Corporate - Significant developments

Last reviewed - 30 June 2021

New measures to promote employment beyond Montevideo (capital of Uruguay): Decree 281/019

To promote the development of business outside Montevideo, Decree 281/019 establishes the following benefits applicable to certain kind of services:

The services:

  • Advisory services (including technical and consulting services).
  • Management or administration.
  • Data processing services.
  • Data centre and data centre recovery.
  • Commercial management of payment platforms, games, and sales of goods and services.
  • Financial administration.
  • Research and development operations support.

 The benefits:

  • Corporate income tax (CIT) exemption of 90% of the income generated from services promoted, provided that the result of the following quotient of each exercise is higher than 60%: remunerations paid to employees working in the referred areas/remunerations paid for personal services (either to employees or to third parties).
  • Exemption of net wealth tax (NWT) on assets used to render the services promoted.

 Benefit period:

  • 5 years when at least 15 new jobs are generated at the end of the second financial year-end.
  • 8 years when at least 30 new jobs are generated at the end of the third financial year-end.
  • 10 years when at least 60 new jobs are generated at the end of the fourth financial year-end.

In all cases, the number of jobs has to be maintained (not decreased) until the end of the exemption period.


  • Carry out the activity in a location at least 80 km from the centre of Montevideo.
  • Generate at least 15 direct qualified jobs with 50% Uruguayan citizens at the end of the second financial year-end. This percentage can be reduced with prior authorisation.
  • Provide the services to at least five entities.

New Double Tax Treaties (DTTs)

The DTT subscribed between Italy and Uruguay for the avoidance of double taxation and the prevention of fiscal evasion, with respect to taxes on income, entered into force on 9 October 2020 while its provisions apply as of January 2021. The DTT, which was signed on 1 March 2019, is the first of its kind between the two countries.

As to treaties ratified but not yet in force, a reference to the case of Japan is to be made. On 13 September 2019 in Montevideo, the DTT was signed, being expected to enter into force 30 days after Congress approval in both countries. As of June 2021, the exchange of notes is still pending.

Organisation for Economic Co-operation and Development (OECD) Multilateral Instrument (MLI)

On 11 September 2019, the Uruguayan Congress approved the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting ('Multilateral Instrument' or MLI). The main objective of this instrument is to introduce, quickly and efficiently, the package of measures included in the minimum standard in bilateral treaties, without the need to renegotiate the treaty signed with each of the adhered states. The MLI contains mandatory provisions (minimum standard) and others that are optional. In the case of the optional provisions, each signatory can opt in or out, in whole or in part.

Globally, the MLI entered into force on 1 July 2018. 

On 6 February 2020, Uruguay deposited its instrument of ratification of the MLI with the OECD's Secretary General. For Uruguay, the MLI entered into force on 1 June 2020. Nevertheless, the provisions of the MLI will have effect with respect to a 'Tax Convention included' as of the year following the one in which the instrument is in force in both contracting parties.    

The following countries that have a DTT in force with Uruguay are signatories of the MLI: Belgium, Chile, Finland, Hungary, India, Korea, Liechtenstein, Luxembourg, Malta, Mexico, Portugal, Romania, Singapore, Spain, and the United Kingdom. DTTs with Brazil, Ecuador, Paraguay, and Vietnam are not included, given that those countries have not adhered to the MLI.

Production of software and related services: Decree 96/019

Law 19,637 introduced amendments, as of January 2018, to the exemption applicable for activities of production of software and related services, provided the assets are developed, at least partially, in Uruguay. This Decree introduces complementary provisions regarding to the regulation of the referred exemption: 

  • In order to be deducted, the losses incurred in the acquisition of software from CIT payers partially exempted must be reflected in the respective documentation.
  • 60% of the expenses incurred in the software development and related services, which are exempted incomes of CIT to the counterpart, can be deducted.
  • The depreciation of software acquired as of 1 January 2018 will be deductible in application to the percentage of exempted incomes.
  • For tax purposes, the property from the assets produced will be attributed to the company that carried out such activities, to the extent it has the exclusive right of use and exploitation conceded from the partner or shareholder that registered it under the protection of intellectual property (IP) regulations.
  • The documentation that supports its operative must include the registry number of the asset and the corresponding percentage of exoneration in order to be exempted.

Free Zones (FZs): Local Tax Authority Resolution 231/019

The Resolution includes several provisions related to changes introduced by Law 19,566 to the FZ regime and by Regulatory Decree 309/018.

One of the most relevant changes to the FZ regime is the authorisation for the provision of services from FZ to non-FZ territory, provided the beneficiary of said services is a taxpayer taxed by the CIT. In this regard, the Resolution issued by the Tax Office establishes that the services contracted by CIT payers with Free Zone Users (FZUs) must be linked to taxable income of the beneficiary. In addition, CIT payers must inform to the FZU that they meet the mentioned conditions before the service is rendered.

The Resolution establishes certain provisions related to activities of research and development (R&D), such as the information to be included in a tax return that must be filed annually to the Tax Office and its due date, as well as the attribution of the property of the registered assets.

In addition, the Resolution states new requirements to the documentation issued by the FZU and information that must be provided by the FZU to the Tax Office before carrying out exceptional, supplementary, or auxiliary activities outside the FZ.

Furthermore, according to new regulation, more detailed information regarding purchases and sales should be included in the annual tax return (Form 2181).

Finally, compulsory application of the electronic invoicing regime to the FZU, which is not already included in the referred regime, is foreseen. Such obligation also applies to non-FZUs that undertake certain activities in connection to the FZ.    

MERCOSUR (Southern Common Market) origin of goods in FZs: Decision 33/15

On 21 July 2019, Decision 33/15 issued by the Common Market Council (CMC) of the MERCOSUR entered into force. This Decision establishes that all goods originated in a member state of the MERCOSUR, or a third country with the same origin rules (on the basis of an agreement with the MERCOSUR), shall not lose their origin nature when they pass through a special customs zone, an export processing zone, or an FZ, provided such zones are under customs control.

In order to enjoy the benefits of MERCOSUR origin, neither the tariff classification of the goods nor their origin nature verified by means of the Certificate with which they enter such zones shall be altered. It should be borne in mind that if the origin nature wants to be maintained, there shall be carried out only operations to ensure the trade, conservation, division into lots or volumes, and operations bearing similar purposes.

This applies when the final destination of the goods is any of the full MERCOSUR member countries.

Tax credit for R&D activities: Law 19,739

The Uruguayan Parliament approved Law 19,739, which allows the Executive Power to provide a tax credit to those companies that carry out R&D activities to the extent they are properly certified by the National Agency of Innovation and Research.

In addition, the Law establishes the following caps to the tax credits to be given:

  • 35% of the R&D expenses if they are executed totally within the company.
  • 45% of the R&D expenses in case they are executed along with technological centres or universities that are properly certified.

In this context, the Executive Branch issued Decree 407/019, which establishes the definition of R&D, as well as the concept of an R&D project. Additionally, the Executive Branch establishes the eligible expenses, the annual cap for company benefits, the maximum amount of benefits that can be provided by the Law, and its requirements, among other provisions.

Low-or-No-Tax Jurisdictions (LNTJs)

The Executive Power issued Decree 393/019, which established the requirements for a country to be considered as an LNTJ. In this context, the Uruguayan Tax Authority is empowered to issue a consolidated list for tax and transfer pricing purposes of countries, jurisdictions, and regimes that meet the conditions in order to be considered as an LNTJ.

In December 2020, the Uruguayan Tax Authority issued Resolution 2440/020, which became effective on 1 January 2021 and excludes the jurisdiction of Grenada from the list mentioned above.

In this context, according to Resolution 2440/020, as of 1 January 2021, the following jurisdictions are considered as LNTJs:

Angola Islas del Pacífico Puerto Rico
Antigua and Barbuda Jamaica Saint Helena
Ascensión Jordan Saint Pierre and Miquelon
Brunei Kiribati Sint Martin
Christmas Island  Labuán Solomon Islands
Cocos Islands Liberia Svalbard
Djibouti Maldives Swaziland
Dominica Niue Tokelau
Falkland Islands Norfolk Island Tonga
Fiji Oman Tristan de Cunha
Guam Palau Tuvalu
Guyana Pitcairn Islands US Virgin Islands
Honduras Polinesia Francesa Yemen

Corporate restructures: Mergers and demergers

On 28 February 2020, the Executive Branch issued Decree 76/020, which establishes provisions applicable to corporate restructures when they are carried out not pursuing an economic benefit.

Regarding CIT, it is established that the companies that resolve to merge or demerge according to the regulations established in the Commercial Companies Act may choose to do so without computing the corresponding goodwill when the following conditions are met:

  • The ultimate owners of the companies involved in mergers or demergers remain the same, keeping their equity proportions and not changing them for a period of not less than two years from the date of the final contract.
  • Information regarding the entire property chain, identifying all ultimate owners, has been included in the affidavit submitted to the Central Bank of Uruguay (BCU).
  • The companies maintain the business of the predecessor companies for the same period referred to in the first bullet above.

In case the option of not computing goodwill is exercised and a breach of any of the established conditions is verified, the restructure will be subject to the general tax regime. The corresponding taxes should be updated by the evolution of the indexed unit between the date of its occurrence and the date of the configuration of the breach.

Furthermore, the Executive Branch issued Decrees 21/021 and 64/021, which establish the maintenance requirement for a period of not less than two years of the equity proportions of the beneficial owners participating in the mergers and splits must be at least 95%. In addition, the concept of beneficial owner is widened, when, at the request of a party, the Executive Branch adds entities and/or legal structures.

Update to the Promoted Housing regime

On 16 April 2020, the Executive Power issued Decree 129/2020, by virtue of which several provisions that currently regulate the Promoted Housing regime (formerly known as Housing of Social Interest) are modified.

Apart from the benefits in force, which shall remain in effect, the following benefits are added:

  • The exemption of NWT shall be applicable not only to the fiscal year during which the construction work is completed, but also to the three following years after its completion.
  • The refund of value-added tax (VAT) on account of such goods or services incorporated to the civil work shall be admitted for up to two years after the completion of the construction work.
  • The exemption of CIT applicable to certain leases is increased from 40% to 60% of the income generated.
  • The full exemption of CIT from leases is extended, provided the associated rental complies with some requirements of amount and maximum income.
  • Regarding the tax benefits in the acquisition for leases, it is further provided that the benefits of the regime may be used throughout the effective term of the exemption of the Promotional Declaratory.
  • Concerning CIT, individual income tax (IRPF), and income tax on non-residents (IRNR), the Decree introduces a full exemption with no price caps for leases in certain locations, or leases made effective through the Guarantee Fund for Real Estate Leasing of the Ministry of Housing, Land Use, and Environment or other certified guarantees. For the rest of the cases, the exemption applicable to income generated is increased from 40% to 60%.
  • It is admitted the possibility of granting completion of partial works for projects promoted with different stages or sectors.

Promotion of construction Projects of Great Economic Dimension

On 29 April 2020, the Executive Power issued Decree 138/020 to promote building activities for the sale or lease of real estates destined to be offices, housing, and housing developments, qualifying as 'Projects of Great Economic Dimension'.

This measure was originally established by Decree 326/016, now being amended by the new regulations. More tax benefits are granted, and the requirements related to investment amounts are lowered. The scope of building activities and eligible investments are also extended. 

The tax benefits include an exemption of CIT of up to 40% of the eligible investment with an annual exemption limit of 90% of CIT and a maximum term of ten years. As to NWT, there is an exemption for the civil construction work and lands with different terms depending on the location in or outside the capital of the country. Movable assets are also exempt from NWT during their useful life. In addition, there is a VAT and import taxes exemption, as well as VAT tax credit for the acquisition of equipment, machines, materials, and services destined for the civil construction work and for the movable assets designated for common areas. 

These tax benefits are applicable for projects filed as of 7 May 2020.

Investment projects: Temporary tax benefits

The Investment Law 16,906 and its regulations (Decrees 455/07, 02/12 and 143/018) offer great tax saving opportunities for companies investing in fixed assets.

In effect, in light of a series of indicators (e.g. increase in employment, exports, decentralisation) measured by way of a matrix, significant tax benefits in terms of CIT, NWT, VAT, and import taxes have been granted to projects promoted by the Executive Power.

For the purpose of promoting investment, the Executive Power issued, on 26 May 2020, a Decree that foresees a new temporary increase in the benefits granted.

The temporary benefits foreseen by the Decree are:

  • 20% increase in the percentage of CIT exemption based on the matrix of indicators for investment projects submitted between 1 April 2020 and 31 March 2021, provided at least 75% of the investment involved in the project is executed before 31 December 2021. 
  • It is established the computation of 150% for such investments executed between 1 April 2020 and 31 January 2021 for the purpose of establishing the amount exempted from CIT, without deducting said extra from the total amount exempted. This benefit is applicable to both new and pre-existing projects.

The referred temporary benefits shall be cumulative in the period between 1 April 2020 and 31 March 2021.

Additionally, for the years ended in the period between 1 April 2020 and 31 March 2021, companies with effective investment projects (provided they state so in the compliance with controls and monitoring they are to submit) may opt among the following benefits:

  • Suspend for one year the benefit of CIT exemption granted.
  • Consider CIT exemption may not exceed 90% of the amount of tax payable.

On 23 March 2021, the Executive Branch issued Decree 94/021, which foresees  a new temporary increase in the tax benefits granted by Investment Promotion Law. Said temporary benefits foreseen by the Decree are:

  • The computation of 130% for those investments executed between 1 April 2021 and 30 September 2021 for calculating CIT benefits (this benefit is applicable to both new and pre-existing projects).
  • For incremental benefits already granted to investments of 2016, 2018, and 2020, it is established that they may be accumulated with this new provision.

    National Budget Law 19,924: Period 2020-2024

    On 31 August 2020, the Executive Power submitted to Congress for consideration the Bill of Law corresponding to the National Budget for the period 2020-2024, which was later approved in December 2020. In this context, Law 19,924 covers a variety of areas, such as education, economy, and security. Below, we detail the main tax modifications included in the referred law:

    • Tax losses from previous years: Law 19,438 (October 2016) limited the deduction of tax losses from previous years to 50% of the net taxable income. Now this limitation disappears. In this sense, as of the years ended on 31 December 2020 (inclusive), taxpayers with accumulated losses may deduct them without considering any cap.
    • Simplified Joint-Stock Corporations (SAS as per its Spanish acronym): The law establishes that when the members of the Board of Directors do not receive remuneration, the contributions to social security will be made by at least one of the directors, based on the maximum salary paid by the company. Also, it is added that the administrators and legal representatives of this type of company will be considered non-dependent workers for social security purposes. This means that in the event that a non-dependent worker works as such in more than one company, one must contribute for the higher notional salary, and not for each of them (as it is the case today).
    • Foreigners: Foreigners who have obtained permanent residence as of 1 January 2020 and MERCOSUR migrants who enter to reside permanently until 31 March 2021 will have the same benefit that returned Uruguayans enjoy with regard to free entry of personal belongings. Consequently, the goods are free from all exchange procedures and exempt from all kinds of customs duties, taxes, or related charges. Assets in scope include personal property and other effects, such as tools, machines, and instruments related to the exercise of their profession, art, or trade; one vehicle of their own; among others.
    • Tax credit for rental payments: Payment by electronic means will no longer be mandatory to obtain the corresponding tax credit for taxpayers who lease a property intended for permanent housing.

      Regulations on Investment Promotion regime: Decree 268/020

      The Investment Promotion regime is supported by the provisions set forth by Law 16,906. Under such regime, relevant tax benefits are granted to CIT payers who execute eligible investments and generate certain positive externalities.

      On 30 September 2020, the Executive Power issued Decree 268/020, which introduces modifications to the current regulations on the Investment Promotion regime. The Decree encourages the execution of the investment considering the economic situation of the country in the frame of the health emergency (COVID-19).

      Although the basic objectives pursued are not altered (i.e. job creation, decentralisation, exports increase, use clean technologies, research, development, and innovation), the matrix of indicators is eliminated and the method to determine how each one is rated is delegated to the COMAP.

      Modifications introduced by this new regulation include:

      • Computable investment: Elimination of the 20% cap applicable to the calculation of investment projects previously executed and extension of the period of calculation.
      • Exemption of CIT: Increase in the maximum cap of exemption to be applicable each fiscal year and establishes an extension of the minimum period of exemption.
      • Weight of the Indicators Matrix: Nominal weight of four indicators (job creation, export increase, decentralisation, and sectorial indicator) are increased while that of the indicator research, development, and innovation is decreased.
      • Simplified Matrix: All investment projects could be assessed through a simplified matrix with only one indicator: job creation. Furthermore, an additional point is awarded to the job creation indicator for all projects submitted up to 31 December 2020.
      • Compliance Assessment: The compliance assessment for indicators will be conducted once the compliance schedule is over (three fiscal years).

      VAT relief: Decree 128/021

      On 4 May 2021, Decree 128/021 was issued extending the term of the provisions set forth in Decree 304/020 until 30 June 2021. The regulations established that the following activities will have a reduction of 9% in the VAT rate (standard rate 22%), provided the transactions are executed through electronic means:

      • Gastronomic services provided by restaurants, bars, canteens, cafes, tea rooms, and alike, or by hotels, motels, apart hotels, inns, tourist stays, country hotels, tourist farms, country inns, country houses, and camping hostels, provided that the services do not include lodging.
      • Vehicles rental without chauffeur.
      • Mediation services for the leasing of real estate for tourist purposes.

      For VAT payers under the 'small companies regime', the reduction is determined by applying a discount of 7.38% on the total amount of the transaction.