Scope and Rates
The Uruguayan value added tax (VAT), is a tax based on the value added method. All business undertakings that are income taxpayers are defined as VAT payers. VAT also applies to self-employed individuals and associations of individuals rendering personal services in Uruguay.
VAT is due on:
- the sale by VAT taxpayers of movable property located in Uruguay
- services, specified in the law, provided they are performed in Uruguay
- the final importation of movable property and
- the aggregate value generated through real estate constructions.
For VAT purposes, the concept of taxable “sale” includes:
- transfers of movable goods which are attached to the soil at the time of the transfer, provided they have their own individuality and represent goods in trade for the taxpayer
- the removal of movable property by the owner for his personal use or consumption
- transactions carried out by commission agents, consignees and others who sell or buy personal property in their own name but on behalf of third parties.
Under the VAT system, tax is levied at each stage of the manufacturing and distribution process on a non cumulative basis. The accumulation of tax is avoided through the deduction of VAT invoiced to the entity. The entity pays VAT on the total amount invoiced in each monthly tax period, but it is entitled to recover the input VAT it incurred during the same period. If, in any tax period, the balance of input VAT is higher than the amount of output VAT, the entity is not entitled to a refund (unless the refund is related to exports). Instead the difference is carried forward and can be credited against future VAT liabilities.
The standard rate of VAT is 22 percent.
There is a reduced rate of 10 percent for certain goods and services, including:
- bread, biscuits, fish, meat, oils, rice, cereal flour, salt, sugar, coffee, tea, soap, edible fats, transportation of milk
- drugs and pharmaceuticals
- the services provided by hotels related to lodging
- the services provided outside of the relationship of health-related dependency in humans. Shuttle service by ambulance is also included
- sales of package tours organized by local agencies or wholesalers, local or abroad. The Executive Branch will define what is meant by packages
- the provision of electricity to the destination Municipalities with public lighting.
- transportation of passengers
- real estate, in the case of the first sale to conduct business
- insurance covering the risks of death, age, disability, illness and injury
- fruits, flowers and vegetables in their natural state.
Exempt services include:
- interest on public and private bank deposits and warrants
- leases of property
- insurance and reinsurance covering the risks of fire and climate to the following assets:
- agricultural crops, horticultural, fruit and forest located within the national territory
- the structures of protection for these crops
- all species of livestock production developed in our country
- banking service provided to CIT taxpayers
- supplies made by companies registered with the competent authorities for the arrangements for application of chemicals, seed and fertilizer for agriculture
- supply of cold by using cold storage or other similar technical procedures
- fruits, vegetables and horticultural products in their natural state
- the personal rewards obtained outside the agency relationship, when they originate in cultural activities developed by artists living in the country
- fees derived by the intervention in the sale of government securities issued by the Uruguayan state and private, when the latter are issued in the country
- the leasing of agricultural machinery and other services related to the use of it, made by cooperatives, producer associations and unions to their members
- the services provided by hotels outside of high season, related to lodging
- insurance of risks of death, age, disability, illness and injury
- leasing CD and DVD, containing works of music and film with cultural/educational character
- the distribution of motion pictures for exhibition in cinemas
Exempt goods include imports and sales of:
- foreign currency, precious metals, coins, or bullion, securities and bonds, public and private securities
- transfers of appropriations
- agricultural machines and accessories
- petroleum fuels, except fuel oil and gasoil
- goods to be used in agricultural production and raw materials for processing
- newspapers, periodicals, magazines, books and pamphlets of every kind, with the exception of pornography. It also covers educational material
- supply of water for basic household consumption
- sheep meat and offal
- works of music and film character, in (CD) (DVD) or other digital
- exports of goods and services are zero-rated.
Excise tax (IMESI): applies to the first transaction carried out by manufacturers or importers of certain goods in the domestic market.
If businesses make taxable supplies in Uruguay through a permanent establishment they will be required to register and account for local VAT.
There are penalties for failure to file tax returns based on the general terms fixed by the tax administration.
No. Under Uruguayan VAT legislation it is not possible for a non-resident entity to voluntarily register in Uruguay and act as an established entity.
VAT registration is not possible without a permanent establishment in Uruguay. If the company (permanent establishment) performs activities in the country, VAT registration is mandatory.
Taxpayers are required to submit VAT returns on a monthly basis.
Yes, returns covering turnover tax and excise tax.
The Central Bank of Uruguay (BCU) regulates and provides all exchange rates. The exchange rate of the day previous to the transaction applies.
There are certain items that businesses cannot recover VAT on. For example:
- Exempt supplies: where VAT relates to both taxable and exempt supplies, you need to make an apportionment (prorata rule).
- Business entertainment: VAT on services rendered by bars, restaurants, hotels is not recoverable.
International Supplies of Goods and Services
Exports of goods and services are included in the scope of VAT, but they are zero rated. This means VAT is not levied on the output, but VAT paid on inputs may be recovered through tax refunds, which the taxpayer may request after shipping the goods. .
Goods supplied and services performed abroad are not subject to tax.
When goods are imported into Uruguay, import VAT and customs duties must be paid before the goods are released from customs’ control.
Services rendered are taxable.
In such cases, the local taxpayer must self-assess the VAT payment in the month immediately after the taxable event is completed, and will compute the VAT credit in the following month. This will be a pass-through cost for the local company so long as it is registered for local VAT purposes.
Taxpayers are required to document their operations related to taxable activities by means of invoices, sales slips, credit notes, debit notes or other similar commercial documents that must comply with certain formalities established by applicable regulations.
The content of invoices is strictly regulated.
A taxpayer is required to issue an invoice for each taxable transaction performed. If this requirement is not complied with, the purchaser is not entitled to the VAT credit otherwise arising from the purchase.
Invoices and similar documents corresponding to transactions between 2 registered taxpayers must show the relevant VAT separately. Transactions made by a registered taxpayer with a final consumer or a small taxpayer must not show separately the corresponding VAT.
Tax invoice must contain the following data:
- date of issue
- a sequential invoice number
- taxpayer identification number (RUT) and customer taxpayer identification number
- supplier’s name and address
- customer’s name
- the quantity and nature of the goods/services supplied
- unit price (exclusive of any VAT)
- rate of any discounts (if not included in the unit price and if applicable)
- the VAT rate applicable
- the total amount price (including VAT)
- issue authorization code.
Currently no, but in the near future will be mandatory for certain activities and optional for the rest of all the activities.
Transfers of Business
Under Uruguayan law N° 16906 a VAT exemption could be granted by the Executive Power to mergers and transactions related to business reorganizations. Such an exemption does not operate automatically, it must be requested by the company to the Executive Power, which analyzes the request on a case by case basis.
Options to Tax
Individuals and companies engaged in a small business activity and whose gross turnover does not exceed a certain threshold may be subject to a simplified regime (Monotributo) that combines income tax and VAT.
Head Office and Branch transactions
There are no special rules for VAT, since both are considered as different taxpayers for VAT purposes.
In the absence of an invoice or similar document or were the price is less than the market value, the market price is used as the taxable base.
There are certain penalties for failing to fulfill formal obligations.
The penalty or fine for failing to pay VAT due varies between 5 percent and 20 percent of the unpaid VAT.
In case of fraudulent practices, besides fines ranging from 1 to 15 times the unpaid taxes, imprisonment can be imposed in certain cases.
Compensatory interest is at present 12 percent annual rate, capitalized every 4 months.
How often do tax audits take place?
Tax audits take place regularly, but not with a specified periodicity.
Are there audits done electronically in your country (e-audit)? If so, what system is in use?
Is it possible to apply for formal or informal advance rulings from the (indirect) tax authority?
Are rulings and decisions issued by the tax authorities publicly available in your country?
Yes, rulings are available on the tax office website: www.dgi.gub.uy
An aspect to be considered is that not all the services provided from Uruguay to foreign entities are considered as exports. In order for them to qualify as export services they must be included in a shortlist established by the Executive Power.
Movements of goods inside Uruguayan free zones or port areas (areas of the national territory subject to a special tax regime) are not subject to VAT.
Services provided inside the free zones or port areas are considered as exports, provided they are exclusively and necessarily developed in those areas.