Uruguay’s corporate tax system has seen notable changes in recent years, with a new global minimum tax taking effect alongside a long-standing territorial principle that now includes key exceptions. The nation’s basic corporate tax rate stays at 25%, but a Domestic Minimum Complementary Tax—aligned with the OECD’s 15% Qualified Domestic Minimum Top-up Tax—now applies to multinational groups whose consolidated annual income exceeds €750 million, effective January 1 2026.
The new rule aims for these groups to be subject to a minimum effective tax rate of 15% on qualifying income, when certain circumstances apply. This development marks Uruguay’s first major shift away from its traditional territoriality-based system, where only income sourced domestically was subject to tax. While the principle continues to guide the regime, recent updates have broadened tax obligations for both companies and individuals on foreign earnings under specific conditions.
For individuals, foreign-sourced capital income, such as dividends, interest, and rental yields, is taxed at 12%, and the same percentage applies to capital gains realized from the sale of foreign assets. Businesses face a wider set of rules: foreign income becomes taxable when it originates from commercial activities, employment, or capital gains, including dividends, royalties, or technical services.
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VAT and excise taxes redefined
Non-resident entities that do not maintain a permanent establishment in Uruguay are subject to a withholding tax that ranges from 0.5% up to the maximum rate, depending on the type of income involved. For example, dividends paid to non-resident shareholders attract a levy of 7%, with the local subsidiary responsible for withholding the amount at source.
Uruguay’s tax structure also incorporates a 22% Value Added Tax (VAT), applied at every commercial stage, although certain goods qualify for a 10% reduced rate. An excise tax (IMESI) targets luxury items such as alcoholic beverages, perfumes, cigarettes, and vehicles, with rates that vary according to the specific product. The excise charge is levied at the first transfer, at import, or when the item is used for personal consumption.
GAAR gaps and foreign income rules
Uruguay does not have a General Anti-Avoidance Rule (GAAR) in its domestic legislation. Nevertheless, Article 6(2) of the Tax Code gives priority to economic substance over legal form, although observers continue to debate whether this provision functions effectively as a GAAR. There is, however, a specific GAAR applicable to the taxation of foreign passive income earned by non-qualifying entities belonging to a multinational group.
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The most frequent issues that lead to tax controversies are the request for annulment of tax assessments issued by the Tax Authority. These tax assessments are usually the result of tax inspections carried out by the Tax Authority on the taxpayer to be assessed. Once the inspection is finalized, a tax assessment is issued by the Tax Authority, which enables the taxpayer to initiate tax controversy proceedings. These tax assessments usually understand that the taxpayer was responsible for paying taxes different from the ones actually paid. In most cases, the Tax Authority takes the position that the taxpayer should have paid more tax than it did.
In Uruguay, the process and resolution of tax controversies are ruled with all administrative procedures (these being the procedures in which the state is the counterpart). For most tax controversies, it is mandatory to first finish an internal administrative proceeding before beginning the judicial proceeding. Currently in Uruguay there are no alternative methods to resolve tax controversies other than the administrative proceeding and the judicial administrative proceeding, however, scholars have been starting to enable the possibility of resolving tax controversies with the Tax Authority through arbitration. Once an amount to be paid by the taxpayer is set, there is a possibility of refinancing the debt with the Tax Authority.