Main Taxes
Sole Proprietorship Companies (SAU) in Uruguay are subject to the following taxes:
- Income Tax on Economic Activities (IRAE): Rate of 25%.
- Wealth Tax (IPAT): Rate of 1.5%.
- Value Added Tax (VAT): Basic rate of 22%.
- Corporation Control Tax (ICOSA).
Principle of Territoriality
The Uruguayan tax system is based on the “Principle of Territoriality”.
This means that the aforementioned taxes do not apply to income generated, activities carried out or assets located abroad.
For example, if a UAS is engaged in:
- Make investments or deposits in financial institutions abroad.
- Owning shares in foreign companies (holding activity).
- Have properties located outside the country.
In these cases, the income will not be subject to the IRAE, the assets will not be computed for the IPAT and there will be no activities taxed by VAT.
The only tax that the SAU will pay in Uruguay will be the ICOSA, which amounts to approximately USD 720 per year. Contáctanos para más información
Trading Regime
Income Tax:
When a UAA carries out international trading (buying and selling goods or services abroad without them transiting through Uruguay), a part of the income generated is considered to be subject to taxes in Uruguay.
The General Tax Directorate allows this income to be determined by applying a 3% rate on the difference between the purchase and sale price in Uruguayan pesos, without deduction of other costs.
A rate of 25% is applied to this income, resulting in an effective taxation of 0.75% of the profit generated.
Dividend Tax:
Dividends generated by Uruguayan-source income are subject to a rate of 7%.
Applying this rate to Uruguayan source income (3%), a withholding of 0.21% is generated.
Adding the IRAE and the dividend tax, the total taxation will be approximately 0.96% on the profit generated.
Wealth Tax:
SAUs pay the IPAT at a rate of 1.5% on assets located in Uruguay, being able to deduct commercial or bank debts with domestic financial institutions.
In the case of international trading, export credits and offshore bank accounts are exempt.
There is no obligation to withhold the IPAT on unpaid balances to persons abroad if the debts come from imports, trading operations, loans or deposits in foreign currency.
Other Taxes:
SAUs also pay ICOSA (approximately USD 720 per year), deductible from IPAT if applicable.
International trading operations are not taxed with VAT.
If more than 90% of the assets of the SAU are outside the country, the interest on loans received from abroad is not subject to the Non-Resident Income Tax (IRNR).
If the income taxed by IRAE does not exceed 10% of the total, advisory services hired from abroad are subject to an effective withholding of IRNR of 0.6%.
Otherwise, the withholding is 12%.
Conclusion
SAUs in Uruguay are an attractive option for channeling international trading operations due to:
- Their domicile in a jurisdiction not considered a tax haven.
- Subject to the general tax regime with an IRAE rate of 25%.
- Effective marginal taxation of 0.96% on the income generated in each operation.
