Countries › Uruguay › Guide › 12. Sectors › Software and IT services in Uruguay: the IRAE exemption, the cost ratio for registered software, the 50 percent test for services and foreign IP income

Software and IT services in Uruguay: the IRAE exemption, the cost ratio for registered software, the 50 percent test for services and foreign IP income

Last verified: 2026-10-27 · Status: Stable

Income from software development services and related services is fully exempt from IRAE when more than 50 percent of direct costs are incurred in Uruguay with adequate full time staff (T.O. 2023 Title 4 art. 66 S; Decreto Nº 150/007 art. 161 BIS). Income from exploiting registered software is exempt only in the ratio of qualifying development costs (own and unrelated costs plus 30 percent) to total costs, a nexus approach introduced by Ley Nº 19.637 in 2018. The exemption needs a sworn statement to DGI and a note on every invoice; missing notes cost the exemption for the year, and multinational group entities must watch the 2022 rules that make foreign IP income Uruguayan source unless it is qualified (Title 4 art. 9 and 16).

USD figures use UYU 40.21 per US dollar, the BCU quotation for DLS. USA BILLETE on 27 October 2026; amounts in Unidades Indexadas (UI) use UYU 6.6792 per UI, the BCU quotation for 27 October 2026; amounts in Unidades Reajustables (UR) use UYU 1,940.77, the September 2026 value published by IMPO (Decreto Nº 229/026), the latest available on 27 October 2026. Conversions are for orientation only.

Key facts

Software services exemption: share of direct costs in Uruguay	50 % (must exceed)T.O. 2023 Title 4 art. 66 S) 2, as of 2026-10-27 · in force
Uplift on qualifying costs in software ratio	30 %T.O. 2023 Title 4 art. 66 S) 1, as of 2026-10-27 · in force
IRAE general rate	25 %T.O. 2023 Title 4 art. 23, as of 2026-10-27 · in force
Invoice note of exempt percentage or amount	Required; omission voids the year's exemption Decreto Nº 150/007 art. 161 TER c), as of 2026-10-27 · in force
Registration required for software ratio exemption	Ley Nº 9.739 registration Decreto Nº 150/007 art. 161 BIS i, as of 2026-10-27 · in force

The rule

1. IRAE exempts income from research and development in biotechnology and bioinformatics and from production of software, where the resulting assets are protected and registered as intellectual property. The exempt amount is the income times a ratio: numerator, direct costs incurred by the developer and services contracted with unrelated parties (resident or not) or related Uruguayan residents, increased by 30 percent and capped at the denominator; denominator, total costs including the above without the uplift, costs of licensing or acquiring IP and services from related non residents, counted until the asset is registered. The regulation limits this to income from leasing, use, licensing or sale of the intangible and requires registration under Ley Nº 9.739.
Cost to do it: Registration of the software under Ley Nº 9.739 and record keeping; IRAE at 25 percent on the non exempt share.
Example: Licence income of UYU 80,420,000 with a ratio of 97.5 percent leaves UYU 2,010,500 taxable and IRAE of UYU 502,625. / On US$2,000,000: US$50,000 taxable, IRAE US$12,500.Texto Ordenado 2023, Title 4 art. 66 S) numeral 1 (from Ley Nº 19.637); Decreto Nº 150/007 art. 161 BIS (added by Decreto Nº 244/018), Title 4 art. 66 S) 1; Decreto Nº 150/007 art. 161 BIS i, 2018-07-13 official text · verified 2026-10-27

2. Income from software development services and related services (implementation, integration, support, updates, corrective and evolutive maintenance, data conversion and migration, testing and quality certification, IT risk, security, and training under conditions) is fully exempt if the activity is carried out in Uruguay: the taxpayer must employ full time staff adequate in number, qualification and pay, and direct costs incurred in Uruguay must exceed 50 percent of total direct costs of those services in the year. Related parties are those under common direction or control.
Cost to do it: No fee; compliance is a documentation exercise.
Example: A Montevideo dev shop with UYU 40,210,000 of direct costs, UYU 24,126,000 of them in Uruguay (60 percent), has its service income fully exempt. / US$1,000,000 of direct costs with US$600,000 in Uruguay passes the test.Texto Ordenado 2023, Title 4 art. 66 S) numeral 2; Decreto Nº 150/007 art. 161 BIS ii, Title 4 art. 66 S) 2; Decreto Nº 150/007 art. 161 BIS ii, 2018-08-13 official text · verified 2026-10-27

3. Only entities listed in literal A) of the IRAE taxpayer article qualify, excluding de facto and civil partnerships. Claimants must file a sworn statement with DGI (for registered software, with the registration certificate and any exclusive use licence from the registering shareholder), and every invoice and supporting document must state the asset registration number and exempt percentage, or the exempt amount for services. If documents are issued without that note, all income from that asset or all eligible service income in the year loses the exemption, and this cannot be cured until the next year. Costs must be documented to ensure traceability.
Cost to do it: Internal compliance cost; loss of a whole year's exemption for a missing invoice note.
Example: One invoice of UYU 402,100 issued without the note can make a full year's service income of UYU 80,420,000 taxable, IRAE UYU 20,105,000. / A full year of US$2,000,000 of service income would bear IRAE of US$500,000.Texto Ordenado 2023, Title 4 art. 66 S); Decreto Nº 150/007 art. 161 TER (literal c worded by Decreto Nº 96/019 art. 5), Title 4 art. 66 S); Decreto Nº 150/007 art. 161 TER, 2019-04-22 official text · verified 2026-10-27

4. For tax purposes, software produced by a company belongs to it when the company holds the exclusive right of use and exploitation granted by the partner or shareholder who registered it under Ley Nº 9.739.
Cost to do it: Cost of a written exclusive licence from the registering shareholder.
Example: A founder who registered the code personally should grant the company an exclusive licence so the company can claim the ratio exemption. / Same in USD.Decreto Nº 150/007 art. 161 BIS i, paragraph added by Decreto Nº 96/019 art. 4, Art. 161 BIS, 2019-04-22 official text · verified 2026-10-27

5. For entities in a multinational group, income from patents or registered software sold or used abroad is Uruguayan source income in the part that is not qualified income; qualified income uses the same 30 percent uplift cost ratio and requires an annual sworn statement to DGI. If those incomes are exempt under other rules, they are considered entirely Uruguayan source.
Cost to do it: Annual sworn statement; IRAE at 25 percent on non qualified foreign IP income.
Example: A group entity earning UYU 40,210,000 of foreign royalties with a 60 percent ratio has UYU 16,084,000 treated as Uruguayan source. / On US$1,000,000 of foreign royalties with a 60 percent ratio, US$400,000 becomes taxable Uruguayan source income.Texto Ordenado 2023, Title 4 art. 9 (from Ley Nº 20.095 art. 3) and art. 16 numeral 6, Title 4 art. 9 and 16 numeral 6, 2022-11-25 official text · verified 2026-10-27

6. Companies that used the exemption regime in force on 31 December 2017 could opt to keep it for registered software assets, but not beyond financial years closed on 30 June 2021.
Cost to do it: Not available: the transition ended with years closed on 30 June 2021.
Example: Legacy software assets now follow the cost ratio. / Same in USD.Texto Ordenado 2023, Title 4 art. 66 S); Decreto Nº 150/007 art. 161 QUATER, Title 4 art. 66 S), last paragraph, 2018-07-13 official text · verified 2026-10-27 · changed: Ley Nº 19.637 of 13 July 2018 replaced the full exemption for software with the cost ratio for registered assets and the 50 percent local cost test for services; the optional transition ended with years closed on 30 June 2021.

Item	Registered software (numeral 1)	Services (numeral 2)
What income	Licensing, use or sale of registered software	Development and related services
Test	Qualifying costs x 1.30 / total costs, capped at 100 percent	Direct costs in Uruguay above 50 percent and adequate full time staff
Exempt share	The ratio	100 percent
Paperwork	Sworn statement with registration certificate; invoice note	Year end sworn statement; invoice note

Two routes to the software IRAE exemption

Cost	US$	Counts in numerator?
Own developers	800,000	Yes
Unrelated contractors	100,000	Yes
Related non resident services	300,000	No (denominator only)
Numerator (900,000 x 1.30)	1,170,000
Denominator	1,200,000
Ratio	97.5 percent

Worked cost ratio

Worked example

Registered software: costs of US$800,000 own staff, US$100,000 unrelated contractors and US$300,000 related non resident services give a ratio of 1,170,000 / 1,200,000 = 97.5 percent. Of US$2,000,000 (UYU 80,420,000) licence income, US$1,950,000 is exempt and US$50,000 taxable, so IRAE is US$12,500 (UYU 502,625).
Services: a team in Montevideo serving foreign clients with 60 percent of direct costs in Uruguay pays no IRAE on that service income; on US$500,000 of profit that avoids US$125,000 (UYU 5,026,250) of IRAE at 25 percent.

Step by step

1. Use an eligible entity (for example an S.A., SRL or SAS); de facto and civil partnerships do not qualify.
2. Register software assets under Ley Nº 9.739 and, if a shareholder registered them, grant the company an exclusive licence.
3. Track direct costs by asset and by service line, separating related non resident costs.
4. Add the exempt percentage or amount to every invoice from the first one of the year.
5. File the DGI sworn statements (at registration for assets, at each year end for services).
6. If part of a multinational group, compute qualified foreign IP income under Title 4 art. 9.

Common traps

A single invoice without the exemption note can cost the whole year's exemption for that asset or service line (Decreto Nº 150/007 art. 161 TER).
Payments to related non resident developers count only in the denominator and dilute the ratio.
The services test requires more than 50 percent, not 50 percent exactly, and adequate full time local staff.
Exempt foreign IP income of a multinational group entity is treated as entirely Uruguayan source (Title 4 art. 16 numeral 6).
The exemption covers IRAE only; payroll contributions and other taxes still apply.

Sources

← Forestry in Uruguay: qualified plantations, twelve year tax benefits, IRAE limits, native forest protection and land ownership rulesTelecommunications and media in Uruguay: URSEC, spectrum, generic authorisations, fines and audiovisual licence ownership limits →