Montevideo

Taxation in Montevideo, Uruguay

What are the tax rates in Montevideo, Uruguay? How are corporations taxed? Here’s Teleports overview of personal, corporate and other taxation topics in Montevideo, Uruguay.

Personal taxation in Montevideo

Effective personal income tax rate

Annual income$25,000$40,000$80,000$125,000$200,000
Rate25%27%28%29%29%

Teleport city rankings for personal income tax

Personal taxation puts Montevideo in position 137 of all Teleport Cities.
WORSTBEST

Basis

Both resident and nonresident individuals are taxed on their Uruguay-source income. Tax residents also are taxed on certain foreign-source income, i.e. income from movable assets, such as loans, deposits and any kind of capital investment in a nonresident entity (but not capital gains derived from assets located abroad).

Residence

An individual is considered resident if he/she is in Uruguay for more than 183 days in the calendar year or if the individual's economic or center of vital interests is in Uruguay.

Filing status

Joint assessment for married couples is permitted. A different rate scale applies to individuals opting for this regime.

Rates

Income from employment is taxed at progressive rates ranging from 0% to 30%. The general rate for capital gains and holding income is 12%.

Deductions and allowances

Deductions are allowed for contributions to social security, a small fixed amount per minor child and certain payments on mortgage loans. Six percent of the annual rent (corresponding to permanent housing) paid during the fiscal period may be credited against the annual tax burden.

Taxable income

Personal income tax is imposed on income from employment, income from capital and capital gains. Uruguay resident individuals also are taxed on income from movable property located abroad.

Capital gains

Capital gains are considered taxable income.

Other taxes on individuals

Real property tax

The municipal authorities levy a tax on real estate. The "real value" (determined by the municipal government) of the property is subject to tax at the time of transfer at a rate of 4% (2% each for the buyer and the seller).

Social security

Employed and self-employed individuals are required to make social security contributions based on their salary.

Net wealth/net worth tax

A net worth tax is imposed on residents and nonresidents on the difference between assets and certain liabilities as of 31 December each year.

Compliance for individuals

Penalties

A penalty of 5%, 10% or 20% of tax due is imposed for late payment. Surcharges also apply at a monthly rate of 1.4%.

Filing and payment

If an individual has only one employment, the employer files the annual tax return; otherwise, the employee must file a return. Independent workers are required to make advance payments and file a tax return in May of the year following the tax year end.

Corporate taxation in Montevideo

Teleport city rankings for corporate income tax

Corporate taxation puts Montevideo in position 106 of all Teleport Cities.
WORSTBEST

Basis

Uruguay operates a territorial system, under which Uruguay businesses and foreign entities carrying out business activities in Uruguay through a permanent establishment (PE) are taxed only on income sourced in Uruguay. Foreign-source income is exempt. Nonresidents without a branch or PE in Uruguay that receive certain types of Uruguay-source income are taxed via withholding.

Taxation of dividends

Dividends received by a resident corporation are exempt from corporation tax.

Residence

A company is considered resident if it is established according to Uruguayan law.

Losses

Tax losses may be carried forward for five years. The carryback of losses is not permitted.

Incentives

Exemptions or other benefits are available to companies engaged in certain types of activities and any other activities promoted by the government. Companies located in free trade zones also are entitled to beneficial measures.

Participation exemption

No, but see under “Taxation of dividends.”

Foreign tax credit

Uruguay does not grant a credit for foreign tax paid, unless so required under an applicable tax treaty.

Taxable income

Taxable income comprises all income derived from activities carried out in Uruguay. Expenses that are necessary to produce taxable income may be deducted.

Capital gains

Capital gains derived by a company, including a PE of a foreign company, are taxed as ordinary income at the standard corporate income tax rate (i.e. 25%).

Other taxes on corporations

Capital duty

Capital duty is levied at 1.5% on the net worth of the entity.

Real property tax

The municipal authorities levy tax on real estate.

Social security

An employer must withhold social security contributions on behalf of its employees (18.125% to 23.125%, depending on the salary and whether the employee has minor children and/or a nonworking spouse) and contribute a percentage of the monthly payroll to the social security fund (12.625%).

Compliance for corporations

Penalties

A penalty of 5%, 10% or 20% of tax due is imposed for late payment. Surcharges apply at a monthly rate of 1.4%.

Rulings

A taxpayer may request a ruling on the tax consequences of a proposed transaction.

Filing requirements

An entity must make monthly advance payments of tax based on the tax liability of the previous year or on estimates of the current year’s liability. A self-assessment tax return must be submitted within four months of the end of the accounting period, and final tax is payable by that date.

Other taxation in Montevideo

Value added tax

Filing and payment

Corporate VAT taxpayers must file monthly VAT returns. Independent workers file on a bimonthly basis.

Rates

The standard rate is 22%. A reduced rate of 10% also applies in certain cases, and some transactions are exempt.

Taxable transactions

VAT is imposed on the sale of goods, the provision of services and imports.

Registration

Registration is compulsory for businesses. Services rendered by nonresidents in Uruguay are subject to VAT and the tax is withheld by the contractor.

Anti-avoidance rules

Transfer pricing

Transfer pricing rules are based on the OECD guidelines. The following transfer pricing methodologies are permitted: comparable uncontrolled price, resale price, cost plus, profit split and transactional net margin methods. Documentation requirements apply.

Investment basics

Accounting principles/financial statements

IAS and IFRS. Financial statements must be prepared annually.

Principal business entities

These are the corporation, limited liability company, sole proprietorship, free zone corporation and branch of a foreign entity.

Withholding tax

Dividends

Dividends paid to a nonresident are subject to a 7% withholding tax, unless the rate is reduced under a tax treaty.

Branch remittance tax

Profits remitted by a branch to its head office are subject to the same regime as dividends.

Technical service fees

Services provided in Uruguay by nonresidents and technical services provided from abroad to corporate income taxpayers in Uruguay are subject to a 12% withholding tax.

Interest

The withholding tax on interest paid to a nonresident is 3%, 5% or 12%, depending on the term and currency of the loan/deposit/investment. The rate may be reduced under a tax treaty.

Royalties

The withholding tax on royalties paid to a nonresident is 12%, unless the rate is reduced under a tax treaty.