Uruguay proudly promotes itself as the most stable and advanced country in Latin America. The small South American nation leads all development rankings in social issues, governance, and environment in the region. Learn more about international taxes in Uruguay.
As a market leader in digital growth and logistics, Uruguay has become an attractive location for foreign investors to enter. But to succeed in this growing economy it’s crucial companies have a sound understanding of the local regulations and international taxes in Uruguay.
This piece will provide you with the most up-to-date information on international taxes in Uruguay and the essential aspects of establishing a company in the country.
See also: Company formation agent Uruguay
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How much tax do you pay on foreign income in Uruguay?
Under Uruguay’s territorial system of taxation, only income from sources within Uruguay is subject to tax. As a result, foreign-source income is not taxable. This means that income earned from activities, assets, or rights outside of Uruguay is not subject to Corporate Income Tax (CIT), regardless of the nationality, domicile, or residence of the parties involved or where the transaction agreements are signed.
In Uruguay, businesses are taxed at a rate of 25% on the income they earn within the country. This includes income from activities conducted in Uruguay, income from property in the country, and income from rights used in Uruguay.
To calculate taxable income, businesses can deduct necessary expenses for generating revenue in Uruguay if they are properly documented. They can also deduct expenses that are subject to taxation in the hands of their counterparts. Non-residents receiving income from Uruguay are typically subject to a 12% withholding tax, but this may not apply if the payment is earned through a Permanent Establishment in Uruguay.
What is IP tax in Uruguay?
The Wealth Tax (IP – Impuesto al patriomonio) in Uruguay is an annual tax that applies to both entities and individuals, whether they are residents or non-residents. It taxes the net worth by subtracting certain liabilities from assets located in Uruguay and rights exercisable against Uruguayans at the end of the fiscal year. Entities are subject to a 1.5% rate (with some exceptions), while individuals are taxed at a progressive scale with a non-taxable minimum.
Is Uruguay a free trade zone?
Currently, Uruguay boasts eleven free trade zones, each specializing in different areas of expertise. The Free Trade Zone Regime in Uruguay offers tax and customs advantages to companies.
It serves as an efficient tool for businesses to streamline their operations, avoiding delays and bureaucratic processes while enjoying appealing fiscal benefits.
Free trade zones in Uruguay, whether public or privately owned, are highly secure areas with distinct features:
- No state monopolies govern these zones.
- Companies operating within the zones enjoy tax and customs exemptions on their business activities.
- There is unrestricted movement of goods, fixed or capital assets, with exemptions on taxes and duties.
- Companies have the freedom to engage in various business, industrial, and service activities within these zones.
Does Uruguay have any tax treaties?
Uruguay has double taxation treaties with over 20 countries including Germany, Mexico, the United Kingdom, and India. It also has low or no tax jurisdiction agreements with another 33 countries and territories.
Important considerations for company formation in Uruguay
- Collaborate with a legal representative
- Choose the right entity type
- Economic activity registration
- Conduct market research
- Find a local expert
If you are interested in starting a business or expanding into Uruguay, you will need to take into account several factors, such as:
Collaborate with a legal representative: If you’re not a permanent resident in Uruguay, having a legal representative is essential when forming a business there. Find someone familiar with the local business community and well-versed in corporate law or accounting to support your venture.
Choose the right entity type: There are various company types available in Uruguay, and the selection depends on your business nature, number of initial investors, and management approach.
Economic activity registration: During the business registration process, ensure you precisely register your economic activity to avoid potential legal issues. Your legal representative can guide you in accurately describing your activities to comply with local regulations.
Conduct market research: Thorough due diligence and professional market research are crucial to identify suitable sectors for your business and leverage your expertise. An experienced corporate legal representative can provide valuable advice or connect you with relevant individuals.
Find a local expert: Partnering with a knowledgeable local expert is vital for forming a successful business in Uruguay. A legal representative with in-depth knowledge of the country’s business landscape can be instrumental in your company’s growth and compliance.
Biz Latin Hub can help with international taxes in Uruguay
At Biz Latin Hub, we have a team of specialists who can provide you with customized services to meet your Uruguay business needs.
Our comprehensive range of legal, accounting, and back-office solutions enable us to serve as your primary contact point, helping simplify and speed up your entry into the Uruguayan market.
Talk to our team of local experts today about international taxes in Uruguay, company formation, and how to find the top talent in the region.
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The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.