Uruguay, officially the Oriental Republic of Uruguay, is a small country in South America with political stability as well as strong international relations. This country has a high-income economy, a GDP per capita of $15,778, and a population of about 3.4 million people. The Oriental Republic of Uruguay is ranked first in Latin America for lack of corruption, e-government, democracy, freedom of the press, and peace. It may seem rather small for entrepreneurs and startups. However, this country is still attractive to consider setting up a business as a basis to expand into other markets instead of operating locally only.
Ease of Doing Business in Uruguay
It is known that in 2002, the country got through one of the biggest financial and economic crises. Nevertheless, the financial performance of Uruguay stayed more stable than that of its neighbors. It also showed its reliable reputation among many investors. As a result of this crisis, local banks have become more capitalized and secured. Moreover, in 2009, when the world economy faced a global recession, the economy of Uruguay continued to grow.
Uruguay is a favorite place for property investments because foreigners have the same protections and rights to own, buy, and also sell real estate as Uruguayan residents. Moreover, there are government programs to help entrepreneurs all over the country. Uruguay also has high-quality software engineers you can hire for a reasonable price compared to the United States.
According to the Doing Business 2020 report, ease of doing business ranking in Uruguay is:
- Rank: 101
- DB score: 61,5
The ease of doing business score (DB score) serves as the basis for ranking economies on their business environment and shows an economy’s absolute position relative to the best regulatory performance, while the ease of doing business ranking is an indication of an economy’s position relative to that of other countries’ economies.
When it comes to taxation, there are taxes imposed by Uruguay basically at the national level on companies and individuals, both non-residents and residents, according to the source-of-income rule. Therefore, taxes will be imposed on assets owned and services performed.
There are also tax payments, which are known as the total number of taxes paid by businesses (plus electronic filing). This tax is counted as paid once a year even if payments are more often. The World Bank research shows that Uruguay’s tax payments number is 20.
An income tax is a tax imposed on individuals or business entities (taxpayers) in respect of their income or profits earned. Income tax rates may vary by the types or characteristics of the taxpayer and the type of the income.
As for Uruguay Personal Income Tax Rate, it is 36%.
A corporate tax (also called corporation tax or company tax) is a direct tax imposed on the profits of a corporation. The corporate income tax (CIT) rate in Uruguay is 25%.
In addition, there is a valuable network of double taxation treaties that follows the Organization for Economic Cooperation and Development model, which can cut and even eliminate the Uruguayan income tax.
All non-resident income received in Uruguay is taxed at a flat rate of up to 12% on gross income, and dividends paid to non-resident shareholders are subject to withholding tax (IRNR) at the rate of 7%. The Uruguayan VAT rate is 22% and is applied to services and goods sold on Uruguayan territory.