In general, expenses incurred for earning income in Uruguay are deductible to the extent they are documented.

The following expense types are not deductible or have limited deductibility for Uruguayan tax purposes:

• Personal expenses and expenses not related to the business are not deductible;
• All payments made to non-residents (including payments made to related parties) are subject to compulsory proportional deduction if the effective tax rate of the country of the recipient is lower than 25%. Payments made to non-residents are fully deductible if the tax rate of the country of the recipient is at least 25%;
• Interest expenses are generally deductible subject to the compulsory proportional deduction methodology and based on the ratio of assets that generate taxable income to total assets;
• Donations are generally deductible based on the organization to whom the donation is made. In certain cases, donations are deductible up to 25% and a tax credit can be claimed for the balance 75%;
• Corporate income tax is not deductible;
• Penalties for tax infringements are not deductible;
• Certain expenses incurred in relation to exemption incentive for software development (see Sec. 10.1.) are not deductible;
• Payments made to exempt small companies are not deductible, if they are not made through electronic transfer or are not documented with electronic invoices (effective 1 January 2021); and
• Losses from illegal acts are not deductible.