International Trade in Goods and Services in Uruguay: A Unique Tax Regime
1. Introduction
Uruguay offers an exceptionally attractive tax regime for international trade in goods and services, applying preferential taxation under Resolution No. 51/997. This regulatory framework, issued by the National Tax Authority (DGI), provides an estimated calculation (presumed, based on income and costs) to determine the Tax on Income from Economic Activities (IRAE) for companies that carry out trading activities from Uruguay. According to the regulatory framework, this activity is defined as the purchase of goods or services to and from abroad, without the goods entering Uruguayan territory or the services being rendered from within Uruguay.
2. Resolution No. 51/997
The regime of Resolution No. 51/997 establishes an optional regime for determining the net income of Uruguayan source for this type of activity, set at 3 % of the difference between the sale price and the purchase price of the goods and services. This result is taxed by IRAE at a rate of 25 %, so the effective tax rate for those who opt to apply this regime will be 0.75 % of gross income. For determining the purchase price, only the direct sales cost of the goods purchased may be considered, without considering other costs such as transportation, insurance, etc.
3. Dividend distribution
In addition to IRAE, the shareholders of companies paying IRAE, upon the distribution of their dividends, are subject to Non-Resident Income Tax (IRNR) or Individual Income Tax (IRPF) at a rate of 7 %. It is worth noting that this tax applies up to the concurrence of the amount of dividends distributed with the amount of the net taxable income taxed by IRAE. This implies that dividend distributions will be subject to 7 % withholding up to the amount of taxable income. Above this amount, they are not subject to any withholding. Thus, the effective rate on dividend distributions is 0.21 % of net income, i.e., 0.21 % of the difference between the sales price and the purchase price of the goods or services.
4. Numerical example
Let’s assume that the Uruguayan company trading in Uruguay sells goods for USD 1,500,000 and buys them for USD 1,400,000, i.e. the difference between the purchase and sale price of the goods amounts to USD 100,000. First, the 3 % rate is applied to this amount to determine the net tax income from Uruguayan sources; i.e., the net tax income would amount to USD 3,000 (100,000 x 3 %). To determine IRAE, the 25 % rate must be applied to taxable income; i.e., USD 750 must be paid for this concept (3,000 x 25 %).
If we also calculate the tax on dividends, a 7 % withholding must be applied on the net taxable income, which in this case will amount to USD 210 (3,000 x 7 %). In conclusion, the total tax burden on a transaction with a gross income of USD 100,000 will be as follows:
- IRAE: USD 750
- IRNR / IRPF: USD 210
- TOTAL: USD 960
- Total tax burden: 0.96%
5. Advantages of doing business in Uruguay
Uruguay is a very attractive place for its trading tax regime for entrepreneurs and investors seeking to conduct or restructure their businesses in politically and economically secure jurisdictions, and it provides an environment conducive to the growth and expansion of companies in Latin America and around the world. This tax regime may represent an excellent opportunity to relocate certain activities at a lower tax cost than elsewhere. In conclusion, Uruguay’s trading regime offers a highly favorable tax environment for international trade, positioning it as a competitive and profitable option in the global market.
