Understanding Uruguay's Tax System and Special Economic Zones in 2025

Uruguay operates under a territorial tax regime, meaning taxation primarily applies to income generated within its borders. The country’s revenue structure is heavily reliant on indirect taxes, with Value Added Tax (VAT) contributing 45.2% of total tax receipts and special excise taxes accounting for 9.5%, together making up over half—54.7%—of national tax revenue.

Main Taxes and Rates in Uruguay

The Uruguayan tax system includes ten principal taxes. Beyond VAT and excise duties, key contributors include income tax and property tax, representing 37.2% and 6.4% of total tax revenue respectively. Below is a detailed overview of the major levies shaping Uruguay’s fiscal landscape in 2025.

Value Added Tax (VAT)

The standard VAT rate in Uruguay stands at 22%, though it may be reduced to 20% under certain conditions. A lower rate specifically targeting tourism-related services has been adjusted downward from 14% to 10%, reflecting efforts to boost this sector. This tiered approach supports strategic industries while maintaining broad-based consumption taxation.

Personal Income Tax

Individuals are subject to personal income tax once earnings exceed 23,380 Uruguayan pesos (approximately USD 766). The progressive system features seven brackets, with the top marginal rate increased to 34%. Notably, several types of investment income are exempt, including interest from AFAP-managed public bonds, dividends, distributed profits, and certain financial activity taxes. Short-term deposit interest (under one year) is taxed at 5%, while longer-term deposits face a reduced 3% rate.

Corporate Taxation

Uruguay has streamlined corporate taxation through the Integrated Tax on Business Income (IRAE), which replaces older taxes such as IRIC, IRA, and IMPEQUE. Key elements include:

1. Standard IRAE rate set at 25%. Companies that reinvest profits benefit from favorable treatment; those distributing profits face an increased effective rate of 30%. Firms investing in research and innovation may qualify for full tax exemptions.
2. VAT reduction from 23% to 22%, with plans to gradually lower it further toward 10% in targeted sectors.
3. Introduction of a Financial System Regulatory Tax to strengthen oversight. Institutions including banks, brokers, currency exchanges, securities issuers, and pension fund managers (AFAPs) must contribute to support central bank regulatory enhancements.
4. Imposition of a 12% tax on interest income derived from bank loans, aimed at moderating credit expansion and increasing financial sector contributions.

Import Duties

To promote openness and attract foreign investment, Uruguay maintains a simplified tariff structure introduced in 1993, categorizing imports into three main rates: 10%, 15%, and 20%. Exemptions have also expanded significantly:

1. 20% Tariff: Applies to consumer goods domestically produced and sufficient to meet demand, along with high-value-added manufactured or semi-manufactured industrial products.
2. 15% Tariff: Covers imported semi-finished or finished goods requiring local processing before market entry, as well as items where domestic supply falls short despite existing production capacity.
3. 10% Tariff: Reserved for essential capital equipment, spare parts, raw materials, and other inputs not available locally.
4. Tax-Free Imports: Includes agricultural inputs like fertilizers, seeds, animal vaccines, and biotech tools for breeding. Additionally, projects deemed to serve the "national interest" enjoy full exemption from customs duties, import surcharges, VAT, and internal excise taxes on imported machinery and materials.

Asset Tax

This levy applies to net assets (total assets minus liabilities) held within Uruguay. Different rates apply based on entity type:

• Industrial and commercial enterprises: 1.5%
• Banks and financial institutions: 2.8%
• Natural persons holding non-productive assets: progressive rates between 0.7% and 1.5%

A surcharge applies to household or individual asset values exceeding USD 45,000, effectively doubling the applicable tax rate on the excess. Assets used for agricultural or livestock activities remain fully exempt, supporting rural economic development.

Special Economic Zones in Uruguay

Free Zone Regulations

Uruguay’s free zones are overseen by the Ministry of Economy and Finance, which approves company admissions. Day-to-day operations and infrastructure management are handled by private zone operators. Businesses pay rental fees for facilities and services but incur no additional administrative charges. While goods stored within these zones enjoy full tax exemption, they become subject to customs duties upon entry into the domestic market.

Industrial manufacturing is prohibited in free zones; however, permitted activities include repackaging, labeling, plug adaptation, sorting, bundling, and minor assembly—provided the fundamental nature of the product remains unchanged. Sectors represented include electronics, pharmaceuticals, apparel, automotive parts, and logistics.

Currently, no Chinese-owned companies operate within Uruguayan free zones, although 30–40% of goods transiting through them originate from China. Labor regulations require that at least 75% of employees be Uruguayan nationals, limiting foreign workforce participation to 25%.

In addition to free trade zones, Uruguay has established several free ports since the enactment of the Port Law in May 1992. Montevideo became the first port on South America’s Atlantic coast to adopt free port status. Other designated ports include Nueva Palmira, Fray Bentos, and Colonia.

Under current rules, cargo docked in Montevideo’s port can move freely without formal clearance or licensing. Goods remain under customs supervision but are exempt from all taxes during storage. Destinations can be altered freely, and value-added handling—including reclassification, consolidation, repair, reinforcement, and limited cutting—is allowed as long as the core identity of the goods isn’t transformed. Long-term warehousing is unrestricted in both duration and volume.

Overview of Key Free Zones

Uruguay hosts 11 official free zones, most focused on logistics and warehousing, though some cater exclusively to service-oriented businesses. The largest among them is Zonamerica Free Zone, located about 30 kilometers from downtown Montevideo and established in 1987.

Zonamerica is operated by a joint venture between Uruguayan (60%) and Belgian (40%, via the port operator of Montevideo) stakeholders. It serves over 350 companies employing more than 10,000 people, drawing clients from Europe, North America, and Asia. European firms dominate, but notable Asian entrants include India’s Tata Group. Services offered span finance, legal consulting, software development, telecommunications, and logistics, with logistics alone comprising half of the zone’s activity.

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