Uruguay is chosen as a regional base for a reason that is easy to state and easy to overstate. Its corporate tax reaches income from activities carried on, assets located or rights used economically in the country, and stops there. Article 16 of Title 4 of the 2023 Texto Ordenado says it in a single sentence, and article 23 of the same Title sets the rate at 25 per cent of net fiscal income. Groups read the two provisions together and conclude that whatever is earned outside the country falls outside the tax. For most of the life of the current system that conclusion was close enough to correct.
It stopped being complete for fiscal years beginning on or after 1 January 2023. Ley N° 20.095 of 25 November 2022 rewrote the source article and added two categories of income that arise abroad and are nonetheless treated as Uruguayan source. Neither category is aimed at the local business. Both are aimed at the entity that holds assets abroad, sits inside a multinational group and has nothing in Uruguay except a registered address. That is a description a good many regional bases would recognize.
What the source rule actually covers
The general rule in article 16 is a rule about facts, not about entities. Income is Uruguayan source when it comes from activities developed in the country, from assets situated there or from rights used economically there, regardless of the nationality, domicile or residence of the parties and regardless of where the contract was signed. Nothing in it turns on where a company is incorporated.
The article then lists specific cases that are treated as Uruguayan source whether or not the general rule would reach them. Insurance covering risks in the country or relating to persons who were resident there when the contract was made. Advertising and technical services rendered from abroad, outside an employment relationship, to taxpayers of the tax, where they relate to income within its scope. Income from the federative and image rights of athletes registered with resident sporting bodies, and from the mediation that derives from them. Income from derivatives obtained by taxpayers of the tax.
A fifth case deals with indirect transfers, and it was tightened by Ley N° 20.446 of 16 December 2025, which replaced the numeral with effect from 1 January 2026 and extended it from entities in low or nil taxation jurisdictions to non resident entities generally. Gains on the transfer of shares and other equity interests in non resident entities, and on the creation or assignment of usufruct over them, are Uruguayan source where, at any point in the 365 days before the transfer, more than 50 per cent of the entity’s assets consisted directly or indirectly of assets situated in Uruguay, or where those assets exceeded 31,500,000 indexed units and the transfer moved more than half of them. The numeral does not apply where the ultimate owners of the transferring and the acquiring entities are entirely the same, keep at least 95 per cent of their proportions for at least two years and the acquirer holds what it received for that same period, and an equivalent carve out covers mergers and demergers. A holding sitting above Uruguayan assets does not put those assets outside the tax net by being incorporated elsewhere.
The 2023 amendment, and the two categories it created
The first new category covers income from intellectual property relating to patents or registered software, obtained by an entity that belongs to a multinational group, where the asset is sold or used economically outside Uruguay. It is Uruguayan source to the extent that it does not qualify under the nexus fraction described below, and where income of that kind is exempt under some other provision it is treated as Uruguayan source in full.
The second category is the one that matters most in practice. Where an entity belongs to a multinational group and is not a qualified entity, income arising from assets situated or rights used economically outside Uruguay is Uruguayan source if it falls into a listed set: income from immovable property, dividends, interest, royalties outside the first category, other movable capital income, capital gains on the assets that generate any of those, and any other increase in net worth derived from them. Deposits, loans and any other placement of capital or credit are expressly swept in, and the same numeral adds that income from the sale or economic use of trademarks outside the country is Uruguayan source in every case.
Read together, the two categories describe the classic passive holding. Shares held abroad, loans made abroad, a license exploited abroad, a property abroad. None of that was Uruguayan source before 2023. All of it is now, unless the entity that owns it is qualified.
What a qualified entity has to look like
Article 10 of Title 4 sets the test, and it is applied asset by asset rather than entity by entity. An entity has adequate economic substance for a given income stream only if three conditions hold at the same time during the fiscal year. It employs human resources appropriate in number, qualification and remuneration to administer the investment assets, and has adequate premises in Uruguay for that activity. It takes the necessary strategic decisions and bears the risks in Uruguay. And it incurs the costs and expenses appropriate to the acquisition, holding or disposal in question.
Two relaxations follow, and they are narrower than they look. For the first two conditions, activity performed in Uruguay by third parties counts, provided the entity supervises it properly. That accommodates outsourced administration. It does not accommodate administration performed abroad. Separately, the second and third conditions do not apply to entities whose principal activity is holding participations in other entities and which carry on no substantial commercial or investment activity, nor to entities whose principal activity is acquiring and holding real property. A pure holding therefore still has to meet the first condition, which is the one about people and premises.
The proof is documentary and annual. Taxpayers have to file a sworn return with the Dirección General Impositiva setting out the facts on which qualified status rests. The status is not asserted in a memorandum after an audit begins. It is filed, or it is not.
The intellectual property fraction
For patents and registered software the statute does not use a substance test at all. Article 9 of the same Title computes qualified income by applying a fraction to the income from exploiting the asset. The numerator is the direct costs incurred to develop each asset, increased by 30 per cent, capped so that it can never exceed the denominator. The denominator is the total development costs, including those in the numerator without the uplift, plus the cost of acquiring or licensing in intellectual property rights and the cost of services contracted from related non resident parties.
Only expenditure by the developer, services bought from unrelated parties whether resident or not, and services bought from resident related parties count in the numerator. Costs of buying the intangible in, and development contracted out to a related party abroad, sit in the denominator alone. The consequence is arithmetical. An entity that acquired its intellectual property rather than building it has a numerator close to zero, and almost all of its income becomes Uruguayan source.
The credit, and what it does not do
Article 118 allows a taxpayer taxed abroad on the income caught by the two new categories to credit the analogous foreign income tax against the Uruguayan corporate tax on the same income, on the conditions set by regulation, capped at the Uruguayan tax computed before the deduction.
That relieves double taxation. It does not relieve the structure. Passive income routed through a low taxed jurisdiction produces little foreign tax to credit, which is precisely the case the amendment was written for. The credit protects an entity that is genuinely taxed elsewhere. It does nothing for one that is not.
The individual layer above the company
None of this displaces the tax on the individual behind the entity. Article 6 of Title 7 brings into the personal income tax, with listed exceptions, the capital income that a resident individual obtains from non resident entities and the capital gains on the assets behind it, and article 37 of the same Title sets 12 per cent as the residual rate that catches that income where none of the specific lower rates applies. A charge of this kind is not new. Ley N° 18.718 introduced it for movable capital income from non resident entities, for fiscal years beginning on or after 1 January 2011, and it runs alongside the corporate rules described above.
There is also an imputation rule that is easy to overlook when a family holds foreign assets through an entity. Under article 21 of Title 7, income of that kind obtained by a non resident entity, or by one of the resident entities listed in article 12 of Title 4, is imputed directly to the resident individuals who are its final beneficiaries, with the minimum participation set at 5 per cent, and it is treated as accrued when the first entity subject to the obligation collects it rather than when anything is distributed. The rule is no longer confined to entities in low or nil taxation jurisdictions. Ley N° 20.446 rewrote it and repealed the separate low taxation cascade in article 22, both with effect from 1 January 2026.
The Dutch counterpart, and the treaty that does not exist
Groups that use Uruguay as a Latin American base and the Netherlands as a European one usually assume the two are connected by a treaty. They are not. The table of tax agreements in force published by the Ministerio de Economía y Finanzas shows the relationship as an information exchange agreement, signed on 24 October 2012 and in force since 1 June 2016 under Ley N° 19.375, and not as a double taxation convention. The Dutch treaty register records the same agreement as in force from that date and lists no double taxation convention with Uruguay. Information moves between the two administrations. Withholding rates do not come down, there is no covered agreement for the multilateral instrument to work on, and the only mutual agreement procedure is the one in article 11 of that agreement, which is for doubts and difficulties between the two administrations over the agreement itself and not for relief from double taxation.
What the Dutch side offers instead is domestic. The participation exemption in article 13 of the Wet op de vennootschapsbelasting 1969 removes results from a shareholding of at least 5 per cent from the tax base, subject to the tests that exclude a portfolio participation unless it is subject to a real levy by Dutch standards or its assets consist for less than half of low taxed free investments. The rate table in article 22 of the same law charges, in its 2026 version, 19 per cent on a taxable amount of up to 200,000 euro and, above that figure, 38,000 euro plus 25.8 per cent of the excess. Outbound dividends carry 15 per cent under article 5 of the Wet op de dividendbelasting 1965. Interest, royalties and dividends owed to an affiliated body in a low taxed jurisdiction, or caught by the artificial arrangement cases, carry the conditional withholding tax at the highest percentage of that same table under article 4.1 of the Wet bronbelasting 2021.
What the two regimes now ask of the same file
The interesting fact is that the two questions have converged. Uruguay asks whether the entity holding the asset has people, premises, decisions and costs in Uruguay. The Netherlands asks whether the participation is held as an investment and whether the recipient of an outbound payment is anything more than a conduit. Neither is asking where the company is registered.
A regional base built on registration alone therefore fails on both sides at once, and it fails in a way that is visible from a filing rather than discovered in an audit. In one mandate we moved the treasury and shareholding functions of a Latin American group into the entity that already had the staff, and left the empty vehicles to be wound up, because keeping them cost more in annual sworn returns than the tax they had ever saved.
The sequence that follows from this is unglamorous. Decide first which entity is going to hold each class of asset, then staff that entity properly, then document the decisions where they are actually taken. Uruguay remains an efficient base for a group that does its work there. It has stopped being a place where an asset can simply be parked.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.