VAT, GST and Sales Tax in Uruguay

Summary

Name of the tax Value-added tax (VAT)
Local name Impuesto al valor agregado (IVA)
Date introduced 29-Dec-72
Trading bloc membership Mercosur Member
Administered by Directorate General of Taxes (http://www.dgi.gub.uy)
VAT rates
Standard 22%
Reduced 10%
Other Zero-rated and exempt
VAT number format Tax identification number (RUT), which contains 12 digits
VAT payments Monthly
VAT return periods Monthly (small VAT taxpayers, as determined by the VAT authorities, must file annually)
Thresholds
Registration None
Recovery of VAT by non-established businesses No

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods or services made in Uruguay by a taxable person
  • The importation of goods from outside Uruguay, regardless of the status of the importer

Who is liable

A VAT taxpayer is any taxpayer for corporate income tax pur­poses that makes taxable supplies of goods or services in the course of doing business in Uruguay. Additionally, taxpayers of personal income tax for independent activities are subject to VAT as well as nonresidents rendering services in Uruguay or performing business activities. No registration threshold applies. The definition of a VAT taxpayer applies to a permanent estab­lishment of a foreign business in Uruguay.

Group registration. VAT grouping is not allowed under the Uruguayan VAT law. Legal entities that are closely connected must register for VAT individually.

Non-established businesses and tax representatives. A “non-established business” is a business that does not have a fixed estab­lishment in Uruguay. To register as a taxpayer, a non-established business must have an address in Uruguay and must appoint a tax representative to undertake its VAT obligations (such as filing returns).

Registration procedures. Two printed copies of Form 0351 should be submitted to the tax office. Additionally, Form 0352 (indi­viduals) or 0353 (legal entities) may have to be submitted in order to register representatives. The registration should be done when operations would take place. Additionally, a notary certifi­cation in Spanish would be needed containing information of the company and the representatives. If all documents are duly pro­vided, the registration is finished on the same day the form is submitted. The corresponding representatives of the company submit the registration. The form should be signed by a person authorized by the company, but the submission to the tax office can be done by a third party. It is not possible to register online.

Late-registration penalties. Penalties and interest are assessed for late registration for VAT.

Reverse charge. In Uruguay the importer entity should pay VAT on the taxed goods, no matter if it is a local or foreign entity.

Digital economy. There are no specific rules on taxing the digital economy.

Deregistration. Deregistration is accomplished by submitting Form 0351, establishing that the entity is no longer a VAT payer.

VAT rates

The term “taxable supplies” refers to supplies of goods and ser­vices that are liable to VAT, including the zero rate.

The following VAT rates apply:

  • Standard rate: 22%
  • Reduced rate: 10%
  • Zero rate: 0%

The standard rate applies to all supplies of goods or services, unless a specific measure provides for the zero rate, the reduced rate or an exemption.

Examples of goods and services taxable at 10%

  • Basic foodstuffs
  • Soap
  • Medicines
  • Services supplied by hotels in “high season” to resident indi­viduals
  • Tourist services
  • Health services

Examples of goods and services taxable at 0%

  • Exports of goods

The term “exempt supplies” refers to supplies of goods and ser­vices that are not liable to tax. Exempt supplies do not give rise to a right of input tax deduction (see Section F).

Examples of exempt supplies of goods and services

  • Foreign currencies, securities, bonds, stocks and other financial transactions
  • Milk
  • Books, newspapers, magazines and educational material
  • Water
  • Services supplied by hotels in “low season” to resident indi­viduals

Option to tax for exempt supplies. Not applicable.

Time of supply

The time when VAT becomes due is called the “time of supply” or “tax point.” The basic time of supply is either when the goods are transferred or when the services are performed. The invoice for the transaction must be issued at the time of supply.

Imported goods. The time of supply for imported goods is either the date of importation or the date on which the goods leave a duty suspension regime.

Recovery of VAT by taxable persons

A taxable person may recover input tax (or credit VAT), which is VAT charged on goods and services supplied to it for business purposes. A taxable person generally recovers input tax by deducting it from output tax (or debit VAT), which is VAT charged on supplies made.

Input tax includes VAT charged on goods and services supplied in Uruguay and VAT paid on imports of goods.

A valid tax invoice or customs document must generally accom­pany a claim for input tax credit.

Credit VAT would be recovered only if related, directly or indi­rectly, to sales subject to VAT or exports.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for making taxable supplies or for other business purposes (for example, goods acquired for private use by an entrepreneur). In addition, input tax may not be recovered for some items of business expenditure.

The following lists provide some examples of items of expendi­ture for which input tax is not deductible and examples of items for which input tax is deductible if the expenditure is related to a taxable business use.

Examples of items for which input tax is nondeductible

  • Purchase of a car, van or truck by professional individuals

Examples of items for which input tax is deductible (if related to a taxable business use)

  • Business gifts
  • Purchase, lease or hire of cars, vans and trucks, except by pro­fessional individuals
  • Advertising and sponsorship
  • Parking
  • Travel expenses
  • Attendance at conferences and seminars
  • Business use of home telephones and mobile telephones

Refunds. If the amount of input VAT (credit VAT) recoverable in a month exceeds the amount of output VAT (debit VAT) payable, the excess credit may be carried forward to offset output tax in the following tax period. Nevertheless, input VAT related to export sales can be recovered through credit certificates issued by the tax authorities.

Partial exemption. There are no partial exemptions.

Preregistration costs. Before registration, some documents may have to be translated or notarized. Therefore, costs may vary depending on the company’s situation. The cost of submitting a form, currently approximately UYU150, is updated every six months.

Recovery of VAT by non-established businesses

Uruguay does not refund VAT incurred by foreign businesses unless the foreign businesses have a permanent establishment in Uruguay.

Invoicing

VAT invoices and credit notes. A VAT taxpayer must generally provide a VAT invoice for all taxable supplies made, including exports. A separate invoice is not required to be issued for an amount of less than UYU110, but all sales made in amounts lower than UYU110 must be recorded together in a general invoice prepared at the end of each business day. A VAT invoice is necessary to support a claim for an input tax credit. A VAT credit note may be used to reduce the VAT charged and reclaimed on a supply of goods and services. A credit note must contain the same information as a VAT invoice.

Exports. Uruguayan VAT is not chargeable on supplies of export­ed goods. However, to qualify as VAT-free, exports must be sup­ported by customs documents confirming that the goods have left Uruguay.

Foreign-currency invoices. If an invoice is issued in a foreign cur­rency, the amounts may be converted to Uruguayan pesos using the buyer exchange rate bill used between banks on the day before the transaction.

VAT returns and payment

VAT returns. VAT returns are generally submitted monthly. “Small VAT taxpayers” must submit returns annually. The tax authorities decide which businesses qualify as “small VAT taxpayers.” However, all VAT taxpayers must make VAT payments monthly. Monthly VAT returns and payments are due in the month follow­ing the month in which the transactions are reported. The exact date for payment depends on the taxpayer’s registration number (RUT).

Small VAT taxpayers must file annual tax returns in the second month following the end of the taxpayer’s fiscal year. For exam­ple, if a small VAT taxpayer closes its fiscal year in December, its annual VAT return is due in February. The exact date for payment depends on the taxpayer’s registration number.

In case of professional individuals, VAT returns must be submit­ted annually (between June and August of the following year, depending on the calendar issued by the tax authority) although payments would be done bimonthly, e.g., payment of taxes cor­responding to months January and February would be due in March.

VAT return liabilities must be paid in Uruguayan pesos.

Penalties

A penalty of 5%, 10% or 20% is imposed for late payment of VAT, and a penalty of UYU380, UYU400 or UYU440 is imposed for late submission of the VAT return. The penalty rate depends on the date of payment. In addition, interest is charged on late payments of tax at a rate that varies.

Penalties for severe cases of nonpayment of VAT, infringement of VAT regulations and fraud include criminal sanctions, such as fines and imprisonment.