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March 16, 2021

Uruguayan tax authorities rule taxpayer must remain in “tax holiday” regime

Once a “tax holiday” election is made, a taxpayer may only have the election revoked if there was a fact or law error at the time of the election.

The Uruguayan tax authorities have ruled (Consultation No. 6369) that a taxpayer who elected to participate in the “tax holiday” regime must remain in the regime because the taxpayer could not show that there was a fact or law error when the election was made.

The taxpayer acquired tax residence in Uruguay during 2017 and joined the “tax holiday” regime to pay nonresident income tax on the yields of movable capital until tax year 2022.

The taxpayer wanted to leave the regime beginning 1 January 2019. The taxpayer intended to pay personal income tax on the yields of movable capital beginning on that date.

Once the election is made, the Uruguayan tax authorities ruled, a taxpayer cannot leave the regime unless there is a fact or law error as defined in Article 64 of the Uruguayan Tax Code.

The tax authorities concluded that the taxpayer did not prove there was a fact or law error; therefore, the taxpayer had to remain in the regime until tax year 2022. 

Consultation No. 6369 is binding on the taxpayer who requested it, but other taxpayers in a similar situation may follow it, provided they follow the guidance provided in the consultation. The consultation was issued on 25 January 2021.


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 Abogados, Latin America Business Center, Madrid

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

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


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