Uruaguay Tax & Business Guide - Deloitte

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Basic facts
Population 3.2m Inflation 4.9% (2005)*
Main languages Spanish GDP per head US$5,207*
Currency Uruguayan peso (Ps) GDP growth 6.0% (2005)*
Economic communities Latin America Integration Association, Mercosur, WTO
GDP sources 11.9% agriculture, 29.1% industry, 59% services
*Economist Intelligence Unit.
Political environment

Uruguay is governed by a president elected for a five-year term. Two parties, the Partido Colorado (PC, known as the Colorados) and the Partido Nacional (PN, known as the Blancos), have traditionally dominated politics.

Tabar» V?zquez of the left-wing Encuentro Progresista-Frente Amplio (EP-FA), a broad coalition of 21 political groups, was elected president in October 2004 and took office in March 2005. The next presidential and legislative elections are due in October 2009.
Foreign trade and investment
Exports US$3.4bn (2005)* Imports US$3.9bn (2005)*
*Economist Intelligence Unit.

Leading export markets: Brazil, the US, the EU and Argentina.

Major exports: Beef, hides and skins, milk products and honey, processed rice and wool.

Uruguay places few restrictions on foreign investors. A foreign-owned company may locate anywhere in the country and receives local treatment. Incentives include tax exemptions and relief from import tariffs on capital goods. There is a free-zone regime, which includes tax exemptions (except for social security contributions) for free-zone users.

The IMF has approved a three-year stand-by arrangement for Uruguay. Stand-by agreements are loan arrangements between the IMF and various countries subject to compliance with certain requirements.
Business and financing
Business forms Corporations, limited liability companies, branch

Foreign ventures favour the corporation (sociedad an€nima, or SA), the limited liability company (sociedad de responsabilidad limitada, or limitada) and a foreign company branch (sucursales de personas jurÃdicas del exterior). The SA is preferred for sizeable firms. Its capital must be represented by shares, with shareholdersÌ responsibility limited to the shares subscribed. The SA is the only corporate entity that may issue shares to the public. The limitada form is also widely used, especially for smaller operations. Although the formation of a limitada is based on a partnership deed, a limitada is a legal entity distinct from its individual members; SAs may also be partners of a limitada.
Labour environment
Unemployment rate 12.2% (2005)* Minimum wage Ps 2,617.5 (monthly)
*Economist Intelligence Unit.

Uruguay has a surplus of university graduates and a sufficient supply of skilled and semi-skilled workers, but skilled workers are often attracted abroad.

Employers contribute 17.5% of monthly payroll to the social security fund centralised under the Banco de Prevision Social (BPS), 1% as a salary tax and 0.125% for a re-training fund.

Use of foreign personnel is generally not restricted, except in banking, fishing and businesses in free-trade zones, where three-quarters of the workforce must be residents.
Taxation
Corporate tax
Main rate 30%

Resident and non-resident companies are taxed only on Uruguayan-source income. The corporate tax is charged at a flat rate of 30%. Dividends paid between resident companies are exempt. Foreign dividends and other foreign income are not taxable. Non-residents without a branch or permanent establishment in Uruguay that derive certain types of income from Uruguay are taxed by withholding, but are not taxed on interest or capital gains.
Individual tax
No personal tax, but social security contributions at progressive rates to 24.125%

There is no personal income tax in Uruguay. However, employers are required to contribute a percentage of monthly payroll to the social security fund. There is also a payroll tax at progressive rates to 6% in respect of wages and salaries. The total contributions deducted from wages and salaries can therefore rise to 24.125%. A tax reform plan, including the introduction of a comprehensive personal income tax, is under consideration.
Capital gains
Company gains taxed as income

Capital gains of businesses, including branches of foreign companies, are taxed as ordinary income, but gains derived by individuals are not subject to tax. Non-residents without a branch or permanent establishment in Uruguay are not taxed on capital gains arising in Uruguay.
Indirect tax
VAT standard rate 23% Lower rate 14%

Value-added tax (VAT) applies to most transactions at the standard rate of 23%. A lower 14% rate applies to basic foodstuffs and other essentials, accommodation services of hotels, fruit, flowers and horticultural products in their natural state, and road passenger transport. Exemptions include the transfer and rental of immovable property, certain machinery, goods and raw materials for use in agriculture, qualifying banking operations, medical services and the import of crude oil. Special rules apply to farming. Registration is compulsory for businesses.
Tax administration and compliance
Tax year Corporations: accounting year; Individuals: calendar year

Businesses make monthly prepayments of tax, based on the tax liability for the previous year or on estimates of the current yearÌs liability. Businesses must submit a self-assessment tax return within four months of the end of the accounting period, and final tax is payable by the same date. Social security contributions of individuals are deducted from employment income.
Additional tax information
Withholding taxes Dividends, Royalties and Technical service fees 30%, Interest 0%.
Tax treaties Uruguay has concluded two tax treaties (with Germany and Hungary).
Dividends Dividends are exempt.
Revenue protection There is no transfer-pricing or anti-tax-haven legislation. However, a tax reform plan that includes transfer-pricing rules is under consideration.
Groups There are no provisions for group taxation.
Incentives Fishing; forestry; export promotion; mining; industrial promotion; tourism; free zones.
Other taxes Bank assets tax, Excise duties, Farming tax, Immovable property tax, Import and export duties, Net worth tax, Personal services to public entities tax, Special insurance businesses tax, Specific consumption tax.