Uruguay Moves Toward a Personalized VAT Regime
Uruguay's Ministry of Economy is exploring a groundbreaking shift in its tax system by proposing a personalized VAT regime. Initially developed with support from the Inter-American Development Bank in 2022, the proposal was officially presented on January 8, 2025.
Key Changes in the VAT System
Currently, Uruguay applies a standard VAT rate of 22%, with a reduced 10% rate for essential goods and exemptions for certain necessities. The proposed reform is built on three main principles:
- Expanding the tax base – reducing or eliminating VAT exemptions.
- A single VAT rate – potentially setting a uniform rate of 21%.
- Targeted reimbursement – providing electronic VAT refunds to the lowest-income 30% of the population.
Challenges and Considerations
Implementing a personalized VAT system would require significant technological and administrative upgrades, including:
- Electronic transaction tracking to prevent fraud and ensure correct tax application.
- E-invoicing integration for real-time tax database interactions.
- Personal data security to protect consumer information.
- Identification at the point of sale through tax ID numbers linked to economic profiles.
- Efficient reimbursement systems via tax cards, mobile apps, or electronic payments.
- Public acceptance of a system that tracks spending habits.
- Administrative complexity in managing personalized taxation.
If successfully implemented, Uruguay would become one of the first countries to introduce a VAT system tailored to individual economic profiles, setting a precedent for tax modernization worldwide.
There’s more you should know about e-invoicing in Urugway – learn more about the new and upcoming regulations.
