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September 11, 2023

Uruguay enacts new initiative to attract IT professionals using tax incentives

  • A new law makes it easier for certain information technology (IT) professionals with IT activities in Uruguay to pay nonresident income tax and to be exempted from making social security contributions.
  • The law also makes employers responsible for withholding nonresident income tax on behalf of the IT professionals under contract.
  • This Alert outlines the eligibility requirements.

Uruguay continues to demonstrate its commitment to fostering the growth of its information technology (IT) sector through the enactment of Law No. 20,191 on 23 August 2023. Under this law, the government provides IT professionals with the option to pay the Non-Resident Income Tax (IRNR) for income obtained in Uruguayan territory under employment contracts entered into between 30 August 2023 and 28 February 2025. Furthermore, these professionals can opt not to be included in the social security system, thus exempting them from making corresponding contributions.

To be eligible for these benefits, certain conditions must be met simultaneously:

  • The professional must either be a foreigner or a national who has not established fiscal residence in Uruguay in the last five fiscal years.
  • The professional must be actively engaged in activities within Uruguay and physically present in the country for at least two-thirds of the calendar year or the duration of their employment contract.
  • The professional's income must solely come from a dependent working relationship in Uruguay, specifically within the IT sector, as defined in Article 52 (S) of Title 4.

Conditions B and C should be evaluated annually — if they are not met, the IT professional will be subject to taxation under the regular tax regime.

This option must be exercised at the outset of the first relevant employment arrangement and remains applicable for the year it is chosen and the subsequent four years.

Lastly, Law No. 20,191 designates employers as responsible for withholding IRNR on behalf of the IT professionals under contract.

IT professionals and their tax advisors will want to become familiar with the new law. Access the full text of the law here (only in Spanish).


For additional information with respect to this Alert, please contact the following:

EY Uruguay, Montevideo

Ernst & Young LLP (United States), Latin American Business Center, New York

Ernst & Young LLP (United Kingdom), Latin American Business Center, London

Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific

Published by NTD's Tax Technical Knowledge Services group; Carolyn Wright, legal editor