Uruguay has a territorial tax system, by which it assumes taxing power with regard to activities, revenue or assets arising from sources located within the borders of the Uruguayan territory, whatever the nationality, domicile or residence of the tax subjects.

Taxation of Individuals

Individuals Income Tax (IRPF for its acronym in Spanish): levied on revenue from capital and revenue from work of Uruguayan source, as well as certain yield on capital with foreign origin, obtained by individuals who are Uruguayan tax residents. Uruguayan tax residents are those who (i) remain in the national territory for more than 183 days a year, or (ii) who have their main base of activities or interests there (for example, the family - spouse and children - are based in Uruguay).

WealthTax: is an annual tax levied on assets and rights located, placed or used financially in the country by individuals, indivisible family and succession groups as of December 31st of each year.

Property Transfer Tax: levied on conveyance of real estate ownership rights at a rate of 4%, payable by the buyer and the seller at a rate of 2% each one, on the updated catastral value

Taxation of Non Resident Individuals

Non Resident Revenue Tax (NRRT): this is levied on natural persons and other non resident entities for revenue obtained from an Uruguayan source of any kind arising from corporate activities and related yields from work, yields from capital, from capital gains obtained in Uruguay, that do not operate in the country through a permanent establishment.

WealthTax: non-resident individuals are exempt from this tax; except when they own estate within the Uruguayan territory and hence the same rates for resident inviduals apply.

Property Transfer Tax: levied on transmission of real estate ownership rights at a rate of 4%, payable by the buyer and the seller at a rate of 2% each one, on the updated catastral value.

Taxation of Corporate Entities

Economic Activity Revenue Tax (IRAE for its acronym in Spanish): the taxpayers are limited liability stock companies and trusts (except guarantee ones) as long as the generation fact is verified, that is, that revenue is obtained from an Uruguayan source. The fixed taxation rate for such revenue is set at 25%.

Wealth Tax: applies to taxpayers who hold assets and rights located, placed or used financially within Uruguay, after deduction of the admitted liabilities. Taxed at a 1.5% rate.

Value Added Tax (VAT): companies that perform activities subject to IRAE, levied on internal trade of goods, services provided within the country, importing goods to the country and added value arising from real estate construction. There are two types of VAT: the minimum is 10% and the basic is 22% as well as services intermediation.

Property Transfer Tax: levied on conveyance of real estate ownership rights at a rate of 4%, payable by the buyer and the seller at a rate of 2% each one, on the updated catastral value

Stock Company Control Tax (ICOSA for its acronym in Spanish): stock companies have a fixed tax levied that applies to incorporation of the company, at a rate of 1.5% and a rate of 0.75% at the financial year end. A fixed advance amount is paid during the financial year of approximately US$ 50 (an amount that varies annually and is published on the General Directorate of Taxes website). The amount paid in ICOSA may be deducted from the amount of wealth tax payable.

Features of the Main Types of Uruguayan Companies

The majority of trading companies operating in Uruguay are formed as stock companies (S.A:) or branches of foreign companies. Some small companies trade as limited liability companies (SRL).

Uruguayan Limited Liability Companies

Limited liability companies may be incorporated by at least two founding partners. They have a maximum limit of 50 partners; if that limit is exceeded, they must be transformed into an S.A.

There are no minimum or maximum capital limits.

The governing body of the SRL is named by appointment in the shareholders' agreement that must be registered at the Business Registry. That formality must be carried out whenever there is a change of director. The relevant notifications must also be submitted to the tax authorities.

Uruguayan Stock Companies

Stock companies may be incorporated by at least two founding partners.

There are no minimum or maximum capital limits. The only applicable rule is that at least 25% of the authorised capital must be paid up and the rest of the capital must be subscribed up to 50% of the authorised amount. The contributions must be made by deposit in a bank account held in the name of the company

An Ordinary General Meeting of Shareholders must be held at least once a year to approve the result of the financial year and management by the Board of Directors.

In stock companies, the management body is appointed by a Declaration at the Business Registry pursuant to Act 17,904, declaring which person or persons form the company Board of Directors. Once the registration is performed, the tax authorities must be informed.