Net income derived from business activities conducted in Uruguay, obtained by legal entities resident in Uruguay and non-residents operating through a permanent establishment (PE) in Uruguay, is taxed at a CIT rate of 25% under the source principle (i.e. the territorial system of taxation). Accordingly, Uruguay taxes only income that is derived from activities conducted within its borders, income generated from property located in Uruguayan territory, or income derived from the economic use of rights within its territory (see Foreign income in the Income determination section for an exception to this principle).
In order to determine the net taxable income, all accrued expenses that are necessary for the generation of Uruguayan-source income and that are duly documented are allowed as deductions. Additionally, taxpayers are able to deduct expenses from their gross income if such expenses are subject to taxation (either foreign or local taxation) in the hands of their counterpart. A compulsory proportional deduction must be calculated when the taxation in the hands of their counterpart is lower than 25% (CIT rate).
A 12% withholding tax (WHT) is imposed on Uruguayan-sourced income obtained by non-residents, except in cases where the income is obtained through the operations of a PE in Uruguay (see the Withholding taxes section for more information).
Uruguayan corporations that sell and buy foreign goods and/or services from Uruguay (which are not physically introduced to the country, in the case of goods; or which are not economically used in Uruguay, in the case of services) may determine the net Uruguayan-source income on a notional basis of 3% of the gross margin (difference between the selling price and the purchase price). This gross margin has to be compliant with transfer pricing rules (in line with Organisation for Economic Co-operation and Development [OECD] guidelines). The applicable effective CIT rate is 0.75% (25% x 3%).
Local income taxes
No taxes on corporate income may be levied by municipal authorities or other local governments.