Tax regime

The Legislative Branch passes national tax laws, which are later implemented by the Executive Branch.

The tax administration does not have the legal authority to modify tax legislation.

Each of the 19 departments in the country can establish, collect and control only certain taxes through their respective Departmental Councils. The most significant departmental taxes include the Real Estate Tax, Vehicle Registration Fee and the Food Analysis Tax. However, their incidence on companies is generally insignificant.

Taxes on companies and individuals in the current tax system are as follows:

• Corporate Income Tax (IRAE)
• Wealth Tax (IP)
• Personal Income Tax (IRPF)
• Non-Resident Income Tax (IRNR)
• Value Added Tax (IVA)
• Excise Tax (IMESI)

Corporate Income Tax (IRAE)

The Corporate Income Tax (IRAE) is an annual tax of 25% on profits from Uruguayan sources derived from economic activities of any nature. Uruguayan sources of income are those obtained from activities carried out, goods located or rights economically exploited in Uruguay. Income derived from agriculture and livestock activities are also subject to IRAE. Taxpayers in certain cases may opt to pay either IRAE or the Agriculture - Livestock Goods Sales Tax (IMEBA), which is applied to the sale of certain products in said industry.

Wealth Tax (IP)

Assets in the country are subject to Wealth Tax (IP) at the close of the fiscal year (certain liabilities are deductible). Rates are as follows: 3.5% for obligations and debentures, savings bonds and other similar bearer securities; 2.8% for bank and financial institution equity; and 1.5% for other legal entities.

Individuals pay IP at progressive rates that range from 0.7% to 2.5%. It is applied on the amount exceeding the individual non-taxable amount of approximately USD 80,000 (double for married couples). This tax is forecasted to be unified and reduced progressively to 0.1% by 2016.

Personal Income Tax (IRPF)

The Personal Income Tax (IRPF) is a direct tax applied to resident individuals with Uruguayan sources of income. For the purposes of this tax, a resident is considered as a person who is in the country for 183 days during the year or who has Uruguay as the center of his or her vital or financial interests. The tax is applied under a dual system that distinguishes income derived from capital sources (taxed at proportional rates that range from 3% to 12%) and from labor sources (taxed at progressive rates from 0% to 25%). The tax is calculated and paid as of 31 December of each year. Regulations require withholding and retentions for various types of income.

Non-Resident Income Tax (IRNR)

The Non-Resident Income Tax (IRNR) is an annual tax applied to Uruguayan sources of income by non-resident physical and legal persons. The tax is applied at proportional rates that range from 3% to 12%, depending on income type. In general, the tax is applied through retentions via local companies that pay or credit income taxed abroad. When no designated retention agent exists, the taxpayer must designate a representative in Uruguay and pay the tax directly.

Value Added Tax (IVA)

Value Added Tax (IVA) is taxed on the domestic circulation of goods and services, imports and the adding of value originating in the construction of buildings. The basic rate is 22%. A 10% rate applies to certain basic goods and services such as medicines. In addition, a series of goods and services are exempt from this tax.

Excise Tax (IMESI)

The Excise Tax (IMESI) is applied to the first sale made by producers or importers of certain products in the local market. Exports are not subject to IMESI. The rate varies according to the item and it is generally set within the parameters established by law.

As seen in the following chart, collection of indirect taxes (IVA and IMESI) accounts for nearly two thirds of the DGI tax bureau's total collections, while the remaining amount corresponds to direct taxes (mainly IRAE and IRPF).