Individual income tax is levied on income obtained by resident and non-resident individuals. The source principle for levying taxes includes income derived from activities developed in, property located in, or rights economically used within the Uruguayan territory. However, there are specific cases where (under certain conditions) income generated outside Uruguay is subject to tax.
Income tax on resident individuals (IRPF)
IRPF was broadened in 2010, such that remunerations that employees derive from personal services rendered outside Uruguay to local taxpayers are subject to IRPF at progressive rates ranging from 0% to 36%. Additionally, the source principle of IRPF was widened and includes income derived from technical services. Now advertising services rendered outside Uruguay by self-employed individuals (not included in the company’s payroll) will be taxed, provided those services are incurred to generate taxable income for local corporate income tax (CIT) purposes.
The income derived from mediation, leasing, use, transfer of use, or transfer of federative rights, image rights, and similar of athletes registered in resident sports entities, regardless of the registration period or permanence in Uruguay, is also considered Uruguayan sourced.
From 2017, income derived from derivative financial instruments (DFIs) obtained by resident individuals is considered Uruguayan sourced.
IRPF's source principle on capital investments was also widened and, since 2011, includes income originated on holding movable assets located outside Uruguay, income that is referred to, in general, as ‘passive income’.
IRPF is levied on capital investments (e.g. interest, rents, royalties, capital gains) at a flat rate of 12%, with some exceptions. This tax is basically levied on gross income.
Earned income stemming from work (i.e. wages, salaries, etc.) is subject to progressive rates ranging from 10% to 36%. As only a few expenses are allowed as deductions (such as social security contributions and a notional amount corresponding to education, feeding, health, and housing of dependent underage children), almost the whole gross income is subject to this tax.
The income tax rates applicable to resident employees are the following, as of December 31, 2019:
|Annual taxable gross income (UYU*)||Tax rate (%)|
* Uruguayan pesos
This tax can also be paid as a family unit. The scale of rates to be applied depends on the income of each of the family group's members. If each of the members earns more than 12 minimal salaries (one minimal salary is approximately UYU 15,000), taxable income before deductions must be added together and then the following scale of rates is applied according to the different income brackets (as of December 31, 2019):
|Annual taxable gross income (UYU)||Tax rate (%)|
If one of the members earns less than 12 minimal salaries, taxable income before deductions must be added together and then the following scale of rates is applied according to the different income brackets, as of December 31, 2019:
|Annual taxable gross income (UYU)||Tax rate (%)|
Income tax on non-residents individuals (IRNR)
IRNR is levied on Uruguayan gross income at rates that vary from 7% to 25%. Income obtained by entities resident, domiciled, or located in low or no-tax jurisdictions (LNTJs) is taxed at 25%. This tax is mainly collected by way of withholding.
If the non-resident individual obtains income from a Uruguayan source of any kind, then the local CIT payer must withhold IRNR on the corresponding payment.
Although IRNR follows the source principle, technical services (defined as services rendered in the fields of management, technical, administration, or advice of any kind) rendered by non-residents (not under a dependency relationship) outside Uruguay, but associated to taxable income for CIT purposes, are deemed to be Uruguayan sourced and subject to IRNR at a rate of 12% or 25% (in case of being from LNTJs). However, it is also stated that when the taxable income for CIT obtained by the local user of said service does not exceed 10% of its total income, then only 5% of the service fee paid or credited abroad will be subject to IRNR. In these cases, the effective tax rate is 0.6% (5% x 12%), or 1.25% if the recipient individual is from an LNTJ on the amount paid or credited abroad. In those cases where the company receiving the service does not obtain income subject to CIT, the service received will be entirely associated with foreign-source income and thus not subject to IRNR.
The following will also be considered Uruguayan-source income:
- Advertising services rendered from outside Uruguay by independent service suppliers to CIT payers.
- Mediation, leasing, use, transfer of use, or transfer of federative rights, image rights, and similar of athletes registered in resident sports entities, regardless of the registration period or permanence in Uruguay.