The legal system of Uruguay is based on the civil law system, which belongs to the tradition of continental European law.

The judicial system in Uruguay is organised into three levels.

• First Instance Courts – these are the lower courts where most legal proceedings begin. In some geographical areas, they are divided into specialised courts (ie, criminal law, family law, etc) depending on the nature of the case.
• Appeal Courts – also known as Second Instance Courts, these courts review the decisions made by the First Instance Courts, having the power to modify or uphold those decisions. They are specialised into different areas of law.
• Supreme Court of Justice – as the highest judicial authority, it is responsible for: (i) ensuring the uniform interpretation and application of the law, (ii) reviewing the constitutionality of laws, and (iii) resolving conflicts of jurisdiction between different courts.

In addition to these three levels, the Supreme Administration Court (TCA), which is not part of the Judicial Power, develops judicial activity by solving disputes between individuals or entities and administrative agencies or bodies, having the authority to annul or modify administrative acts that are deemed unlawful or unjust.

Foreign investment is heavily promoted in Uruguay. Uruguay Foreign Investment Law (No 16.906) establishes the general framework for foreign investments in the country, aiming to promote and protect it by providing legal guarantees and incentives.

Uruguay offers various investment incentives including tax incentives, exemptions or reductions, free trade zones, and special economic zones. These incentives are designed to promote economic development, job creation, and technology transfer.

In fact, there are no differences in treatment of national and foreign capital, and incentives to promote investment are available to both. There are also no limits to the endowment of foreign capital in companies.

Transparency and anti-corruption measures are also applicable, enhancing investor confidence.

Foreign investments in certain strategic sectors, such as telecommunications, energy, transportation, and defence, may require specific authorisations or approvals from the relevant government agencies. The approval process generally involves submitting an investment proposal or application detailing the nature of the investment, its economic impact, and compliance with applicable laws and regulations.

Under Uruguayan legislation, neither specific restrictions nor prior approval are/is needed for foreign investments.

Some activities or types of investments may require specific authorisations that, when applicable, generally involve the following steps.

• Investment proposal – comprising the nature of the investment, its economic impact, the expected benefits for Uruguay, and compliance with applicable laws and regulations. It shall include detailed information about the investor and business plan.

• Submission of application – before relevant government authorities. The specific authority will depend on the sector and nature of the investment – eg, the Free Trade Zone Area of the Ministry of Economy regarding Free Trade Zone projects, etc.

• Evaluation and approval process – the timeline for approval can vary, and delays may occur.
• Compliance and implementation – conditions or requirements set by the authorities must be complied with. This may include registering the investment or adhering to relevant regulations and reporting obligations.

Consequences of investing without approval can vary depending on the specific circumstances and type of activity. Sanctions include fines, penalties, or even the invalidation of the investment.

Investment is generally exempt from prior conditions. However, authorities may condition their approval of investments under regimes with benefits to certain commitments that apply not only to foreign investment but also to nationals. These are typically aimed at ensuring that investment aligns with national priorities, contributes to economic development, and complies with applicable laws and regulations.

While the specific commitments may vary depending on the nature of the investment and the sector involved, they generally comprise:

• job creation for local residents;
• technology transfer in certain sectors; and
• engagement with local suppliers, service providers, or contractors.

Authorities expect foreign investors to commit to complying with all applicable laws, regulations, and reporting requirements. This includes tax obligations, labour laws, environmental regulations, and any sector-specific regulations.

The legal system in Uruguay provides alternatives for investors to seek judicial review or challenge administrative decisions (depending on the specific procedures outlined in the applicable laws and regulations) that they believe are unlawful, arbitrary, or in violation of their rights.

Uruguay has also entered several bilateral investment treaties (BITs) with a number of countries to protect foreign investors’ rights and provide mechanisms for dispute resolution. Said treaties provide additional legal safeguards for foreign investments, and typically include provisions on fair and equitable treatment and protection against expropriation without compensation.

Investor-State Dispute Settlement (ISDS): Uruguay also provides access to international arbitration through ISDS mechanisms. This allows investors to resolve investment disputes with the government through independent arbitration panels, offering a neutral and impartial forum for dispute resolution.

Although there are numerous options for conducting business, the most frequent corporate vehicles in Uruguay are as follows.

• Limited Liability Company (SRL), whose paid-in capital is represented by social quotas.
1. Shareholders’ liability is limited to their capital contributions, and under specific circumstances they may be liable for salary, tax, and social security debts.
2. It is a flexible and widely used corporate vehicle, suitable for small and medium-sized businesses.
3. SRLs do not have a minimum or maximum capital requirement.
4. There is a minimum of two partners and a maximum of 50.
• Corporation (SA) – this is a joint-stock company with shares (typically bearer or nominative) held by shareholders.
1. Shareholders’ liability limited to their capital contributions.
2. SAs are subject to stricter regulations and are commonly used for larger businesses or when seeking public investment.
3. There is no mandatory minimum capital either but 25% of the authorised capital must be paid during the incorporation process, and an additional 25% must be subscribed. It is not required to fully integrate the capital.
4. A minimum of two shareholders are required only for its incorporation, and no maximum is set. However, it is common practice to acquire previously incorporated corporations with no activity, and no minimum shareholders apply to said situation.
• Simplified Stock Corporations (SAS) – introduced in recent years, this stock company with shares (nominative or registered only, bearer shares not permitted) combines characteristics of both SRL and SA.
1. It offers a simplified and flexible structure, with limited liability and simplified administrative requirements.
2. It does not have a minimum capital requirement, but each shareholder must pay 10% of their contribution in cash or 100% in kind at the time of incorporation, with a two-year timeframe to contribute the remaining amount.
3. A sole shareholder is admitted as long as it is not an SA.

A foreign company can also establish a branch in Uruguay to conduct business activities, which operates as an extension of the foreign company while being bound to local regulations. The foreign company remains liable for the obligations and liabilities of the branch.

• SRL – after securing the name and approving the by-laws of incorporation, the SRL is registered before the Registry of Commerce, tax offices (BPS and DGI), and publications are made. The process takes approximately 30 business days.

• SA – setting up a corporation from scratch in Uruguay is a lengthy process (five to eight months) and requires the presence of two founding shareholders and the capital integration. For these reasons, the common practice in Uruguay is to purchase pre-established corporations with no prior activity to start working immediately.

• SAS – after securing the name, the incorporation by-laws are approved and the company is registered before the Registry of Commerce, BPS and DGI, and communications on shareholders and final beneficiaries are made to the central bank. The whole process can take up to 30 business days if a model by-law is used (five-business-day approval before the Registry of Commerce), or longer if a tailor-made by-law is chosen (30-business-day approval).

Branches

• Registration of the branch before the Registry of Commerce; and
• Registration before the tax offices and the Ministry of Employment and Social Security.

The complete process takes approximately two months, but the branch is allowed to operate from the start of registration.

Private companies in Uruguay are subject to certain reporting and disclosure obligations, whose aim is to promote transparency and ensure compliance with legal and regulatory requirements.

The specific reporting and disclosure obligations may vary depending on the type and size of the company, but they generally include the following.

• Financial statements – to be submitted annually (when applicable).
• Tax reporting – submission of periodic tax returns and payment of applicable taxes.
• Shareholder meetings – typically held annually, they serve as a platform for discussing important matters related to the company’s operations, financial performance, and future plans.
• Shareholder and Final Beneficiary Register – which documents the final ownership and shareholding structure of the company before the Uruguayan Central Bank. It is a confidential, non-public access registry.
• Regulatory filings – depending on the nature of the business, private companies may need to file specific reports or disclosures with relevant regulatory authorities. This applies to companies operating in regulated sectors such as finance, insurance, and telecommunications.

• SRL – two scenarios:

1. With 20 or fewer partners – administration and representation will be carried out by one or more individuals, whether they are partners or not, appointed in incorporation by-laws or at a later stage.
2. With over 20 partners, SA regime is applicable.

• SA – the administration will be entrusted to either a board of directors or an administrator, who can be an individual or a legal entity, appointed in the shareholders’ meeting.

• SAS – it is not mandatory to establish an administrative body, but it shall have at least one legal representative.

The main rules pertaining to directors’ and officers’ liability can be summarised as follows:

• Duty of care and diligence – to act with the care and diligence of a reasonably prudent person in similar circumstances. They must act in the best interests of the company and exercise their duties with the level of skill and expertise expected of their position.
• Duty of loyalty – to act in the best interests of the company and its shareholders, avoiding conflicts of interest and disclosing any personal or financial interests that may affect their ability to make impartial decisions.
• Liability for breach of duties – they can be held personally liable for (i) any breach of their fiduciary duties, including acts of negligence, fraud, or mismanagement, and (ii) damages caused to the company, shareholders, or third parties as a result of their actions or omissions.

Regarding shareholders’ liability, the principle of limited liability is recognised, which means that it is limited to the amount they have invested or agreed to contribute to the company’s capital.

However, under certain circumstances shareholders can be held personally liable for the company’s actions or debts:

• Unpaid capital – shareholders are required to fulfil their capital contribution obligations as established in the company’s by-laws; therefore they may be held liable for the unpaid portion.
• Fraudulent or abusive behaviour harming the company, its creditors, or third parties – this includes situations where shareholders use the company as a front for illegal activities or to defraud others.
• Piercing the corporate veil – in exceptional cases, courts may disregard the separate legal entity of the company and hold shareholders personally liable for the company’s debts or obligations. This typically requires evidence of fraud, abuse, or situations where the company’s legal personality is used to evade legal obligations.

In Uruguay, labour legislation is fragmented, and there is no systematisation of the rules – ie, there is no single law or labour code, and labour law is characterised by being composed of various sources with different origins:

• sources common to other disciplines, such as the Constitution, laws, regulatory decrees, case law, etc; and
• sources specific to this field, such as collective bargaining agreements, employment contracts, internal company regulations, etc.

Sources stemming from external regulations – ie, the Constitution and laws – establish non-negotiable minimums for the parties involved.

Two guiding principles govern the hierarchy of sources.

• The preservation of more favourable conditions (which continue to apply despite the existence of subsequent norms of equal or higher hierarchy that may reduce them).
• The principle of the prevailing, more favourable, rule in the event of concurrent or successive rules of different ranks.

It is not mandatory for the employment contract to be in writing. However, it is compulsory to register the employee before the Ministry of Labour and Social Security (MTSS) and the Social Security Bank (BPS). Despite this, having a written contract is a recommended best practice that we strongly suggest, as it can facilitate proof (in case of a claim) of the negotiated aspects between the parties (eg, probation period, remote work, etc).

Regarding the duration of the employment contract, while labour law favours continuity, contracts can be either indefinite (including a probation period after which the hiring is considered permanent), fixed term (with a limited duration), or subject to a resolutive condition (eg, substitute contracts).

Depending on the type of contract, there may or may not be a requirement to pay severance compensation upon termination (at any time) or potential consequences for early termination (if the predetermined term is not respected).

The legally established maximum daily working time is 8 hours. Any hours worked beyond this limit are considered “overtime” and are compensated at a rate of 100% of the corresponding hourly salary (except on rest days, which are compensated at a rate of 150%). Additionally, a midday break shall be taken during the workday.

The weekly limit for working hours depends on the activity:

• 48 hours in the industrial sector; and
• generally, 44 hours in commerce and services.

A weekly rest period of one day or one and a half days (depending on the applicable regulations) shall be provided. Certain sectors may have more favourable regulations reached through Collective Bargaining Agreements.

Overtime refers to hours worked beyond the legal, contractual, or agreed limits, and it serves as compensation for the extra effort involved in longer workdays. It cannot be compensated with other benefits, such as additional time off.

Certain workers are exempt from the regulations that limit working hours and, therefore, from overtime requirements. This includes higher-level personnel, travelling employees, and on-site sales representatives.

The employment relationship can end for various reasons. Some of these scenarios include:

• Resignation – sole decision of the worker, with no obligation to provide prior notice.

• Job abandonment – it is also the worker’s will, although not explicitly expressed. It must be established through prior notice and evidence.

• Dismissal – the company must provide compensation for terminating the employment relationship.

• End of term or condition – eg, due to the return of the regular employee after a temporary substitution, or the end of a seasonal job.

• Early termination of fixed-term contracts – compensation may be required for the remaining term.

• Dismissal for serious misconduct – no compensation is due.

In Uruguay, dismissal does not require prior notice, consent, acceptance, or the expression of a just cause or reason (some exceptions may apply). However, it entails the obligation to compensate the worker with a legally determined payment, calculated on the basis of seniority and the salary at the time of termination (including all regular benefits received), and starts from one month’s salary for each year or fraction of service, with a maximum of six months. Unlike other systems, the compensation does not continue to increase after six years of seniority.

Special compensation must be paid due to exceptional circumstances surrounding the dismissal of specially protected workers:

• recently certified workers with an illness;
• workers who have suffered a work-related illness or accident;
• pregnant workers or those who have recently given birth;
• dismissal as retaliation for reporting to authorities; and
• dismissal of workers with disabilities.

Mass lay-offs are not legally regulated, and there is no specific process to follow. However, it should be noted that in the presence of a labour union (which is not mandatory), prior notice is necessary for decisions that impact employment, and, in some sectors, it is mandatory to engage in prior discussions with the union.

The right to strike and the exercise of union activity are legally and constitutionally recognised in Uruguay, protecting both delegates and affiliated members in cases of discrimination, persecution, or dismissal for anti-union reasons.

The most relevant union rights include the right to:

• demand;
• collective bargaining;
• strike action;
• join (or not join) a union (including the right to disaffiliate);
• establish unions without prior authorisation;
• not be dissolved;
• free expression;
• paid time off for union activities; and
• the protection of union activity (“union privileges”).

Additionally, the state guarantees the rights of non-striking individuals to access and work in their respective establishments, as well as the rights of company management to freely enter the premises. Violent forms of strike action are not permitted.

The state promotes, encourages, and ensures the free exercise of collective bargaining between employers and workers, having the right to reach agreements on working conditions and regulate their reciprocal relationships.

Minimum wages, job categories, and work benefits (applicable nationwide) are currently established by Collective Agreements negotiated in Wage Councils, which are tripartite bodies composed of worker representatives (unions), employer representatives, and government representatives.

In addition to industry-wide negotiations, collective bargaining also takes place at the company level between the employer and the respective union.

Recently, Uruguay amended the Collective Bargaining Law, addressing some of the observations made by the International Labour Organization (ILO) in accordance with International Labour Convention No 98, and based on a complaint filed by the business sector. Current legislation enables the negotiation of company-level collective agreements with representatives of non-unionised workers (when there is no union), without the need to resort to the most representative organisation in the industry.

The BPS is the entity responsible for social security in Uruguay. Contributions to the BPS are essential to finance the social security system and ensure the social protection of workers.

Both personal and employer contributions are mandatory, aimed at guaranteeing access to the social security system. While employer contributions are made by the employer, personal contributions are deducted from the employee’s salary and are transferred, along with employer contributions, to the BPS every month.

Below, we detail the types of contributions and their corresponding rates.

• Retirement contribution – it is a contribution made to finance the social security system and ensure the payment of pensions to workers when they reach retirement age.
• National Health Fund (FONASA) – it is the financial entity responsible for collecting, managing, and distributing resources allocated to healthcare.
• Labour Conversion Fund (FRL) – its main objective is the professional retraining of workers, especially those who are unemployed.
• Labour Credit Guarantee Fund (FGCL) – the FGCL was created to cover contingencies arising from the employer’s insolvency.
• Personal Income Tax (IRPF) – this tax applies to the personal income of each worker.

Personal contributions to be made by the employee:

• Retirement contribution: 15%
• FONASA: The contribution varies between 3% and 8% for each worker, depending on their income and family situation (ie, dependents). This is why not all individuals pay the same amount to FONASA, even if they have the same income.
1. 3% for employees with or without children, with no spouse or partner, and a salary up to 2.5 times the base of benefits and contributions (BPC).
2. 4.5% if the salary exceeds 2.5 BPC and there are no dependent children.
3. 6% if the nominal salary exceeds 2.5 BPC and there are dependent children or children with disabilities.
4. 6.5% if the salary exceeds 2.5 BPC, there are no children, but there is a spouse or partner.
5. 8% if the nominal salary exceeds 2.5 BPC and there are children, or there is a spouse or partner.
• FRL: 0.10%
• FGCL: Not applicable for the employee.
• IRPF: This tax is calculated based on a progressive scale according to income, with rates ranging from 10% to 36%. If the income obtained by the worker does not exceed 7 BPC, the income is not subject to this tax.

Employer contributions to be made by the employer:

• Retirement contribution: 7.5%
• FONASA: 5%
• FRL: 0.10%
• FGCL: 0.025%

Different types of taxes can be found based on the type of imposition.

Income Taxes

Regarding income taxation, we primarily refer to three major taxes: the Corporate Income Tax (IRAE), the Personal Income Tax (IRPF), and the Non-Resident Income Tax (IRNR).

Corporate Income Tax (IRAE)

This tax levies a rate of 25% on the net income from Uruguayan sources, fiscally adjusted, obtained by companies from any economic activities. In the Uruguayan tax system, the principle of source generally applies, meaning that only Uruguayan-source income is subject to taxation. Uruguayan-source income includes income derived from activities carried out, assets located, or rights economically utilised within the country, regardless of the nationality, domicile, or residence of the parties involved in the transactions and the place where the legal business is concluded.

Income from agricultural activities is also subject to IRAE, and in certain cases, the taxpayer can choose to pay either this tax or the Agricultural Products Transfer Tax (IMEBA), which taxes the sale of certain goods produced in the agricultural sector.

Additionally, the tax includes certain income assimilated to business income due to habitual real estate sales or promises of sale.

Finally, certain income subject to IRPF obtained by those who choose to pay IRAE, or who are obligated to do so, are also included in this tax.

Personal Income Tax (IRPF)

The IRPF is an annual personal and direct tax that taxes income from Uruguayan sources, as well as capital gains from foreign sources, earned by individuals considered residents in the country.

Regarding this tax, we will focus only on how it works for capital gains (Category I) because these are the amounts that companies must withhold from shareholders at the time of payment.

Capital gains include income in the form of money or assets derived from deposits, loans, and any capital or credit investments.

In general, IRPF for Category I income is withheld. The responsible entities for withholding are primarily the state, companies, and notaries, who must deduct the tax from the recipients of the taxable income and remit it to the Tax Administration.

Non-Resident Income Tax (IRNR)

The IRNR is an annual personal and direct tax that taxes all income from Uruguayan sources earned by non-resident individuals or entities when they do not operate in the country through a permanent establishment (PE).

As IRPF, this tax is withheld by the IRAE taxpayer.

In summary, when an IRAE taxpayer company pays dividends to resident individuals or non-resident individuals or entities, those dividends are subject to IRPF or IRNR at a rate of 7%, to the extent that such dividends correspond to profits subject to IRAE.

Additionally, if a shareholder of a Uruguayan company provides a loan to the company and charges interest on it, the company must withhold IRPF or IRNR at a rate of 12% on the interest paid to the shareholder and remit it to the tax administration.

Capital Taxes

Regarding capital taxation, the main distinctions are the Wealth Tax (IP) and the Control Tax on joint-stock companies (ICOSA).

Wealth Tax (IP)

The IP is a tax that levies assets located in Uruguay held by industrial, commercial companies, and agricultural operations at the end of the annual fiscal year. For its determination, certain debts are deducted from the assets valued according to tax regulations, applying a rate of 2.8% for banks and financial institutions, and 1.5% for other legal entities. This rate increases to 3% for entities resident, domiciled, constituted, or located in countries or jurisdictions with low or no taxation or that benefit from a special regime of low or no taxation.

The tax legislation follows the criterion of territoriality, so the assets located, placed, or economically used in Uruguay are computed to calculate the tax. However, when there are assets abroad and exempt assets, only the amount of computable debts that exceeds the value of those assets is deducted to determine the taxable amount.

The taxable amount of the tax is determined by the difference between the taxed asset and the deductible liability. For this purpose, our legislation provides an exhaustive list of “admitted” liabilities. When there are assets abroad, exempt assets, excluded assets, and non-computable assets, the liability is only computed for the amount that exceeds the value of those assets.

Tax on Control of Anonymous Societies (ICOSA)

The ICOSA taxes anonymous societies (SA) and is applied on the occasion of their incorporation and at the end of each fiscal year. The taxable amount is UYU578,428 (according to the exchange rate on 31 December of the previous year to the occurrence of the taxable event), with rates of 1.5% for the incorporation of the company and 0.75% for each fiscal year-end.

Consumption Tax

Lastly, regarding consumption tax, it is primarily represented by the Value Added Tax (VAT), complemented by the Internal Specific Tax (IMESI).

Value Added Tax (VAT)

VAT is a tax that applies to onerous operations consisting of the internal circulation of goods, the provision of services within the national territory, the introduction of goods into the country, and the value added resulting from construction on real estate.

The term “internal circulation of goods” refers to any onerous operation that involves the transfer of ownership rights or provides the recipient with the economic power to dispose of the goods as if they were the owner.

The term “provision of services” refers to onerous services that, without constituting an alienation, provide the other party with an advantage or benefit that constitutes the consideration.

Regarding the introduction of goods into the country, the VAT applies to the definitive importation of goods into the domestic market. The basic tax rate is 22%; however, the law provides for the exemption of certain goods and services, while others, such as basic basket products and certain services, are subject to the minimum rate of 10%.

Exports of goods and services considered as “export of services” in the law are not subject to tax, and the VAT included in the purchases of goods and services that are part of their cost can be recovered.

Internal Specific Tax (IMESI)

It is a selective tax that taxes the first sale, under any title, of certain goods with variable rates according to the type of goods: beverages, tobacco, vehicles, cosmetics, fuels, etc.

In Uruguay, there are several tax incentives offered to promote investment, economic development, and job creation, which vary depending on the type of activity to be carried out. The most relevant for foreign investors are:

• Investment Promotion Regime (Law No 16,906) – this regime offers tax benefits to companies that make investments in certain strategic areas such as technology, research and development, renewable energies, automotive industry, and tourism. The benefits may include tax exemptions or reductions, such as Wealth Tax, Corporate Income Tax, and Individual Income Tax, as well as exemptions from import taxes and fees. It should be noted that this Law establishes an incentive regime that is accessed automatically and is aimed at taxpayers engaged in agricultural, industrial activities, and grants benefits to certain taxpayers who have submitted an investment project promoted by the executive branch.

• Free Trade Zone Regime (Law No 15,921) – companies that set up operations in free trade zones can access tax benefits such as exemption from income tax, wealth tax, and consumption taxes, as well as reduced rates for the import and export of goods and services.
• Port and Airport Free Zone Regime – this regime establishes provisions and tax benefits for the operation of free ports and airports in the country. The objective of this regime is to promote foreign trade and encourage logistics activities in port and airport areas.

Under this regime, free ports and airports are areas of Uruguayan territory that enjoy special customs, tax, and commercial regulations. Some characteristics and benefits of the regime are:

• Customs regime – goods entering free ports or airports are considered outside the national customs territory, which means that customs duties and VAT are not applied upon entry.
• Storage and distribution – goods can be stored, handled, and distributed within free ports or airports without paying customs duties or taxes.
• International trade – free ports and airports become centres for international trade, allowing the entry and exit of goods in an agile and efficient manner, facilitating import, export, and re-export operations.
• Logistics activities – the development of logistics activities, such as cargo consolidation, multimodal transportation, regional distribution, and inventory management, is encouraged.
• Companies in the regime – companies can establish themselves within free ports or airports to carry out activities related to trade, logistics, manufacturing, and services, among other sectors.

It is important to highlight that there are specific requirements and regulations to operate within the Port and Airport Free Zone regime, and interested companies must comply with the procedures established by the competent authority.

• Export of Services Regime – this regime offers tax benefits to a wide range of activities and sectors, including qualified professional services, consulting, information technology, financial services, and tourism. These companies can access an exemption from VAT.
• Triangulation Regime (Resolution DGI No 51/1997) – resident entities that engage in the trading of goods without physical passage through Uruguay or in the provision of services that are not provided or used within Uruguayan territory are subject to an optional tax regime. They can determine Corporate Income Tax by applying a 25% rate to 3% of the difference between the sale price and the purchase price of the goods and services, resulting in an effective rate of 0.75%.
• Other specific sectoral regimes worth noting:
1. Software Industry Promotion and Development Regime – this regime establishes tax benefits for companies dedicated to software development and IT services. The benefits may include tax exemptions, reductions in employer contributions, and facilitation of equipment and technology imports, provided that certain conditions established by regulations are met.
2. Renewable Energy Investment Regime – this regulation offers tax incentives to companies that make investments in renewable energy, including tax exemptions and facilities for equipment imports.
3. Innovation and Technological Development Incentive Regime – this regime offers tax benefits to companies that make investments in innovation and technological development, including income tax exemptions for a specified period.
4. Tourism Promotion Regime – there are tax benefits for companies dedicated to tourism, such as exemptions from income tax and wealth tax, as well as incentives for investment in tourism infrastructure.
5. Film Industry Promotion and Development Regime – this regime offers tax benefits to film and audio-visual productions, including a partial refund of VAT and Corporate Income Tax invested in production.
6. Social Housing Regime – this implies tax benefits for constructions intended for housing (with certain conditions), such as exemption from Property Tax, VAT, Property Transfer Tax, and the ability to deduct the cost of property acquisition from Corporate Income Tax.

In Uruguay, fiscal consolidation, as applied in other countries, is not allowed. Instead, companies are considered independent tax entities and must file tax returns individually. Each entity must calculate its own income and expenses, as well as pay taxes based on its own financial situation.

In Uruguay, there are no specific rules known as “thin capitalisation rules”.

However, Uruguayan tax regulations include provisions to prevent companies from carrying an excessive debt burden compared to their equity. If a company has an imbalanced capital structure, with a high proportion of debt in relation to its equity, the Tax Administration (DGI) may consider this as a form of tax avoidance and adjust tax payments accordingly.

These provisions aim to prevent companies from evading taxes through excessive borrowing practices. This means that companies cannot use debt strategies to artificially reduce their taxable income through interest deductions.

The transfer pricing regime covers operations with related entities abroad, operations with entities in low- or no-tax jurisdictions (tax havens), and operations conducted in customs enclaves benefiting from low-tax regimes. These transactions may include the transfer of goods, services, intellectual property rights, and loans.

Relatedness is considered to exist when both parties are directly or indirectly subject to the direction or control of the same individuals or legal entities, or when these individuals have the power to guide or define the activities of the taxpayers through their capital participation, functional influence, or credit rights.

Companies engaging in transactions subject to the transfer pricing regime exceeding UYU50 million (approximately USD7,164,066) or notified by the Tax Administration (DGI) are required to annually submit information to the DGI.

Furthermore, companies have the responsibility to adequately document and support their transfer pricing policies, as well as maintain records and documentation supporting the determination of prices and conditions of transactions with related parties. This documentation must be available for submission to tax authorities upon request.

The Tax Administration has the authority to adjust the prices or conditions of transactions between related parties if they are deemed not to comply with market prices.

Some of the main rules against tax evasion include:

• Law on the Control and Prevention of Money Laundering – this law establishes a legal framework to prevent and control money laundering and the financing of terrorism. It includes the obligation to report suspicious transactions and sets forth due diligence and control measures for certain activities and economic sectors.
• Tax Information Exchange Agreements – Uruguay has agreements to prevent double taxation and prevent tax evasion and avoidance in relation to income and wealth taxes. International treaties in this regard aim to achieve two objectives:
1. Avoid double taxation of taxpayers, preventing the deterrent effect that double taxation may have on the circulation of goods and services, international investment freedom, and the transfer of technology, while providing reasonable legal and tax certainty.
2. Improve co-operation between tax administrations, allowing the contracting states access to information that is potentially relevant for the collection of their taxes, as well as for detecting evasion and combating tax fraud. Furthermore, since 2016, Uruguay has subscribed to the Convention on Mutual Administrative Assistance in Tax Matters, which includes the exchange of tax information with 134 countries.

Treaties that address the first aspect are usually referred to as “double taxation avoidance agreements” (DTAA). These agreements generally include information exchange clauses. Agreements that only refer to the second aspect are usually referred to as “agreements on tax information exchange” (TIEA). The negotiations of these treaties and agreements are co-ordinated by the Tax Advisory Office.

In addition to these specific rules, the Tax Administration of Uruguay carries out control, auditing, and inspection activities to verify compliance with tax obligations and detect potential cases of evasion.

It is important to note that tax evasion is considered a serious offense and is subject to both administrative and criminal penalties, depending on the severity of the situation.

Under the Uruguayan Law on Promotion and Defence of Competition (LDC), companies are required to notify the Commission for the Promotion and Defence of Competition (CPDC) in advance of any act of economic concentration. This applies when the combined gross annual revenue in Uruguay of all participants in the operation, in any of the last three fiscal years, equals or exceeds 600 million Indexed Units (approximately USD84 million).

Acts of economic concentration include various transactions that involve changes in control structure, such as mergers, share or quota acquisitions, purchases of commercial or industrial establishments, total or partial acquisitions of business assets, and other legal transactions transferring control of economic units or companies.

There are exceptions to the requirement for concentration authorisation, including cases where the buyer already owns at least 50% of the shares of the acquired companies, acquisitions of debt securities or non-voting shares, acquisitions by a foreign company without prior assets or shares in the country, and acquisitions of bankrupt companies where only one bidder participated in the bidding process.

The CPDC must decide on the authorisation request within 60 consecutive days, having the option to:

• approve the operation;
• impose conditions; or
• deny authorisation.

If no decision is made within the deadline, the act is considered tacitly authorised.

Concentrations that restrict, hinder, distort, or prevent competition in the relevant market are prohibited by the LDC. Factors such as the relevant market, external competition, and efficiency gains are considered.

Economic concentration shall not proceed without explicit or tacit authorisation from the CPDC.

The LDC prohibits the abuse of dominant position and practices, recommendations, and behaviours that restrict, limit, hinder, distort, or prevent current or future competition in the relevant market. Factors such as economic efficiency gains, involved entities, alternative options, and consumer benefits are considered when evaluating such practices.

The LDC provides examples of prohibited practices that restrict competition, including price fixing, limiting production or technological development, imposing unfair conditions, and denying access to essential infrastructure. Additionally, concerted practices among competitors, such as price fixing and market sharing, are explicitly prohibited.

To assess the impact on competition, the relevant market must be determined by analysing factors like substitute products, geographic scope, and effective competition.

In Uruguay, competition regulations address unilateral conduct, specifically the abuse of a dominant position.

A company is deemed to have a dominant position if it can significantly influence market variables independently of its competitors, customers, or suppliers. However, abuse of a dominant position occurs only when these companies improperly exploit their position to gain advantages or harm others, actions that would not have been possible without their dominant position. It is important to note that the punishment is not for having a dominant position but for the abuse of it.

A patent is an exclusive right granted by the state to the holder of an invention that:

• is new;
• involves an inventive step; and
• is capable of industrial application.

In Uruguay, patents serve as a means of protecting technical inventions, utility models, and industrial designs. The patentability requirements include novelty, inventiveness, and industrial applications. An application needs to be filed with the National Directorate of Industrial Property (DNPI), undergoing a patentability examination.

Upon approval, the patent is granted protection for a period of twenty years from the filing date. After this period, the patent enters the public domain. Utility models and industrial designs, which cover minor innovations and models, are granted exclusive rights of use for ten years, with the possibility of renewal for an additional five years.

Uruguay, as a party to the Paris Convention, extends the protection of industrial patents to citizens of other contracting states, providing a broader scope of coverage.

A trade mark is any sign capable of distinguishing the products or services of one person or organisation from those of others.

In Uruguay, the registration of a trade mark with the National Directorate of Industrial Property (DNPI) grants exclusive rights to the trade-mark owner, including the right to use and exploit it without the need to notify public authorities. Once registered, a trade mark has an initial duration of ten years, counted from the filing date of the application, and can be renewed indefinitely for successive periods of ten years.

The owner of a registered trade mark in Uruguay can take legal action against those who infringe their trade mark or attempt to use a similar mark that may cause confusion in the market.

It is important to note that trade-mark protection is limited to Uruguay and does not automatically extend to other countries. If international protection is desired, the alternatives are: (i) trade mark protection through international treaties, or (ii) registration in each relevant country.

An industrial design refers to the aesthetic or ornamental aspect of a product, which can include its shape, configuration, pattern, or ornamentation.

Upon registration with the National Directorate of Industrial Property (DNPI), the industrial design’s owner has exclusive rights to use and exploit the design, preventing others from using a similar design without authorisation for a period of ten years, which can be renewed for an additional five-year period. To obtain protection, the design must be new and possess individual character, meaning it should significantly differ from existing designs or combinations of known design features.

Industrial design protection only covers the visual appearance of a product and does not extend to its functional aspects. For functional aspects, other forms of intellectual property protection, such as patents, may be applicable.

Copyright in Uruguay encompasses original works in the fields of literature, science (including software, electronics, and information systems), and the arts. It is automatically granted upon the creation of the work and no registration is required.

The copyright owner has exclusive rights to reproduce, distribute, publicly perform, and display the work. In case of infringement, copyright holders have the right to take legal action to protect their rights.

As a party to the Bern Convention, Uruguay extends its protection to foreign authors, ensuring they receive the same rights as local authors.

In Uruguay, software, databases, and trade secrets, are protected through various legal mechanisms.

• Software – the Copyright Law grants automatic protection to software upon its creation, without the need for registration, but registration before the Copyright Registry, under the responsibility of the Copyright Council (Ministry of Education and Culture) is advised. Software can also be protected as a trade secret if it meets the criteria for confidentiality, commercial value, and reasonable efforts to maintain secrecy.
• Databases – they can be considered a creative work eligible for copyright protection as compilations, arrangement, and selection of data. They are automatically protected upon their creation, and the rights of the owner include reproduction, distribution, and public performance.

• Trade secrets – ie, confidential information that has commercial value – are protected under the Law on Protection of Industrial Secrets. Said protection relies on maintaining the information’s confidentiality through contractual agreements, security measures, and internal policies. In case of unauthorised use or disclosure, the owner of a trade secret can take legal action to protect their rights.

It is important for creators and owners of software, databases, and trade secrets to implement measures to safeguard their rights, such as executing non-disclosure agreements, encryption techniques, access controls, and regular updates to maintain the confidentiality and integrity of their intellectual property.

In Uruguay, the main regulations applicable to data protection are as follows.

• Law No 18,331 – this is the primary law that governs data protection in Uruguay. It establishes the rights and obligations of individuals and organisations involved in the processing of personal data, and principles for data collection, consent, purpose limitation, data quality, security measures, and data subject rights. Recent amendments incorporated obligations related to international transfers of data and automatised treatment.
• Regulatory Decrees No 414/009 and 64/020 – provide additional regulations and guidelines for the implementation of data protection measures, outlining specific technical and organisational measures that organisations must adopt to ensure the security and confidentiality of personal data.

The legal framework in Uruguay emphasises the protection of individuals’ rights regarding their personal data. It requires organisations to obtain consent, ensure data security, and provide individuals with access to their data. Non-compliance with data protection laws can result in penalties, including fines and sanctions.

The data protection rules of Uruguay have a geographical application within the national territory, being applicable to all entities and individuals who process personal data within Uruguay’s borders. This includes government agencies, businesses, organisations, and individuals that collect, store, use, or transfer personal data of individuals residing in Uruguay, regardless of their nationality or the location of their headquarters.

Furthermore, Uruguay recognises the importance of international data transfers and has specific regulations governing the transfer of personal data outside the country. These regulations ensure that personal data transferred to other countries receives an adequate level of protection consistent with Uruguay’s data protection standards. The Regulatory and Control Unit for Personal Data (URCDP) maintains a list of territories considered to have an adequate level of data protection.

The Regulatory and Control Unit for Personal Data (URCDP) plays a crucial role in overseeing and enforcing data protection regulations in the country. Its main responsibilities include:

• Regulation and policy development – developing and implementing regulations, guidelines, and policies related to the protection of personal data, ensuring that they are aligned with international standards and best practices.
• Compliance monitoring – conducting audits, inspections, and investigations to ensure that personal data is processed and handled in accordance with the law.
• Guidance and advice – providing guidance and advice to individuals and organisations regarding data protection matters, offering recommendations for best practices in data handling and processing.
• Data subject rights protection – receiving and investigating complaints related to violations, such as unauthorised data processing or breaches of confidentiality.
• Data breach management – co-ordinating the response and management of data breach incidents, ensuring that affected individuals are notified, and appropriate measures are taken to mitigate the impact and prevent future breaches.
• International co-operation – collaborating with international regulatory bodies to enhance cross-border data-protection mechanisms.

The Commercial Companies Law (Law No 16,060 – CCL) has undergone few and isolated amendments since its entry into force on 4 September 1989. The emergence of new technologies, dynamics of the current business environment, solutions implemented in comparative law, and the introduction of Simplified Stock Companies (SAS) in the Uruguayan legal system have highlighted the need for a comprehensive reform of the CCL, which governs limited liability companies and joint stock companies, among others.

A draft law was filed in parliament on 27 June 2022, and is currently under review.