Business Expenses in Uruguay 2026: What You Can Deduct and Which Structure Wins

Last reviewed: November 2026 · Reviewed by Stéphane Gombauld, tax expert, technologist and digital nomad

You run a freelance practice or small company in Uruguay and want to know which costs reduce your tax bill. This guide explains the 2026 deduction rules, the unusual proportional rule, and how your choice of structure decides whether you deduct real expenses at all.

Uruguay business expenses in 2026: the key figures

Is this guide for you?

Read on if you…

• run a Uruguayan company (SAS, SRL or SA) or a sole proprietorship taxed under IRAE;
• are deciding whether to stay under IRPF or move to IRAE;
• pay suppliers abroad and wonder whether those costs are deductible.

Probably not your case if you…

• are an employee with no business income. See personal tax deductions and benefits in Uruguay;
• only invest passively in Uruguay through shares or property.

Which structure lets you deduct real expenses?

Your legal form decides the method. Under IRPF, freelancers get a flat deduction and cannot claim actual costs. Under IRAE, you deduct real expenses, subject to the rules below. Professionals with annual revenue above 4 million UI must move to IRAE. The UI (Unidad Indexada) is an inflation-linked unit.

Comparing structures for your own case? The legal forms of business in Uruguay guide goes deeper, and you can request a review at Heavnn business setup.

What can you deduct under IRAE?

The general test has three parts. The expense must be necessary to earn or keep taxable income. It must be accrued in the tax year. And it must be documented, usually with a CFE (comprobante fiscal electrónico).

Typical deductible costs include:

• salaries, bonuses and BPS social security contributions;
• office rent, utilities and coworking fees;
• professional fees: accountants, lawyers, consultants;
• software subscriptions, hosting and equipment depreciation;
• business travel with a documented purpose;
• interest on business loans, subject to the proportional rule;
• bad debts that meet the legal conditions.

Equipment is depreciated over its useful life rather than deducted at once. Mixed-use items, such as a car you also use privately, attract audits. Keep logs and allocate the business share honestly.

How does the proportional rule work?

This is the most Uruguayan part of the system. Basically, an expense is only deductible to the extent it is taxed in the hands of the person you pay.

The formula: deductible share = recipient's tax rate ÷ 25%.

1. If the recipient pays IRAE at 25%, for example a company, the expense is 100% deductible.
2. If the recipient pays IRPF or IRNR capital tax at 12%, for example an individual landlord, the expense is 48% deductible.
3. If the recipient pays no tax on that income, nothing is deductible.
4. For payments to foreign suppliers, the foreign tax paid on that income counts in the calculation.

Salaries are the main exception and are generally deductible in full when contributions are paid. The aim of the rule is to stop businesses deducting costs that no one pays tax on.

What about permanent establishment and management?

Here's the catch for remote founders. If you live in Uruguay and run a foreign company from there, Uruguay may treat the company as having a permanent establishment (PE) in Uruguay. A PE is basically a fixed place of business, or a person habitually concluding contracts, that creates a taxable presence. Profits linked to the PE are then subject to IRAE.

The reverse also applies. A Uruguayan company run entirely from abroad may face tax claims in the country where decisions are made. Keep board decisions, contracts and key staff aligned with where you want the company taxed. See corporate income tax in Uruguay for the full IRAE picture.

Common mistakes (and what they cost)

• Deducting rent paid to individuals in full → an adjustment to 48%, plus mora fines and surcharges.
• Accepting suppliers without a CFE → the expense is disallowed entirely.
• Staying under IRPF with high real costs → you lose deductions that IRAE would allow.
• Paying foreign contractors in no-tax countries → no deduction, raising your effective rate.
• Running a foreign company from your Montevideo home → a PE claim and IRAE on profits you thought were foreign.

Frequently asked questions

Can a freelancer deduct expenses in Uruguay?

Under IRPF, no. Self-employed people deduct a flat 30% of their fees instead of real costs, plus social security contributions through the tax credit system. If your real costs exceed 30%, opting for IRAE may pay off. Professionals above the revenue threshold of 4 million UI must use IRAE.

What is the proportional deduction rule in Uruguay?

It limits deductions to the share of the payment that is taxed for the recipient. The share equals the recipient's rate divided by 25%. A payment to a company paying IRAE is fully deductible. A payment to an individual taxed at 12% is 48% deductible. Untaxed payments are not deductible at all.

Are salaries deductible for Uruguayan companies?

Yes, salaries and the related social security contributions are generally deductible in full, provided contributions to the BPS are paid and the work relates to the business. Payments to owners or directors follow specific rules, so check how they are documented before deducting them.

How long can tax losses be carried forward in Uruguay?

Tax losses under IRAE can be carried forward for five years and offset against future profits. Losses are adjusted for inflation. There is no carry-back. Keep the original calculations, as the tax office may audit the loss year when you use the losses later.

Is VAT on business purchases recoverable?

Yes, when the purchase relates to sales subject to VAT or to exports. You credit input VAT against the VAT you charge. Exporters of services can often request a refund of input VAT. Purchases linked to exempt activities do not generate a credit.

What is IRAE ficto?

It is a simplified regime for small IRAE taxpayers with revenue below 4 million UI. Instead of deducting real expenses, profit is deemed to be a fixed percentage of revenue, depending on the activity. It suits businesses with low costs and simple bookkeeping, and the editor will confirm the 2026 percentages.

Related guides

• Corporate income tax in Uruguay
• Legal forms of business in Uruguay
• Uruguay tax landscape overview
• Tax fraud regulations of Uruguay
• Personal tax deductions and benefits in Uruguay
• Business expenses in Paraguay
• Business expenses in Mexico
• All country tax guides

Sources

• Dirección General Impositiva (DGI) – Uruguay's tax authority
• IMPO – Official legislation database of Uruguay (Law 18.083, Law 19.820)
• Banco de Previsión Social (BPS) – Social security
• Uruguay XXI – Investment and export promotion agency
• PwC Worldwide Tax Summaries – Uruguay

This guide is general information, not personalised tax advice. See how we research and review.