INDIVIDUAL TAXATION

Nonresidents are taxed on their Uruguayan-sourced income. Married couples may be taxed jointly or separately.

Nonresidents carrying on business activities through a permanent establishment in Uruguay must file income tax returns and compute their own tax liabilities; otherwise, non-residents are normally subject to a final withholding tax.

INCOME TAX

Income is classified into two categories: (1) capital income and capital gains, and (2) income from dependent or independent personal services and pension. Calculation of taxable income and applicable income tax rate depends on the classification of income.

Category I (Capital Income and Capital Gains)

Capital income realized by individuals is subject to 12% tax. Rental income and capital gains realized from selling Uruguayan property are considered as capital income.

RENTAL INCOME
Rental income is taxed at 12%, withheld at source. When calculating the taxable income, the following are deductible: real estate taxes, property tax for basic education, notary fees of the lease contract, administration costs, housing agency commission, capital losses and bad debts.

Entities in charge of collecting the monthly income derived from renting a property (real estate administrators) are considered income tax withholders. Otherwise, those who obtain income derived from renting properties shall pay a monthly payment in advance of the abovementioned tax. The amount of withholding tax arises to 10.5% of the total amount of income received each month.

In case the only income obtained by individuals is derived from renting properties, advance payments can be considered as definitive tax payments.

CAPITAL GAINS
Capital gains are taxed at 12%. Taxable capital gains are the difference between the sales price and acquisition costs, as adjusted for inflation in accordance with the changes in the consumer price index.

Losses derived from capital gains could only be deducted from other incomes derived from capital gains, and only when the origin of these losses comes from a real estate transaction.

NET WORTH TAX (impuesto al patrimonio, IAP)

Nonresidents are taxed at a flat rate of 1.50% on their net worth exceeding the prescribed tax-free amount (minimo no imponible, MNI), which is established annually by the central government. For 2009, it is fixed at UYU2,080,000 (US$105,050) for individuals and estates. For family units or couples filing jointly, the tax-free amount is UYU4,160,000 (US$210,101).

The taxable base is the difference between taxable assets (including properties, assets and rights within the country) and deductible liabilities (debts with banks in Uruguay), and is fixed by assessment by the General Real Estate Registry.

CORPORATE TAXATION

INCOME TAX (impuesto a las rentas de las actividades económicas, IRAE)

Companies earning Uruguayan-sourced income and capital gains are subject to corporate income tax at a flat rate of 25%.

The taxable income is computed by deducting income-generating expenses from the gross income. Other allowable deductions include advertising costs, bad debts, commissions, gifts, goodwill, guaranties, interest expense, rents, representation expenses, research and development, remuneration (to owners, partners, directors), royalties and technical assistance, salaries and wages, service fees, social welfare, taxes on income-generating assets and activities, training costs, travel expenses, and depreciation expenses. A fiscal adjustment for inflation is mandatory.

BUSINESS NET WORTH TAX (impuesto al patrimonio, IAP)

The tax rates vary from 1.5% to 3.5%, depending on the taxpayer´s classification and the type of assets involved. The standard tax rate is 1.5%.

The tax base for the business net worth tax is computed by deducting the company´s total liabilities (e.g. debts with local financial institutions, local commercial debts, and debts in the form of bonds or debentures publicly traded on a stock exchange) from its total assets.

PROPERTY TAX

Property Tax (contribución imobiliaria)

Real estate tax is levied on immovable properties in Uruguay and is payable by the owners. The tax base is the cadastral value of the property as determined by the Cadastral Bureau. The tax rates vary from 0.15% to 0.30%, depending on the property value.