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Uruguay - Income Tax

Uruguay - Income Tax

Taxation of international executives

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Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

Act 18.083 introduced personal income tax to the Uruguayan tax system as from 1 July 2007. This tax applies on Uruguayan-sourced income obtained by resident individuals. Uruguayan- sourced income is basically defined as that obtained from activities developed, goods located, or rights used economically in national territory. As from 2011, as an exception to the source principle regime, some capital income items obtained abroad (basically interests and dividends) are also taxable for personal income tax.

Although the settlement and payment of this tax is annual, several withholding regimes have been established, including monthly withholdings applied by employers over salaries paid to their employees (in most circumstances this system allows the employee not to present an annual tax return).

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Uruguay?

Residents

The taxpayer has to register at the tax office, following the procedures and formalities established by law and regulations.

Non-residents

Non-resident individuals are subject to non-resident income tax on their Uruguayan-sourced income.

In most cases, this tax applies through local withholdings; otherwise the non-resident will have to file their own tax return (personally or by means of an appointed representative).

Tax rates

What are the current income tax rates for residents and non-residents in Uruguay?

Residents

Personal income tax is structured as a dual system that distinguishes between labor income and capital income, applying different tax rates to each class.

Labor income (Progressive rates)

Income tax tables for 2020, in Uruguayan peso (UYU):

Taxable income (UYU)

Rates (%)

0 – 379,596

0

379,596 – 542,280

10

542,280 – 813,420

15

813,420 – 1,626,840

24

1,626,840 – 2,711,400

25

2,711,400 – 4,067,100

27

4,067,100 – 6,236,220

31

over 6,236,220

36


Family group
 

As from 2009 the possibility exists, at the taxpayer’s option, to liquidate the personal income tax assessed over labor income as a family group.

If the income of each member of the family group, individually considered, exceeds UYU195,600 the tax rates are as follows.

Taxable Income (UYU) - Family (when labor income of each member exceeds 12 minimum salaries annually)

Rate (%)

0 – 759,192

0

759,192 – 813,420

15

813,420 – 1,626,840

24

1,626,840 – 2,711,400

25

2,711,400 – 4,067,100

27

4,067,100 – 6,236,220

31

over 6,236,220

36


 

Taxable Income (UYU) - Family (when labor income of one member does not exceed 12 minimum salaries annually)

Rate (%)

0 – 433,824

0

433,824 – 650,736

10

650,736 – 813,420

15

813,420 – 1,626,840

24

1,626,840 – 2,711,400

25

2,711,400 – 4,067,100

27

4,067,100 – 6,236,220

31

over 6,236,220

36


Capital income

Taxable annual income brackets (approximate values)

Tax Rate

 

Percent

Interests from local currency bank deposits with a term of more than 1 year

7

Interests from securities or other debt instruments issued with a term of more than 3 years through public subscription and quoted in a stock exchange

7

Interests from local currency deposits of 1 year or less without readjustment clause

7

Dividends or profits paid or credited by corporate income tax taxpayers originated in the rents resulting from capital gains (deposits, loans, etc.) paid by non-resident entities and constitutes passive income.

12

Other dividends or profits paid or credited by taxpayers of corporate income tax

7

Copyright rents

7

Profits of participation certificates issued by financial trusts through public subscription and quoted in a stock exchange

7

Other capital income

12

Non-residents

Non-resident income tax rates

 

Rate

 

Percent

Interests from local currency bank deposits with a term of more than 1 year

7

Interests from securities or other debt instruments issued with a term of more than 3 years through public subscription and quoted in a stock exchange

7

Interests from local currency deposits of 1 year or less without readjustment clause

7

Dividends or profits paid or credited by taxpayers of corporate income tax and deemed dividends

7

Profits of participation certificates issued by financial trusts through public subscription and quoted in a stock exchange with a term of more than 3 years

7

Income obtained by resident entities which are domiciled or incorporated in countries or jurisdictions with low or no taxation or which obtain benefits under a special low or no taxation regime, except dividends or profits paid or credited by Corporate Income Tax taxpayers

25

Other income

12

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Uruguay?

An individual is considered a resident when any of these conditions is configured:\

  • when they stay in Uruguay for more than 183 days during any calendar year
  • when the center of their vital or economic interests is located in Uruguay.

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country/jurisdiction for more than 10 days after their assignment is over and they repatriate.

No.

What if the assignee enters the country/jurisdiction before their assignment begins?

This situation will not generate any tax effects in itself, but the whole period of the assignee’s stay in Uruguay will be computed to determine if they are a resident or non-resident for tax purposes.

Termination of residence

Are there any tax compliance requirements when leaving Uruguay?

No.

What if the assignee comes back for a trip after residency has terminated?

The same comments made to the previous question apply in this case.

Communication between immigration and taxation authorities

Do the immigration authorities in Uruguay provide information to the local taxation authorities regarding when a person enters or leaves Uruguay?

The local taxation authorities have the power to request this type of information from the immigration authorities.

Filing requirements

Will an assignee have a filing requirement in the host country/jurisdiction after they leave the country/jurisdiction and repatriate?
 

They will be subject to the general filing requirements, depending on the taxable income that they obtain during that fiscal year and on their status as resident or non-resident.

Economic employer approach

Do the taxation authorities in Uruguay adopt the economic employer approach to interpreting Article 15 of the Organization for Economic Co-operation and Development (OECD) treaty? If no, are the taxation authorities in Uruguay considering the adoption of this interpretation of economic employer in the future?
 

No.

De minimus number of days

Are there a de minimus number of days2 before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

Not applicable.

Types of taxable compensation

What categories are subject to income tax in general situations?
 

Labor income and capital income (please see the applicable rates previously mentioned).

Intra-group statutory directors
 

Will a non-resident of Uruguay who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in Uruguay) trigger a personal tax liability in Uruguay, even though no separate director's fee/remuneration is paid for their duties as a board member?

No.

a)   Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in Uruguay?

No.

b)  Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in Uruguay (i.e. as a general management fee where the duties rendered as a board member is included)?

No.

c)   In the case that a tax liability is triggered, how will the taxable income be determined?

Not applicable.

Tax-exempt income

Are there any areas of income that are exempt from taxation in Uruguay? If so, please provide a general definition of these areas.

Almost no exemptions are granted for labor income, but a non-taxable minimum has been established by law, and income from activities developed abroad is in general not subject to tax under the source principle.

With reference to capital income, some of the applicable exemptions include interests from public debt, distribution of dividends or profits from capital participation in entities not subject to corporate income tax and (under certain circumstances) income from the lease of real estate that does not exceed a certain amount established by law.

Expatriate concessions

Are there any concessions made for expatriates in Uruguay?

No.

Salary earned from working abroad

Is salary earned from working abroad taxed in Uruguay? If so, how?

As a general rule, labor income for activities developed abroad will not be taxable under the source principle. However, as from 2011 the labor income obtained by employees of a Uruguayan enterprise for activities developed abroad in favor of their Uruguay employer is also subject to Personal Income Tax.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in Uruguay? If so, how?

Yes. As indicated above capital income of Uruguayan source is subject to tax (personal income tax or non-resident income tax), except if exempted by law.

Dividends, interest, and rental income

As a general rule, dividends or profits paid or credited by a corporate income tax taxpayer to a resident or non-resident individual will be subject to tax at the rate of 7 percent.

Interests are taxed at a rate of 12 percent unless they are obtained from local currency deposits with a term of 1 year or less without readjustment clause (7 percent), from securities or other debt instruments issued with a term of more than 3 years through public subscription and quoted at a stock exchange (7 percent) or from local currency bank deposits with a term of more than 1 year (7 percent).

As an exception to the source principle, dividends and interest received from abroad are also subject to income tax when obtained by Uruguay resident individuals.

Rental income is taxed at the rate of 12 percent unless certain circumstances are met (that is, the rental does not exceed a certain total amount, the owner waives their bank secrecy rights and the other capital income that they obtain does not exceed a certain total amount).

Gains from stock option exercises

No specific rules have been established with reference to stock options, but if they have been granted as part of a labor compensation package they will be considered as labor income and subject to tax under the applicable rules for that category. In principle the moment of taxation would be when the option is exercised.

Residency status Taxable at: 
  Grant Vest Exercise
Resident N N Y
Non-resident N N Y
Other (if applicable) N N Y

Foreign exchange gains and losses

Rents from foreign exchange difference are not subject to tax.

Principal residence gains and losses

Gains and losses corresponding to each income category (labor and income) will be attributed to that category.

Capital losses

Capital losses will be computed in that income category and can be carried forward for 2 years.

Personal use items

Not applicable.

Gifts

Donations received by an individual are not subject to personal income tax (the donor will be subject to tax for the difference between the market value and the fiscal value of the donated goods).

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Uruguay? If so, please discuss?

As indicated above, capital gains that qualify as Uruguayan-sourced income will (as a general rule) be subject to either personal income tax or non-resident income tax.

Are there capital gains tax exceptions in Uruguay? If so, please discuss?

Not applicable.

Pre-CGT assets

Not applicable.

Deemed disposal and acquisition

Not applicable.

General deductions from income

What are the general deductions from income allowed in Uruguay?

Very few deductions will be admitted for personal income tax purposes, among them.

  • In the case of capital income from the rental of real estate, the commission of the real estate administrator and certain applicable taxes can be deducted.
  • In the case of labor income from employment relations, the social security contributions, children healthcare (a small predetermined amount per child), pensioners’ healthcare (a small predetermined amount) and housing rental expenses and interests from loans for the purchase of houses for permanent residence (with certain limits) will be deducted.
  • In the case of labor income from self-employment relations, a notional amount of 30 percent of the income will be admitted as a deduction, plus bad credits.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Uruguay?

Not applicable.

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in Uruguay? For example, Pay- As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

As indicated above, employers have been appointed as withholding agents of the personal income tax that applies on their employees’ salaries on a PAYE basis.

Pay-as-you-go (PAYG) withholding

Not applicable.

PAYG installments

Is there any Relief for Foreign Taxes in Uruguay? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

Uruguay has Double Tax Treaties in force and effect with Argentina, Belgium, Chile, Ecuador, Finland, Germany, Hungary, India, Liechtenstein, Luxembourg, Malta, Mexico, Paraguay, Portugal, Romania, Singapore, South Korea, Spain, Switzerland, United Arab Emirates, United Kingdom of Great Britain and Northern Ireland and Vietnam (treaties with several other countries/jurisdictions are in the process of negotiation but have not been internalized yet and are still not in force).

Relief for foreign taxes

Is there any Relief for Foreign Taxes in Uruguay? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?
 

Uruguay has Double Tax Treaties in force and effect with Argentina, Belgium, Chile, Ecuador, Finland, Germany, Hungary, India, Liechtenstein, Luxembourg, Malta, Mexico, Paraguay, Portugal, Romania, Singapore, South Korea, Spain, Switzerland, United Arab Emirates, United Kingdom of Great Britain and Northern Ireland, and Vietnam (treaties with several other countries/jurisdictions are in the process of negotiation but have not been internalized yet and are still not in force).

Unilateral tax credit is also given for foreign taxes applied on taxable dividends and interest received from abroad by IRPF taxpayers.

General tax credits

What are the general tax credits that may be claimed in Uruguay? Please list below.

As a general rule, Uruguay does not grant tax credits for Personal Income Tax purposes (deductions are also extremely limited, as indicated earlier).

Sample tax calculation

This calculation assumes a married taxpayer resident in Uruguay with two children whose 3-year assignment begins 1 January 2018 and ends 31 December 2020. The taxpayer’s base salary is 100,000 US dollars (USD) and the calculation covers 3 years.

 

2018

USD

2019

USD

2020

USD

Salary

100,000

100,000

100,000

Bonus

20,000

20,000

20,000

Cost-of-living allowance

10,000

10,000

10,000

Housing allowance

12,000

12,000

12,000

Company car

6,000

6,000

6,000

Moving expense reimbursement

20,000

0

20,000

Home leave

0

5,000

0

Education allowance

3,000

3,000

3,000

Interest income from non-local sources

6,000

6,000

6,000


Exchange rate used for calculation: USD1 = UYU38

Other assumptions

  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year and accrue evenly throughout the year.
  • Interest income is not remitted to Uruguay.
  • The company car is used for business and private purposes and originally cost USD50,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income

Year-ended

2018

UYU

2019

UYU

2020

UYU

Days in Uruguay during year

365

365

365

Earned income subject to income tax

Salary

3,800,000

3,800,000

3,800,000

Bonus

760,000

760,000

760,000

Cost-of-living allowance

380,000

380,000

380,000

Net housing allowance3

 

 

122,533

131,930

143,853

Company car4

5,472

5,472

5,472

Moving expense reimbursement

760,000

0

760,000

Home leave

0

190,000

0

Education allowance

114,000

114,000

114,000

Total earned income

5,942,005

5,381,402

5,963,325

Other income

0

0

0

Total income

5,942,005

5,381,402

5,963,325


Calculation of tax liability

 

2018

UYU

2019

UYU

2020

UYU

Taxable income as above

5,942,005

5,381,402

5,963,325

Uruguayan tax thereon

1,557,304

1,326,776

1,477,169

Less:

 

Deductions (such as, social security and dependent children)

60,018

59,730

65,453

Total Uruguayan tax

1,497,286

1,267,046

1,411,716

Foreign Financial Assets

Is there a requirement to declare/report offshore assets (e.g. foreign financial accounts, securities) to the country/jurisdiction’s fiscal or banking authorities?

No (as a general rule, dividends or profits will be subject to income tax).

Footnotes

Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country/jurisdiction for a period of less than 183 days in the fiscal year (or a calendar year of a 12-month period), the employee remains employed by the home country/jurisdiction employer but the employee’s salary and costs are recharged to the host entity, then the host country/jurisdiction tax authority will treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied, and the employee would be subject to tax in the host country/jurisdiction.

1 For example, an employee can be physically present in the country/jurisdiction for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.

2 Notionally established in 10 Bases Ficta de Contribución (BFC) monthly. Currently 1 BFC = UYU1,198.78, UYU1,099.42 (2019), UYU1,021.11 (2018). This deemed regime applied only when the housing is provided by the employer or when the employer reimburses the actual housing costs.

3 This benefit is valued monthly in 0.24‰ of the historic cost of the vehicle.

Disclaimer:

All information contained in this publication is summarized by KPMG Sociedad Civil, a Uruguayan limited liability company and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The information contained in this publication is based on the Law N° 16.713 and subsequent amendments, Law N° 18.083 and subsequent amendments, Law N° 18.131 and subsequent amendments, Title 7 and Title 8 of the Compiled Tax Text; the Web site of the fiscal administrations (DGI) and the Web site of the Uruguayan Social Security administration (BPS).

© 2021 KPMG Sociedad Civil, a Uruguay limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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