Uruguay personal income tax rates are progressive to 25%.
Individuals in Uruguay are subject to income tax, net worth tax and social security taxes. Both resident and nonresident individuals are taxed on their Uruguayan-source income.
Residents are subject to Personal Income Tax (IRPF), while non-residents are subject to Non-residents Income Tax (IRNR). It is considered Uruguayan-sourced the income that stems from activities developed, goods placed or rights used in Uruguay. These taxes are applied on a dual basis:
- Category I: Capital gains and equity increases
- Category II: Income derived from work (employees and independent workers).
Taxable Income (BPC) Tax Rate
Up to 84 Exempt
84 to 120 10%
121 to 180 15%
181 to 600 20%
601 to 1,200 22%
Over 1,200 25%
Value of BPC (Base de Prestaciones y Contribuciones) for 2010: $2,061
BPC is a new reference wage unit being used in Uruguay, it's not the Uruguay currency.
In order to determine the taxable income for Category II, two amounts need to be calculated. The mentioned rates are applied to the gross income, whether received in cash or kind, and results in a "primary tax". It is important to mention that independent workers' gross income admits a 30% deduction as notional expenses, so the rates are applied over the 70% of the gross income.
Social security taxes and a small fixed amount per child are allowed as deductions. The following scale has to be applied to these deductions, resulting in a "deductions tax".
Taxable Income (BPC) Tax Rate
Up to 36 10%
37 to 96 15%
97 to 516 20%
517 to 1,116 22%
Over 1,116 25%
Finally, the tax is the result of deducting the "deductions tax" from the "primary tax". Regarding dependant workers, the tax to be paid by employees is withheld by the employer and an annual adjustment must be done by the employer. The employee is responsible for filing a tax return in which all the work revenues received during the year must be considered, but only if he/she is included in any of the following situations: the employee works for two or more employers or works as a dependant and independent worker simultaneously. On the other hand, dependant workers have to fill in a form in which they inform certain deductions that are admitted and the annual adjustment acts as a tax return.
Payroll and social security taxes
Employers have to withhold the employees' social security taxes. Besides, they are required to contribute a percentage of monthly payrolls to social security fund (12,625%).
DIPAICO (Retirement benefit contributions) 15% 7.5%
DISSE (Medical insurance contributions) 3% - 4.5% - 6% 5%
FRL (Fund for retraining the unemployed) 0.125% 0.125%
An annual Personal Net Wealth Tax is imposed on residents and non-residents. The tax is levied on assets situated in Uruguay on 31 December value according to fiscal regulations. Only debts with local banks can be deducted from taxable assets.
Married couples living together have the option for joint assessment. There is a non-taxable amount (USD 104.000) and it is doubled for married couples.
Individuals are taxed at progressive rates ranging from 0.7% up to 2.25%.
Basis - Both resident and nonresident individuals are taxed on their Uruguay-source income.
Residence - An individual is considered resident if he/she is in Uruguay for more than 183 days in the calendar year, or if the individual's economic or centre of vital interests is in Uruguay.
Tax Filing status - Joint assessment for married couples is permitted. A different scale of rates is applicable to individuals who opt for joint assessment.
Taxable income - Personal Income tax (IRPF) or IRNR is levied on Uruguayan-source income obtained by employees or independent workers. Pensions and annuities paid by Uruguayan entities are subject to a different tax, called the IASS.
Capital gains - Capital gains are taxed at a flat rate of 12%.
Tax Deductions and allowances - Contributions to social security and a small fixed amount per child are allowed as deductions.
Capital duty - No
Stamp duty - No
Capital acquisitions tax - No
Inheritance/estate tax - No
Uruguay Tax year - Uruguay tax year is the calendar year
Real property tax - The municipal authorities levy a tax on real estate. The "real value" of real estate is subject to a tax upon transfer at a rate of 4% (2% paid by the buyer and 2% by the seller). This real value is determined by the municipal government.
Filing and payment of tax - Employees´ tax is withheld by the employer. The annual tax return is filed by the employer if the individual only has one job; otherwise, the employee must file the return. Independent workers are required to make advance payments and file a tax return in May of the year following the end of the tax year.
Uruguay corporate income tax (IRAE) rate is 25%.
IRAE is levied on resident legal entities and permanent establishments of non-resident entities. Non-residents with no permanent establishment in Uruguay are subject to a new specific tax on income of non-residents (impuesto a la renta de los no residentes).
Corporations and individuals are subject to corporate income tax (IRAE) on their net income of Uruguayan source originating from industrial, commercial and agricultural activities at a rate of 25%.
Persons deriving income from agricultural activities may opt to be subject to IRAE or, alternatively, to the tax on disposal of agricultural goods (IMEBA). However, this option is not available to certain types of companies which must always be subject to IRAE.
Uruguay tax year is the same as the commercial year of the company, provided that adequate accounting records are kept. Otherwise, the fiscal year is the calendar year. In either case, companies must file their tax returns by the end of the fourth month following the end of their tax year end.
Advance tax payments are made on account of the final liability for the relevant tax year. If the total advance payments exceed the final liability, a refund is made by means of credit certificates which may be used to pay the taxpayer's future taxes but may not be repaid.
CAPITAL GAINS TAX
Capital gains are subject to the same fiscal treatment as normal taxable income and must be included in the same tax return.
BRANCH PROFITS TAX
Branches of foreign corporations are subject to IRAE and IMEBA at the same rate as resident companies. Dividends, profit distributions or remittances paid or credited abroad by taxpayers subject to IRAE are also subject to a withholding tax called IRNR at the rate of 7%. Repatriations of branch profits to a head office outside Uruguay are subject to this tax.
FRINGE BENEFITS TAX
Corporations and individuals are subject to social security taxation on all salaries and fringe benefits paid to employees at the rate of 7.5% plus 5% of medical care. Additionally, employees are subject to a withholding of 21% on the amounts received. Both percentages are due monthly on amounts paid for the previous month.
Two principal municipal taxes are in force in Uruguay. The main one is 'real property contribution' and is due to municipal authorities on land and buildings located in their area. It represents a percentage (generally 1.5%) of the cadastral value and is due yearly over three to six payments. The second tax is payable by owners of buildings on a monthly basis for the services rendered by the local authority. This amount is adjusted periodically according to current inflation.
A very important federal tax is the net worth tax, due yearly by corporations and individuals. Corporations that pay IRAE are subject to the tax at a standard rate of 1.5% on their net worth, based on the difference between taxable property and deductible liabilities. Agricultural activities are exempted from this tax. The net worth personal tax return must be payable each year in May, on the basis of net worth as of 31 December of the previous year.
DETERMINATION OF TAXABLE INCOME
Depreciation of assets used in business activities must be computed at a maximum annual percentage. In principle, depreciation is calculated under the straight-line method. Key depreciation rates include the following:
Machinery and equipment: 10%
Buildings in urban areas: 2%
Uruguay taxes income on a territoriality basis rather than a worldwide basis. Hence, overseas income is not taxable.
On the basis of original costs in local currency, companies are free to choose between FIFO or average cost. The method chosen cannot be changed without the agreement of the Tax Authority.
CAPITAL GAINS AND LOSSES
No special tax rules apply to capital gains or losses. They must be included in the tax return together with the current income.
Interest paid to banks, financial institutions and companies that pay IRAE is deductible without limitations. Interest paid to individuals is deductible up to a limited percentage, established for the fiscal year by the Tax Authority.
Losses resulting from the tax return are deductible from gains of the next five years and, up to that date, are revaluated according to inflation coefficients.
FOREIGN SOURCED INCOME
Foreign source income is not taxable in Uruguay.
An inflation adjustment must be calculated applying the inflation coefficient for the period on the difference between assets (except fixed assets) and liabilities at the beginning of the exercise. If the difference is positive, the adjustment originates a deductible loss and if it is negative, a taxable income.
FREE TRADE ZONES
Strategically located within Mercosur, Uruguay offers a very liberal free trade zone treatment. Those areas of the national territory with a distinctive economic regime enjoy customs and tax exemptions and are excluded from the jurisdiction of the state monopolies. All types of export focused activities such as commercial, industrial or service oriented activities may be developed in free trade zones.
FOREIGN TAX RELIEF
Foreign tax relief is not available under Uruguayan fiscal law because overseas income is not taxable.
There are no special tax rules relating to corporate groups.
RELATED PARTY TRANSACTIONS
Taxation of related party transactions must be calculated on the basis of the current local prices, independently of the agreement between the parties.
Dividends, profit distributions or other remittances paid or credited by taxpayers subject to IRAE are subject to withholding tax at the rate of 7%. Interest paid is subject to withholding tax at the following rates:
- 3% on interest paid by financial institutions out of deposits in domestic currency or indexed units with more than a one-year term
- 3% on interest on bonds with a term of more than 3 years issued through public offer and quoted on the stock exchange
- 5% on interest from 1-year term deposits or deposits of less than a year
- 12% on other interest
Royalties paid by taxpayers to non-residents are subject to a withholding tax of 12%. Technical assistance fees paid to individuals or corporations abroad are also subject to a 12% withholding tax.
The standard rate of VAT in Uruguay is 22%.
Imports and the supply of goods and services in Uruguay are subject to VAT at the basic rate of 22%. Land, buildings, cattle and non-industrial agricultural products are exempted. Certain essential goods and medicines are subject to the minimum rate of 10%.
A monthly payment is due on sales of the previous month. Independent workers file bimonthly. Tax included in the purchases of merchandise, services and fixed assets is deductible from the tax billed to customers.
Registration - Registration is compulsory for businesses. Nonresidents providing services in Uruguay must pay VAT and the tax is withheld.
A specific consumption tax (IMESI) is levied at various rates on the first sale made by importers and manufacturers of a certain range of products. These include certain alcohol, cosmetics, tobacco, fuel and automobiles.
Income Tax Rate
Corporate Tax Rate
Sales Tax / VAT Rate
Last Update: Nov 2010
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