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April 5, 2021

Uruguay allows certain companies to pay only 50% of their employer pension contributions in light of the COVID-19 pandemic

To mitigate the effects of the COVID-19 pandemic on certain taxpayers, Uruguay enacted a law that allows certain taxpayers to pay only 50% of their employer social security pension contributions. It also authorizes the Executive Power to establish various payment arrangements for taxpayers with overdue tax liabilities.

On 26 March 2021, Uruguay enacted Law No. 19,942 (the Law), which allows certain companies to pay only 50% of their employer social security pension contributions accrued from 1 January 2021 to 30 June 2021, in light of the COVID-19 pandemic. The Executive Power is expected to issue regulations to implement the provisions of this Law soon.

To qualify for this benefit, companies must: (i) be in the Industry and Commerce regime; (ii) have (on average) no more than 19 employees during tax year 2020; and (iii) have income that did not exceed 10 million Indexed Units (approximately US$1.1 million) in the last tax year that closed before the effective date of the Law.

According to the Law, when determining 50% of their employer social security pension contributions, companies should consider all employees, including those subsidized by the Social Security Bank (BPS) and the State Insurance Bank (BSE). Companies, however, should not consider their directors, administrators or legal representatives in the case of simplified joint stock companies when determining the employer social security pension contributions.

The Law also allows the following companies to pay only 50% of the employer's social security pension contributions accrued from 1 April 2021 to 30 June 2021:

  • School transport service companies and school cafeterias
  • Party and event planning organizations, as well as national or international fair organizations
  • Travel agencies and land transportation agencies
  • Concessionaires of international airports and air transportation passenger companies
  • Cinemas and cinematographic distribution companies
  • Hotels and restaurants

Other provisions

Reduced tax rate for certain companies

The Law establishes that the tax rate applicable to companies that started activities on or after 1 January 2021, and conduct business activities that are part of the “reduced economic dimension” tax regime will be reduced by 25% during the first 12 months of operation and reduced by 50% for the following 12 months. This reduced tax rate may not be combined with other benefits a company is eligible to receive. It also will not apply to companies that restart activities.

Payment provisions

The Law authorizes the BPS to establish payment arrangements for debts accrued from 1 May 2018, up to the date of the Law’s enactment, for employer taxes, including contributions to the National Health Fund. These payment arrangements also may be available to taxpayers included in the “reduced economic dimension” tax regime.

Corporate income tax exemption

The Law exempts certain taxpayers from making monthly corporate income tax (CIT) payments from 1 January 2021 to 30 June 2021 if the taxpayers have gross taxable income in the last tax year that closed before the enactment of the Law that does not exceed 915,000 Indexed Units (approximately US$100,000).

Overdue tax payments

The Law allows the Uruguayan Executive Power to authorize payment arrangements for taxpayers with overdue tax liabilities that had to be paid by 28 February 2021. The Executive Power also may authorize payment arrangements for tax liabilities that are due from 1 March 2021 to the end of the COVID-19 pandemic. Whether a taxpayer qualifies for those payment arrangements could depend on the nature of the taxpayer’s activity, the level of income drop, and other indexes of an objective nature.


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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