As an employer in Uruguay, you are responsible for withholding and remitting various taxes from your employees' salaries and making your own employer contributions to the social security system.

Registration and Withholding

You must register your business with the Banco de Previsión Social (BPS), the Uruguayan Social Security Bank, before starting any operations. Depending on your company's structure and employee income levels, you may also need to register with the Dirección General Impositiva (DGI), the Uruguayan tax authority, to withhold Income Tax (IRPF) from employee salaries.

Social Security Contributions

Employers contribute a portion of each employee's salary to the social security system, along with the employee's own contributions. These contributions cover retirement, healthcare, and other social programs. Here's a breakdown of the employer contribution rates:

• Retirement: 7.5%
• Health Insurance: 5% (with a potential surplus in specific cases)
• Fund for Labor Training (FONCAP): 0.10%
• Insolvency Fund: 0.025%

These contribution rates are subject to change. Refer to the BPS website for the latest information.

Income Tax Withholding (IRPF)

If required to register with the DGI, you are responsible for withholding income tax from your employees' salaries based on a progressive tax scale. The withheld amount is then remitted to the DGI on behalf of the employee. There are specific thresholds for mandatory IRPF withholding. Consult a tax professional or refer to DGI resources for details on your obligations.

In Uruguay, employees are subject to various mandatory deductions from their salaries. These deductions contribute to social security, healthcare, and other programs.

Mandatory Social Security Contributions

Employees are required by Uruguayan law to contribute to a retirement plan. The employee's contribution is 7.5% of their salary.

Healthcare Contributions

Employees also contribute to a health insurance program. The contribution rate varies depending on marital status, dependents, and salary level. It ranges from 3% to 8% of the employee's salary.

Other Mandatory Contributions

A small contribution is made to the Labor Restructuring Fund, which is used for retraining unemployed workers. The employee's contribution is 0.1% of their salary. There is also a minimal contribution made to the Labor Credit Guarantee Fund, which guarantees severance payments in case of company closure. However, the employee does not contribute to this fund.

It's important to note that these are the main mandatory deductions. There might be additional contributions depending on the specific industry or employer-employee agreements.

Additional Considerations

Uruguay also has a personal income tax (IRPF) applied to gross income. However, employers typically withhold this tax as well. The tax rate is progressive, meaning it increases with higher income levels.

There might be limitations on the amount of deductions you can claim when filing your annual income tax return. A tax advisor can provide more details on this aspect.

Uruguay employs a Value Added Tax (VAT) system for most goods and services provided within the country. It's crucial for businesses operating in Uruguay to understand the VAT implications for services.

VAT Rates

Uruguay applies a tiered VAT system with three main rates:

• Standard Rate: The general rate for most goods and services is 22%. This applies to a broad range of services unless they fall under a specific reduced rate or exemption.
• Reduced Rate: Certain essential goods and services benefit from a reduced VAT rate of 10%. This includes necessities like food and medicine, health services, hotel stays for tourists, and the first sale of real estate.
• Zero Rate: Exports of goods and services, along with sales of some agricultural products, are typically zero-rated for VAT purposes. This means no VAT is levied on the transaction.

A temporary zero VAT rate was introduced for hotel-related services provided to resident tourists during the summer season (December 15th, 2023 - March 31st, 2024). This benefit may not be applicable year-round.

VAT Registration

There's no threshold for VAT registration in Uruguay. Any business supplying taxable goods or services within the country is generally obligated to register for VAT.

VAT Compliance

Registered businesses must adhere to VAT compliance requirements. This includes:

• Charging and collecting VAT on taxable supplies at the appropriate rate.
• Maintaining proper VAT records.
• Filing VAT returns periodically (typically quarterly).
• Paying any VAT due to the Uruguayan tax authorities.

VAT and Digital Services

Since 2018, Uruguay has imposed VAT on non-resident providers of digital or electronic services delivered in the country. This applies to services like streaming platforms, online marketplaces, and software as a service (SaaS).

Uruguay, a hub for foreign investment in South America, offers a variety of tax incentives to businesses to encourage investment, promote economic growth, and attract skilled professionals.

Free Trade Zones (FTZs)

Uruguay's network of Free Trade Zones (FTZs) provides significant tax advantages to businesses operating within them. These benefits include:

• Exemption from Corporate Income Tax (IRAE): Businesses are exempt from paying tax on profits generated from activities within the FTZ.
• Exemption from Value Added Tax (VAT): Goods imported into and produced within the FTZ are exempt from VAT.
• Reduced bureaucracy: FTZs offer streamlined customs procedures and simplified administrative processes.

Tax Promotion Regime (COMAP)

The Commission for the Promotion of Investments (COMAP) offers tax credits to companies undertaking new investment projects in Uruguay. The benefits under COMAP include:

• Corporate Income Tax (IRAE) Credits: These credits range from 20% to 100% of new capital expenditures, depending on the project's nature, size, and location.
• Exemption from Net Wealth Tax (IPAT): Movable assets used in the project are permanently exempt from IPAT, while construction projects can enjoy an exemption for up to ten years.
• VAT Relief: Businesses can benefit from VAT reimbursement on local purchases of goods and services used for the project.

Other Tax Incentives

Uruguay offers additional tax benefits to specific industries and activities:

• Tax Holiday for IT Professionals: Foreign IT professionals with contracts between 2023 and 2025 can opt for a reduced tax rate and exemption from social security contributions.
• Exemption for International Transport Companies: Companies engaged primarily in air and maritime transport are exempt from Corporate Income Tax (IRAE).
• Tax Benefits for Trading Activities: Businesses involved in the transit of foreign goods through Uruguay can benefit from exemptions on Corporate Income Tax (IRAE).

Eligibility for these tax incentives may come with certain conditions and requirements. Businesses should consult with a tax professional to determine which incentives they qualify for and ensure they comply with all applicable regulations.