deemed to be Uruguayan sourced and subject to IRNR at a rate of 12% or 25% (in case of being from BONT jurisdictions). However, under certain conditions, that tax rate can be reduced.
Earned income stemming from work (i.e. wages, salaries, etc.) is subject to a flat rate of 12%. Those employees of Free Zone individual can opt to be subject to IRNR or Residents Income Tax (IRPF).
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.