The Uruguayan tax system includes both indirect and direct taxes which, in general terms, apply the source principle.
The main direct taxes applied in Uruguay to companies include the Corporate Income Tax (IRAE) at a rate of 25% and the Wealth Tax (IP) at a rate of 1.5%. Only income from Uruguayan source is levied, partially adjusted to inflation, and no tax credit is granted for taxes levied abroad, unless there are double taxation agreements in force.
The main direct tax levied on natural persons is the Personal Income Tax (IRPF). This tax is a personal and direct tax which levies the income obtained by natural persons residing in Uruguay at an increasing rate according to the income received. Residents are natural persons staying in Uruguay for more than 183 days during a calendar year and who establish their main core or center of activities or have economic or vital interests in Uruguay.
Income from Uruguayan sources obtained by non-resident natural or legal persons without permanent establishment in the country are subject to the Non-Resident Income Tax (IRNR). The IRNR is applied at proportional rates ranging from 3% to 12%, depending on the type of income.
The main indirect taxes include the Value Added Tax (VAT) and Excise Tax (IMESI). VAT's basic rate is 22%, with a minimum rate of 10% only applicable to certain products and services. Exports and circulation of most agricultural products are applied the zero rate regime, whereby tax credit is reimbursed. As from September 2014, VAT rate is reduced to 4% for the disposal of goods and services to final consumers, provided that consideration is paid with debit cards or electronic money instruments.
The Excise Tax (IMESI) is applied to the first disposal at any title carried out by producers or importers of certain products, excluding exports. Main products which fall under this category are fuel, tobacco, beverages, cosmetics and cars and the rate varies according to the item.
At the time of assessing any investment in Uruguay, be aware that the country has a wide range of incentives which, among other benefits, allows you to discount the investment made from future income levied by IRAE. For more information, refer to the Investment Promotional Schemes chapter.