background image
5.1. Tax Base for Resident Entities

Uruguay applies a territorial tax system under which resident entities are assessed to tax only on income arising in, or deemed to be derived from sources in Uruguay. Taxable income is computed as gross income less expenses and other allowances incurred in the realization of such income. Dividends received by resident companies are exempt from tax. Exemptions are also available under the various tax incentive schemes of the government (see Sec 10.2).

As an exception to the territorial taxation principle, income earned by a taxpayer from rendering certain specified services (such as technical services, managerial services, advertising services, etc) outside Uruguay will also be considered as Uruguay-sourced income, if such services are used by the recipient taxpayer to earn Uruguayan income subject to corporate income tax in Uruguay.

Effective 1 January 2023, Uruguay introduced new income source rules for passive income from foreign sources received by resident entities that are members of MNE groups. The new rules are another exception to the territorial tax system as, under the new rules, passive income from foreign sources is considered Uruguay-sourced and subject to corporate tax unless the economic substance requirements are met (see Sec. 12.5.).