UruguayTax Obligations Detailed

In Uruguay, employers face various tax obligations related to payroll, corporate income, and other levies.

Employer Obligations in Uruguay for 2025

As of today, February 5, 2025, employers in Uruguay have the following tax obligations:

Payroll Taxes

• Employer Contributions: Employers contribute 12.625% of an employee's gross salary for social security. This contribution covers retirement (7.5%), health insurance (5%), the Labor Restructuring Fund (0.1%), and the Labour Credit Guarantee Fund (0.025%). Both employer and employee retirement contribution rates are applicable up to a monthly amount of UYU 256,821 until December 31, 2024 (the exceeding amount is exempt).
• Employee Withholdings: Employers must withhold income tax and social security contributions from employee salaries. Income tax withholdings operate under a Pay-As-You-Earn (PAYE) system, with rates varying based on income levels. Social security withholdings range from 18.1% to 23.1% of the employee's gross salary, depending on family circumstances. This includes contributions for retirement (15%), health insurance (3% to 8%), the Labor Restructuring Fund (0.1%), and the Labour Credit Guarantee Fund (0.1%). Health insurance contributions are based on a Base Wage Unit (BWU). Remunerations not exceeding 2.5 monthly BWUs are subject to 3% if below the threshold, or higher rates from 4.5% to 8% according to dependents.
• Payroll Frequency and Deadline: Payroll is typically processed monthly, with payments due to employees by the 5th day of the following month.
• 13th Salary (Aguinaldo): Employers are required to pay a 13th salary, known as Aguinaldo, in two installments, one in June and the other in December.

Corporate Income Tax (IRAE)

• Tax Rate: The corporate income tax rate is 25% of net income.
• Payment Schedule: Advance payments are due monthly before the 25th day of each month. The remaining tax liability based on the financial results of the first quarter, the first half-year, nine months, and the tax year should be paid within five days of the respective reporting deadlines.
• Filing Deadline: The annual corporate income tax return is due by the end of the fourth month following the fiscal year-end, which is December 31st.

Other Taxes

• Value-Added Tax (IVA): The standard VAT rate is 22%. A reduced rate of 10% applies to certain essential goods and services.
• Wealth Tax (IP): A wealth tax of 1.5% is levied annually on the net worth of companies. For banks and other financial entities, the tax rate is 2.8%. Entities resident in low or no tax jurisdictions without a permanent establishment in Uruguay face a rate of 3%.
• Property Tax: Municipalities levy property taxes on real estate at variable rates.
• Property Transfer Tax: A 2% tax is payable by both the buyer and seller in a property transfer. Other taxpayers (except direct heirs) pay 4%, or 3% if heirs.
• ICOSA Tax: Upon incorporation, companies must pay a one-time tax of 1.5% based on a notional amount.

Non-Resident Income Tax (IRNR)

• Tax Rate: Generally, non-resident income is taxed at a flat rate of 12%. Exceptions include a 30.25% rate on income derived from Uruguayan real estate held by entities in low/no-tax jurisdictions, a 25% rate on other income from such entities, and varying rates for other income types.

Income Tax for Foreign IT Professionals

• A specific tax regime applies to foreign IT professionals working in Uruguay. Employers must withhold 12% of their nominal salary as non-resident income tax and remit it to the tax authorities the following month. They are also responsible for monitoring and providing evidence of compliance upon request by the Tax Authority or Social Security Bank.

It is important to note that this information is current as of February 5, 2025, and tax laws and regulations are subject to change. Consulting with a tax advisor or legal professional is recommended for the most up-to-date and accurate information.

In Uruguay, employee tax deductions primarily center around social security contributions and a notional amount for dependent children.

Income Tax (IRPF)

• Progressive Tax Rates: Uruguay's income tax system uses progressive rates. These rates range from 0% to 36% based on the employee's annual gross income. As of 2023, there were proposals to reduce these rates; however, it remains uncertain if and how these changes have been implemented as of February 2025.
• Deductions:
  • Social Security Contributions: Mandatory contributions to the social security system are deductible.
  • Dependent Children: A notional amount for the education, food, healthcare, and housing of dependent under-age children is deductible. This deduction was proposed to be increased to 20 BPC (US $2,900) per year, per child as of 2023. However, confirm the current amount for 2025. The deductible amount is calculated by applying a proportional rate to allowed deductions based on the employee's nominal annual income. If this income is less than or equal to 180 BPC (US $26,000), the rate was proposed to increase from 10% to 14% as of 2023. Confirm the current rate for 2025. For higher incomes, a lower rate applies. As of 2024 information, those with monthly incomes below 15 BPC (USD 2,300) could deduct 14% of the total deductions, while those earning more could only deduct 8%.
  • Rental Payments: A tax credit is available for rental payments for permanent housing. This was proposed to be raised to 8% as of 2023. Confirm the current details for 2025.
  • Mortgage Interest: A deduction is available for mortgage interest payments on permanent housing up to a specific limit. This limit was proposed to be raised as of 2023. Check current stipulations for 2025.

Social Security Tax (IASS)

• The Social Security Assistant Tax (IASS) is levied on certain income sources, including pensions and other benefits.
• Minimum Non-Taxable Amount: There's an annual minimum non-taxable amount for the IASS. Verify the current amount for 2025, as changes were proposed as of 2023.

Employer Withholding

Employers in Uruguay are responsible for withholding income tax and social security contributions from employee salaries each month and remitting them to the Dirección General Impositiva (DGI), Uruguay's tax authority. Ensure compliance with current DGI regulations regarding deadlines and procedures for withholdings and payments.

Other Considerations

• Benefits in Kind: Most benefits provided to employees, whether cash or in-kind, are subject to income tax.
• Updated Information: Tax laws and regulations can change frequently. Always verify the latest information with official sources or a tax advisor for the most up-to-date details regarding employee tax deductions in Uruguay for 2025.

In Uruguay, the Value Added Tax (VAT), known locally as Impuesto al Valor Agregado (IVA), is a consumption tax applied to most goods and services.

VAT Rates

• Standard Rate: 22% applies to most goods and services.
• Reduced Rate: 10% applies to specific goods and services, including basic foodstuffs, soap, medicine, some tourism, and health services. The reduced 9% VAT rate for tourism services paid electronically expired on April 30, 2025, reverting to the standard 22% rate.
• Zero Rate: 0% applies to exports, milk, books, newspapers, magazines, and educational materials.
• Exempt: Certain goods and services are VAT-exempt, including foreign currency transactions, securities, bonds, stocks, real estate rentals, and some banking operations.

VAT Registration

• Mandatory: All businesses conducting commercial, industrial, agricultural, or independent professional activities in Uruguay must register for VAT, regardless of turnover. There's no registration threshold.
• Non-resident Digital Service Providers: Non-residents providing digital services to consumers (B2C) must register for VAT. Those serving businesses only (B2B) are generally not required to register; instead, the Uruguayan business customer withholds and remits the VAT.
• Process: Businesses obtain a Tax Identification Number (RUT) upon registration, used for all tax purposes including VAT.

VAT Filing and Payment

• Frequency: Monthly for most businesses. Some small taxpayers may qualify for annual filing.
• Deadline: Generally, the second half of the month following the reporting period. The exact date varies based on the taxpayer's RUT and payment method.
• Electronic Invoicing: Uruguay mandates e-invoicing for almost all VAT taxpayers. December 31, 2024 is final deadline for the majority of remaining taxpayers to comply with the electronic invoicing mandate using XML format for both B2B and B2C transactions.
• Returns: Submitted monthly using form 2176 (or annually using form 2178 for qualifying small taxpayers).

IMESI (Excise Tax)

• Specific Goods: Applies to the first domestic sale by manufacturers or importers of certain goods, such as alcoholic beverages, tobacco, gasoline, fuel, lubricants, and other petroleum products.
• Variable Rates: Rates are specific to each product and can be substantial (e.g., up to 80% for alcoholic beverages, 70% for tobacco, and exceeding 133% for some petroleum products). Other goods like soft drinks, cosmetics, and motor vehicles have rates ranging from 10% to 30%.

Penalties for Non-Compliance

• Late VAT Payment: Fines range from 5% to 20% of the VAT due, depending on the delay, plus interest charges.

This overview is current as of February 5, 2025, and may be subject to changes in regulations. For the most accurate and up-to-date information, consult with a tax professional or refer to official government resources.

Uruguay offers a range of tax incentives designed to attract investment and stimulate economic growth.

Corporate Tax Incentives

• Investment Promotion Regime (Law No. 16,906): This regime offers incentives like exemptions, credits, and deductions on Corporate Income Tax (IRAE) for investments in specific sectors or regions. The exact benefits depend on the project's specifics, offering IRAE exemptions from 30% to 100%. Recent modifications through Decree 268/020 further enhance the benefits available.
• Free Trade Zones: Companies operating within these zones enjoy a highly favorable tax environment, including full exemptions from IRAE, Wealth Tax, VAT, IMESI, ICOSA, and other local taxes, as well as exemption from import duties.
• Industrial Parks: Businesses establishing or operating within industrial parks benefit from IRAE exemption on industrial equipment, along with exemption from excise tax and VAT on acquisitions of such goods. Decree 170/019 and Decree 143/018 (May 2018) regulate these incentives.
• Software Development: A 100% IRAE exemption is available for software development activities, provided at least 50% of associated costs are incurred in Uruguay. Dividends from these activities are also exempt.
• Telecommunications Incentives (Decree 281/024): Telecommunication companies involved in electronic surveillance for criminal investigations benefit from IRAE exemptions (up to approximately US$1.84 million) on investments in electronic data processing equipment and software made before June 30, 2025.

Individual Tax Incentives

• IT Professional Incentives: Qualified IT professionals migrating to Uruguay can opt for Non-Resident Income Tax (IRNR) at a flat 12% rate instead of the progressive Personal Income Tax (IRPF) rates (0% to 36%). This applies to those working for companies in Uruguay under specific conditions (e.g., physical presence, Social Security opt-out), particularly those within the software regime. Agreements must be in place by February 28, 2025.
• Tax Residency Benefits: New tax residents enjoy an 11-year tax holiday on foreign-source income. Alternatively, they can choose a permanent 7% rate on foreign dividends and interest, waiving the holiday. No tax is levied on other foreign income (e.g., rental income, capital gains). There's no tax on foreign assets for residents.

Value Added Tax (VAT) Incentives

• Tourism VAT Reduction: A reduced 9% VAT rate applies to specific tourism services (car rentals, accommodation rentals) until April 30, 2025. Electronic payment methods are required to qualify. Standard VAT is 22%.
• Tax Credit for E-invoicing (Decree 206/019): Taxpayers with lower economic capacity benefit from a tax credit up to UI 80 (around $493.58 for 2025) per month for adopting e-invoicing. This has been extended through December 31, 2025.

Other Incentives

• Free Port and Airport Regime: Offers specific tax advantages for businesses operating within these areas.
• Trading Activities Regime: Provides benefits for companies engaged in goods or services trading.
• Forestry Regime: Offers incentives for forestry-related investments.

It's important to note that tax laws and regulations can change. Consulting with a tax professional is recommended for the latest information and to determine eligibility for specific incentives.