|Corporate Income Tax Rate (%)||25|
|Capital Gains Tax Rate (%)||25|
|Branch Tax Rate (%)||25|
|Withholding Tax (%)|
|Equipment Rent||12 (a)(b)|
|Technical Assistance Payments and Service Fees||12 (b)|
|Branch Remittance Tax||7 (b)|
|Net Operating Losses (Years)|
a) This tax applies to nonresident corporations and individuals and resident individuals. Nonresident corporations are corporations not incorporated in Uruguay.
b) See Section B.
Taxes on corporate income and gains
Corporate income tax. Corporations are taxed on Uruguay-source income, defined as income derived from activities performed, property situated or economic rights used in Uruguay. Any profits, including capital gains, are taxable.
Rate of corporate tax. The corporate tax rate is 25%.
Capital gains. Capital gains are included in ordinary income and taxed at the regular corporate rate.
Administration. Corporations are required to make monthly ad – vance payments. These payments are calculated by applying to monthly gross income a fraction with a numerator equal to income tax for the prior tax year and a denominator equal to the corpora-tion’s gross income for that year. For the months of the current year prior to filing the income tax return, however, the income tax and gross income used are from the corresponding months of the prior year. Filing of tax returns and payment of the balance must be made by the fourth month after the end of the accounting period, which is the company’s tax year-end.
Dividends and branch remittances. Dividends paid to resident companies are exempt from tax. Dividends paid to resident individuals are subject to personal income tax at a rate of 7% if the divi dends are paid out of income subject to corporate income tax. Dividends paid to nonresident companies and individuals and branch remittances are subject to withholding tax at a rate of 7% if they are paid out of income subject to corporate income tax. Dividends and branch remittances paid out of income not subject to corporate income tax are exempt from tax. Dividends subject to withholding tax cannot exceed the taxable profit of the company.
Withholding tax on certain payments to nonresidents. In general, a 12% withholding tax is imposed on the following payments to nonresidents:
- Technical assistance payments
- Service fees
- Equipment rent
Determination of trading income
General. Tax is imposed on taxable profit, which is accounting profit earned in the accounting period after tax adjustments. An inflation adjustment is applied. All Uruguay-source income is taxable. Expenses are deductible to the extent that they are incurred in producing or maintaining taxable income, are documented, and are accrued in the fiscal year.
In general, payments to nonresidents are fully deductible as ex – penses if the effective income tax rate of the country of the recipient is 25% or higher (to be proved through a specific certificate). If the effective tax rate of the country of the recipient is lower than 25%, only a percentage of the expenses is deductible. The percentage equals the ratio of the nonresident withholding tax rate of 12% plus the effective income tax rate of the country of the nonresident (reduced by a tax credit if one exists) to the corporate income tax rate of 25% in Uruguay. If the nonresident withholding tax of 12% applies, the minimum percentage of deduction is 48% (the ratio of the withholding tax rate of 12% to the corporate income tax rate of 25%).
Inventories. Stock is valued according to cost of purchases and production costs. Last-in, first-out (LIFO), first-in, first-out (FIFO), average cost and market price are acceptable methods. The corporation can choose which method to use, but may not change the method without prior authorization.
Provisions. Only deductions for expenses already incurred are allowed. Provisions for bad debts and severance pay are not allowed. Bad debts may be written off if the debtor goes bankrupt or if 18 months have elapsed since the obligation to pay the debt became due.
Depreciation. A depreciation deduction may be taken on tangible assets based on their useful lives using the straight-line method. The following are some of the applicable rates.
|Commercial and industrial buildings||2/3 (a)|
|Office equipment||10 (b)|
|Machinery and equipment||10 (b)|
a) The 2% rate applies to buildings in urban areas; the 3% rate applies to buildings in rural areas.
b) This is the usual rate. The rate for a particular asset depends on its estimated useful life.
For some assets, the units-of-production method may be used. Good will may not be depreciated.
Intangibles assets must be amortized at a rate of 10%.
Tangible assets must be revalued according an index determined by the government. Intangible assets and goodwill cannot be revalued.
Relief for losses. The general rule is that losses may be carried forward for five years and deducted from income without limit. No carryback is possible.
Other significant taxes
The following table summarizes other significant taxes.
|Nature of tax||Rate (%)|
|Value-added tax (VAT), on the sale of
products and most services and on
|Rate on basic foodstuffs and pharmaceuticals||10|
|Net worth tax, on corporate net worth,
computed using values used for tax
purposes; for some companies, up to
50% of this tax may be credited against
corporate income tax (the current
discount is 1%)
|Banks and credit card corporations||2.8|
|Social security contributions, on salaries and wages; imposed on|
|Salaries and wages up to approximately USD4,200; paid by|
|Employer; standard rate||12.625|
|Employee||18.125 to 23.125|
|Salaries and wages exceeding
approximately USD4,200; paid by
|Employee||3.125 to 8.125|
(The salary threshold for social security contributions is updated in February of each year.)
Foreign-exchange controls. Uruguay does not impose foreign-exchange controls. No restrictions are imposed on inbound or out bound investments. The transfer of profits and dividends, loan principal and interest, royalties and fees is unlimited. Non residents may repatriate capital, together with accrued capital gains and retained earnings, subject to applicable withholding taxes and company law considerations (for example, the requirement that companies transfer a portion of their annual income to a reserve).
Import and export operations are transacted at a free rate determined by the market.
Debt-to-equity rules. No specific debt-to-equity rules apply in Uruguay.
Treaty withholding tax rates
The maximum withholding tax rates under Uruguay’s double tax treaties are set forth below. The withholding tax rates in the treaties can be applied only if the nonresident is the effective beneficiary of the income.
|Non-treaty countries||7 *||12||12|
* See Section B.