Uruguay’s tax system consists of indirect taxes, direct taxes, taxes on capital, and social security taxes.
One of the key advantages of Uruguay’s tax system is the absence of personal income taxes and taxes on financial transactions.
• Value-added Tax
This tax is multistage and non-cumulative. It is levied on each stage in which value is added to a product or service. It is known as “impuesto al valor agregado” (IVA) or “value-added tax” (VAT), and it is levied on the price of the product or service. Its basic rate is 23% (14% for certain basic goods). It applies to the import (with exceptions) or sale of goods and services within the country, except for banking services. Exports are not taxed.
• Tax on Luxury and Other Specific Goods
An additional consumption tax is levied on certain goods such as automobiles, alcoholic beverages, gasoline, and tobacco. The rate ranges from 0% to 100%. For most products, it is 20%.
• Tax on Transfer of Property
The transfer of real estate is taxed. The rate is 2% of the fiscal value of the property for each of the parties in a transaction. The sale (partial or total) of shares of a company that owns real estate is not taxed.
Direct taxes are levied on the income of corporations. The tax is levied on income generated within the country, regardless of nationality. It includes branches or subsidiaries of foreign companies. The tax is assessed on the income of 12-month periods. The rate is 35%. To calculate the tax, the carry-over of losses is permitted up to a period of three years. There are special regimes that establish exemptions on certain activities.
Both corporations and individuals are taxed on their net worth. In the case of individuals, there is a minimum non-taxable amount of approximately $50,000. The tax rate ranges from 0.7% to 3% of the net worth in the case of individuals, and between 1.5% and 2.8% for corporations. The tax takes into account only assets located within the country.
Both the employer and the employee must pay social security taxes. The employer’s contribution is 18.5% of the salary. The employee’s contribution ranges from between 19% and 24%.
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