Taxes in Uruguay – Tax system in the business area

Uruguay taxes on a territorial basis, not on residence. It is the feature that defines the whole system and the one that most surprises newcomers: in principle only Uruguayan-source income is taxed. Here is the full map of taxes, with current rates, who pays what, and what it means for a company or for someone moving here.

Rates are set by the DGI and updated periodically: confirm on the DGI site or with an accountant before making decisions.

The main taxes at a glance

Tax	What it taxes	Rate
IRAE	Business income (companies)	25%
VAT	Supply of goods and services	22% standard · 10% reduced · 0% exports
Net Worth Tax	Net assets in the country	1.5% companies · progressive for individuals
IRPF	Income of resident individuals	Capital 7% to 12% · Employment progressive to 36%
IRNR	Uruguayan-source income of non-residents	7% to 12% by income type
IMESI	Specific consumption (fuel, tobacco, drinks)	Varies by product

The principle behind everything: territoriality

Uruguay taxes Uruguayan-source income. Income is considered Uruguayan-source when it derives from activities carried out in the country, from assets located in Uruguayan territory, and from rights economically used within the country.

The consequence for anyone relocating is direct: income generated outside Uruguay is, in principle, outside the scope of the tax. That is the underlying reason the country comes up in residence-planning conversations.

With two important caveats. First, there is no credit for taxes paid abroad unless a double taxation treaty exists with the country concerned. Second, territoriality has exceptions and nuances that vary by income type: it is not a blanket automatic exemption.

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Company taxation

IRAE — business income tax

The central tax on business activity: 25% on net income. The taxable base is effective net income adjusted to local currency, with specific corrections to reflect the impact of inflation.

Two points often overlooked when projecting:

IRAE and Net Worth Tax are not deductible as expenses.
Interest paid to non-resident entities on loans is deductible within certain parameters, and is generally subject to IRNR withholding.

It applies equally to the SA, the SRL and the SAS: the company form does not change the tax burden.

Who is liable for IRAE

Commercial companies — SA, SRL, SAS — are covered, and so are individuals carrying on business activity above the thresholds of the simplified regimes. In other words, it is not a tax exclusive to companies but on organised economic activity.

The tax is settled by financial year, with advance payments made during the year. That detail matters for first-year cash flow: you start paying before the year closes.

Net Worth Tax

It taxes net assets held in the country at year end, after deducting certain liabilities. For legal entities the rate is 1.5%.

Dividends

Dividends remitted abroad are subject to IRNR withholding, particularly where they derive from income already taxed under IRAE at the level of the company that generated it.

Taxation of individuals

IRPF — a dual system

IRPF taxes Uruguayan-source income of resident individuals, and works as a dual system separating two categories with different logics:

Capital income (rent, interest, dividends): proportional rates of 7% to 12%.
Employment income: progressive rates reaching 36%, with brackets and deductions.

That duality matters when planning: the same person can have part of their income taxed at 12% and another part at much higher progressive rates.

Net Worth Tax for individuals

Individuals pay Net Worth Tax at progressive rates, varying according to whether they are resident, and only if their assets in the country exceed the exempt threshold set annually by the Executive.

Non-residents: IRNR

Non-resident income tax applies to Uruguayan-source income obtained by persons and entities without a permanent establishment in the country. It covers all kinds of income: business, capital returns, employment income and capital gains.

Rates run from 7% to 12% depending on income type, and in practice it is applied by withholding at source: whoever pays from Uruguay withholds.

If you are considering relocating, it is worth understanding how this interacts with tax residency, which has its own criteria and is not obtained automatically by holding legal residency.

VAT — the everyday tax

Standard rate: 22%. The general one.
Reduced rate: 10%. Applies to certain goods and services, mainly essentials and medicines.
Exports: 0%. Zero-rated, which in practice means no tax is paid and input VAT can be recovered.
There is also a list of exempt goods and services.

A practical point: every entity liable for IRAE is also liable for VAT. If your company pays IRAE, it will have VAT obligations.

Which regime applies to your structure

The tax burden does not change between company forms, but it does change for the sole proprietorship, which depending on turnover can access simplified regimes not available to companies:

Monotributo: a single contribution replacing taxes and social security payments, with an income ceiling of 183,000 UI in the financial year.
Literal E: a simplified regime with a fixed monthly minimum VAT payment and no IRAE settlement.
General regime: VAT and IRAE with formal accounting.

Full comparison of structures in types of companies in Uruguay.

Incentives and special regimes

The rate table does not tell the whole story, because Uruguay has a set of regimes that reduce or eliminate the tax burden in certain cases:

Investment promotion regime: projects submitted and granted promotional status can access IRAE and Net Worth Tax exemptions, based on indicators such as employment created, exports or decentralisation.
Free trade zones: a regime exempting national taxes for activities carried out within them, with specific requirements and obligations.
Exports: zero-rated for VAT, with the right to recover input VAT.
Software and related services: specific exemptions exist, subject to conditions.

None of these regimes is automatic: all require meeting conditions and, in several cases, prior application and approval. Worth assessing before structuring an operation, not after.

Double taxation treaties

Uruguay has a network of treaties signed with various countries. Their practical relevance is concrete: outside those treaties there is no credit for taxes paid abroad. If you have income or structures in more than one jurisdiction, checking whether a treaty exists with that country is one of the first things to verify.

Formal obligations

Beyond paying, you have to comply. The points that most surprise newcomers:

Electronic invoicing. The electronic tax document regime is mandatory across the taxpayer base, which means engaging an authorised provider or a system that issues in the required format.
Periodic tax returns depending on the tax and regime.
Monthly advance payments of IRAE and VAT.
Withholdings: in many transactions — payments abroad, professional fees, leases — the payer must withhold and remit the tax.

This administrative layer usually determines whether you need an accountant from day one or can start without one, and it varies considerably by regime.

Other taxes to keep in mind

IMESI: a specific consumption tax on certain products such as fuel, tobacco and alcoholic drinks. The rate varies by product.
ITP: Property Transfer Tax, 2% for the buyer and 2% for the seller in property purchases, and 3% or 4% in successions depending on the relationship.
BPS contributions: employer and employee contributions on remuneration, which are not a tax but weigh just as much on labour cost.

Frequently asked questions

What is the IRAE rate in Uruguay?

25% on net business income.

What is the VAT rate in Uruguay?

The standard rate is 22% and the reduced rate 10%, applicable to certain goods and services. Exports are zero-rated.

Does Uruguay tax foreign income?

The system operates mainly on the territoriality principle: in general, Uruguayan-source income is taxed. There are exceptions and nuances by income type, and no credit for taxes paid abroad unless a double taxation treaty applies.