Countries › Uruguay › Guide › 6. Taxes › Corporate income tax in Uruguay (IRAE): 25 percent on Uruguayan source income, what is deductible, the proportional deduction rule and monthly advances

Corporate income tax in Uruguay (IRAE): 25 percent on Uruguayan source income, what is deductible, the proportional deduction rule and monthly advances

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

Uruguay's corporate income tax, the Impuesto a las Rentas de las Actividades Económicas (IRAE), is a flat 25 percent on net taxable income from Uruguayan source activities, assets and rights, charged on companies of every type, permanent establishments, trusts and some funds. Expenses are deductible only if necessary, documented and taxed in the hands of the recipient; when the recipient pays a lower rate, such as the 12 percent IRNR on interest or royalties paid abroad, only a proportion of the expense (12/25, that is 48 percent) is deductible. Ley Nº 20.446 reworded several IRAE source and scope rules from 1 January 2026, and companies pay monthly advances calculated on the prior year's ratio of tax to revenue; the annual return closes the year.

USD figures use UYU 40.214 per US dollar, the BCU quotation for DLS. USA BILLETE on 26 October 2026; UI amounts use UYU 6.6780 per Unidad Indexada, the BCU quotation for 26 October 2026. Both were retrieved from the BCU quotations service on the verification date; conversions are for orientation only.

Key facts

Corporate income tax rate (IRAE)	25 %T.O. 2023 Title 4 art. 23, as of 2026-10-27 · in force
Deductible share of an expense taxed to the recipient at the 12 percent IRNR rate	48 %T.O. 2023 Title 4 art. 31, as of 2026-10-27 · in force
IRAE monthly advances	Monthly, at the prior year ratio of IRAE to taxed gross income; not due in the first year of activity Decreto Nº 150/007 art. 165, as of 2026-10-27 · in force
Tax loss carryforward period	5 yearsT.O. 2023 Title 4 art. 32 literal F), as of 2026-10-27 · in force
UYU per US dollar used for conversions (BCU, DLS. USA BILLETE, 26 October 2026)	40.214 UYUBCU quotations service, as of 2026-10-27 · in force

The rule

1. IRAE taxes Uruguayan source income from economic activities. Taxpayers listed in art. 12 literal A) include the commercial companies of Ley Nº 16.060 and SAS under Ley Nº 19.820, permanent establishments of non residents, trusts other than guarantee trusts and closed credit investment funds. Income is Uruguayan source when it comes from activities carried out, assets located or rights used economically in Uruguay, whatever the nationality or residence of the parties and wherever the contract was signed.
Cost to do it: No registration fee; the company enrols for IRAE when it registers with the DGI.
Example: A SAS earning UYU 40,214,000 of net taxable income in Uruguay is fully within IRAE. / US$1,000,000 of Uruguayan source net income is within IRAE whoever owns the company.Texto Ordenado 2023 (DGI), Title 4 IRAE, as amended by Ley Nº 20.446 of 16 December 2025, Title 4 art. 1, art. 12 literal A) and art. 16, 2006-12-27 official text · verified 2026-10-27 · changed: Ley Nº 20.446 art. 646 (published 8 January 2026, in force from 1 January 2026 under its art. 3) reworded art. 12 literal A) numerals 2 and 6, so that numeral 2 now refers to the commercial companies of Ley Nº 16.060 and the SAS of Ley Nº 19.820.

2. The tax rate is 25 percent of net taxable income (renta neta fiscal). There is no reduced rate for small companies in the rate article; small businesses may instead fall under other regimes in Title 4.
Cost to do it: 25 percent of net taxable income.
Example: Net taxable income of UYU 40,214,000 bears IRAE of UYU 10,053,500. / US$1,000,000 of net taxable income bears US$250,000 of IRAE.Texto Ordenado 2023 (DGI), Title 4 IRAE, Title 4 art. 23 (from Ley Nº 18.083, art. 3), 2006-12-27 official text · verified 2026-10-27

3. Expenses are deductible when accrued in the fiscal year, necessary to obtain and keep taxed income and duly documented. Only expenses that are taxable income for the counterparty under IRAE, IRPF, IRNR or an effective foreign income tax can be deducted, and wages are deductible only if the matching social security contributions were paid.
Cost to do it: Documentation costs only; the rule limits deductions rather than charging a fee.
Example: A UYU 402,140 invoice from a supplier that is not taxed on that income is not deductible at all. / A US$10,000 payment to a recipient not taxed on it saves no IRAE, costing US$2,500 of lost deduction.Texto Ordenado 2023 (DGI), Title 4 IRAE, Title 4 art. 30 (Ley Nº 18.083 art. 3; Ley Nº 19.355 art. 710), 2006-12-27 official text · verified 2026-10-27

4. Proportional deduction: when the expense is income taxed to the recipient under IRNR, or under IRPF Category I (capital income), the deduction is limited by the ratio between the recipient's maximum rate and the 25 percent IRAE rate. For IRNR the rate taken is 12 percent, or 25 percent when that rate applies, so a payment taxed at 12 percent is 48 percent deductible and one taxed at 25 percent is fully deductible. When the recipient is taxed abroad at an effective rate of 25 percent or more the deduction is 100 percent; at a lower effective rate it is proportional. Transfer pricing rules apply on top.
Cost to do it: The non deductible share raises IRAE: 52 percent of an expense taxed at 12 percent is added back.
Example: Interest of UYU 4,021,400 paid to a foreign lender taxed at 12 percent IRNR is deductible only up to UYU 1,930,272; the UYU 2,091,128 balance costs UYU 522,782 of extra IRAE. / US$100,000 of interest to a foreign parent: US$48,000 deductible, US$52,000 added back, US$13,000 of extra IRAE, plus US$12,000 of IRNR withheld, unless the parent proves an effective foreign rate of at least 25 percent.Texto Ordenado 2023 (DGI), Title 4 IRAE, Title 4 art. 31 (texts of Ley Nº 19.438 art. 158 and Ley Nº 19.484 art. 46), 2006-12-27 official text · verified 2026-10-27

5. Non deductible items include personal expenses of owners, losses from illegal operations, tax penalties, profit withdrawals by owners, profits allocated to capital or reserves, IRAE itself and the wealth tax (IP), goodwill amortisation, fees for independent personal services not paid through the electronic means required by Ley Nº 19.210, and, from 2026, the domestic minimum top up tax. Expenses linked to non taxed income are not deductible in proportion.
Cost to do it: Each non deductible item costs 25 percent of its amount in IRAE.
Example: Paying UYU 402,140 of professional fees in cash instead of through a bank or electronic means makes them non deductible, costing UYU 100,535 of IRAE. / A US$10,000 fee paid outside the required electronic means costs US$2,500 of IRAE.Texto Ordenado 2023 (DGI), Title 4 IRAE, as amended by Ley Nº 20.446, Title 4 art. 35, 2006-12-27 official text · verified 2026-10-27 · changed: Ley Nº 20.446 art. 643 added literal J), making the domestic minimum top up tax non deductible, from 1 January 2026.

6. Tax losses of earlier years can be deducted for five years from the close of the loss year, updated by the consumer price index (IPC) for years beginning from 1 January 2016, oldest losses first. Bad debts, casualty losses, depreciation and amortisation of intangibles that represent a real investment with an identified seller are also deductible.
Cost to do it: No fee; claimed in the annual return.
Example: A UYU 8,042,800 loss of 2026 can shelter profits through fiscal year 2031. / A US$200,000 loss of 2026 can save up to US$50,000 of IRAE through 2031.Texto Ordenado 2023 (DGI), Title 4 IRAE, Title 4 art. 32 literals C) to F), 2006-12-27 official text · verified 2026-10-27

7. IRAE is assessed per annual fiscal year. Taxpayers make monthly advance payments (pagos a cuenta) except in the year they start activity when they do not succeed another taxpayer; each month's advance applies the ratio between the prior year's IRAE and its taxed gross income to that month's gross income.
Cost to do it: Cash flow cost of paying during the year; no separate fee.
Example: A company whose 2025 IRAE was UYU 10,053,500 on gross income of UYU 402,140,000 (a 2.5 percent ratio) advances UYU 502,675 in a 2026 month with UYU 20,107,000 of income. / With a 2.5 percent ratio, a month with US$500,000 of revenue requires a US$12,500 advance.Decreto Nº 150/007 (IRAE regulation), Art. 164 and art. 165, 2007-04-26 official text · verified 2026-10-27

Recipient taxed under	Rate considered	Deductible share
IRAE (Uruguayan company)	25 percent	100 percent
IRNR at the general rate (interest, royalties, fees abroad)	12 percent	48 percent (12/25)
IRNR at 25 percent (low or no tax jurisdictions)	25 percent	100 percent
Foreign income tax at an effective rate of 25 percent or more	Effective rate	100 percent
Foreign income tax at a lower effective rate	Effective rate	Proportional to effective rate over 25 percent
Not taxed at all	None	Not deductible

Deductible share of a payment by an IRAE taxpayer, by how the recipient is taxed (T.O. 2023 Title 4 art. 30 and 31).

Item	UYU	US$
Interest paid	4,021,400	100,000
Deductible at 48 percent	1,930,272	48,000
Added back	2,091,128	52,000
Extra IRAE at 25 percent	522,782	13,000
IRNR withheld at 12 percent	482,568	12,000

IRAE cost of US$100,000 of interest paid to a foreign parent taxed at 12 percent IRNR (UYU at 40.214 per US dollar, BCU, 26 October 2026).

Worked example

A Uruguayan SAS owned by a foreign parent has accounting profit of UYU 40,214,000 (US$1,000,000) in 2026 after deducting US$100,000 (UYU 4,021,400) of interest on a parent loan.
The parent is not shown to bear an effective foreign rate of 25 percent on that interest, so only 48 percent is deductible (Title 4 art. 31): UYU 2,091,128 (US$52,000) is added back, giving net taxable income of UYU 42,305,128 (US$1,052,000).
IRAE at 25 percent is UYU 10,576,282 (US$263,000), US$13,000 more than if the interest had been fully deductible. The SAS also withholds IRNR of UYU 482,568 (US$12,000) on the interest.
During 2027 the SAS pays monthly advances based on the 2026 ratio of IRAE to taxed gross income (Decreto Nº 150/007 art. 165).

Step by step

Register with the DGI before starting activity; IRAE, IVA and IP obligations follow from the registration.
Map each income stream against the source rule (Title 4 art. 16), including the deemed source rules for technical services from abroad and, for multinational group entities, foreign passive income.
Before agreeing any payment abroad, check how the recipient is taxed: at 12 percent IRNR only 48 percent of the expense is deductible unless the recipient proves an effective foreign rate of 25 percent or more (art. 31). Keep evidence of the foreign rate.
Pay professional fees and freight through bank transfer or other electronic means so they stay deductible (art. 35).
Compute the monthly advance from the prior year's ratio and pay it every month from the second year (Decreto Nº 150/007 art. 165).
At year end compute IRAE, carry forward losses up to five years, and coordinate with the wealth tax and, for large groups, the domestic minimum top up tax.

Common traps

The 48 percent rule catches intragroup interest, royalties and service fees paid abroad: unless the recipient shows an effective foreign tax of at least 25 percent, more than half of the expense is not deductible (Title 4 art. 31).
Expenses paid to recipients that are not taxed on them at all are fully non deductible, even if commercially necessary (art. 30).
Fees for independent professionals and freight paid in cash lose deductibility (art. 35 literals H and I).
Goodwill amortisation is not deductible, so asset deals that allocate value to goodwill do not create a tax shield (art. 35 literal G).
The domestic minimum top up tax for large groups is not deductible for IRAE (art. 35 literal J, added by Ley Nº 20.446).

Sources

Related: Uruguay country profile · live dashboard · central bank and release calendar · our posts on X · where Argentina is involved, see The Argentine Thread guide

← Taxes in Uruguay: the core system for foreign investors, from IRAE and dividend withholding to IVA, wealth tax and the domestic minimum taxWithholding on payments abroad in Uruguay (IRNR): 7 percent on dividends, 12 percent on interest, royalties and services, 25 percent for low tax jurisdictions →