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Tax losses in Uruguay: five year IRAE carryforward with inflation update, oldest first, no carryback

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

Uruguayan companies can deduct IRAE tax losses for five years from the close of the year in which the loss arose, updated for inflation by the consumer price index for years beginning from 1 January 2016. Profits are offset against the oldest losses first, and the rule only looks backward to earlier losses, so there is no carryback of a current loss against past profits. Losses do not reduce the profit base used to compute deemed dividends for IRNR, and non residents cannot offset results between different categories of IRNR income.

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

Tax loss carryforward period	5 yearsT.O. 2023 Title 4 art. 32 literal F), as of 2026-10-27 · in force
Inflation update of carried losses	IPC for fiscal years beginning from 1 January 2016 T.O. 2023 Title 4 art. 32 literal F), as of 2026-10-27 · in force
Order of use of losses	Oldest first T.O. 2023 Title 4 art. 32 literal F), as of 2026-10-27 · in force
Loss carryback	Not provided T.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. Tax losses of earlier fiscal years accrued since IRAE came into force are deductible provided no more than five years have passed since the close of the loss year. They are updated by the change in the producer price index of domestic products (IPPN) between the closing months, replaced by the consumer price index (IPC) for years beginning from 1 January 2016. The tax result must be cleared of losses already used, offsetting positive results against the oldest negative ones first.
Cost to do it: No fee; claimed in the annual IRAE return.
Example: A loss of UYU 20,107,000 in fiscal year 2026, updated by the IPC, can be used against profits of 2027 to 2031. / A US$500,000 loss saves up to US$125,000 of IRAE if used within five years.Texto Ordenado 2023 (DGI), Title 4 IRAE, Title 4 art. 32 literal F), 2006-12-27 official text · verified 2026-10-27

2. Tax losses of earlier years are not counted as part of net taxable income when computing deemed dividends, so a company that recovers losses still accumulates taxable profit for the three year deemed dividend test.
Cost to do it: Possible 7 percent IRNR on deemed dividends even while losses are being used.
Example: A company with UYU 40,214,000 of 2027 taxable income before loss offset counts that full amount toward deemed dividends. / US$1,000,000 of pre loss income counts toward deemed dividends even if a carried loss eliminates the IRAE.Texto Ordenado 2023 (DGI), Title 8 IRNR, Title 8 art. 14 (first paragraph), 2006-12-27 official text · verified 2026-10-27

3. For non residents, positive and negative results cannot be offset between the different IRNR income categories (business income, labour income, capital income and capital gains); for capital gains, offset follows the IRPF rules.
Cost to do it: Losses in one category give no relief in another.
Example: A non resident's UYU 4,021,400 loss on one share sale cannot reduce IRNR on UYU 4,021,400 of interest income. / A US$100,000 capital loss does not shelter US$100,000 of interest.Texto Ordenado 2023 (DGI), Title 8 IRNR, Title 8 art. 6 and art. 13, 2006-12-27 official text · verified 2026-10-27

4. Losses from derivative financial instruments are admitted only if the counterparty or intermediaries are not resident or located in low or no tax jurisdictions or regimes.
Cost to do it: Disallowance of the derivative loss.
Example: A UYU 2,010,700 hedge loss with a counterparty in a listed jurisdiction is not deductible. / A US$50,000 derivative loss with a low tax counterparty saves no IRAE.Texto Ordenado 2023 (DGI), Title 4 IRAE, Title 4 art. 32 (final paragraph), 2006-12-27 official text · verified 2026-10-27

Fiscal year	Profit before losses (US$)	Loss used (US$)	Loss remaining (US$)
2026	Loss of 500,000		500,000
2027	100,000	100,000	400,000
2028	100,000	100,000	300,000
2029	100,000	100,000	200,000
2030	100,000	100,000	100,000
2031	50,000	50,000	50,000
2032	200,000	0 (expired)	0

Five year window for a US$500,000 (UYU 20,107,000) IRAE loss of fiscal year 2026, with later profits (IPC update ignored for simplicity).

Worked example

A start up SAS loses US$500,000 (UYU 20,107,000) in fiscal year 2026 and earns US$100,000 a year from 2027 to 2030 and US$50,000 in 2031.
It uses US$450,000 of the loss by 2031, updated by the IPC (Title 4 art. 32 literal F). The remaining US$50,000 expires at the end of the five year window, so 2032 profit is fully taxed.
Meanwhile the income before loss offset still counts for the three year deemed dividend test (Title 8 art. 14).

Step by step

Record each year's tax loss and its closing month to compute the IPC update.
Apply losses oldest first and track the five year expiry of each vintage.
Model deemed dividends separately, ignoring losses, if profits are retained.
Before a restructuring, check whether losses survive; Title 4 art. 88 only empowers the Executive Branch to exempt IRAE on mergers, spin offs and transformations that strengthen the company.

Common traps

Five years is short for capital intensive projects with long ramp ups; unused losses expire (Title 4 art. 32 literal F).
There is no carryback, so a loss after profitable years gives no refund.
Using losses does not stop deemed dividend imputation (Title 8 art. 14).
Derivative losses with low tax counterparties are not deductible at all (art. 32).

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

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