Uruguay Budget Bill Includes a Pillar 2 Domestic Minimum Tax

General

On August 31, 2025, the Ministry of Economy and Finance sent the Draft Budget Law for the period 2025–2029 to Parliament. This includes a domestic minimum tax (‘DMTT’ – intended to be a ‘QDMTT‘).

The Draft Law does not include an income inclusion rule (IIR) or an under-taxed profits rule (UTPR).  The Draft Law is proposed to be effective from January 1, 2026.

Under Article 5 of the Law, the OECD GloBE Commentary, as well as other OECD guidance such as the Administrative Guidance and Safe Harbour rules are to be used as a source of ‘illustration and interpretation’ for the application of the Law.

Whilst the Draft Law uses the same approach as the OECD Model Rules (with the same approach to the effective tax rate calculation, jurisdictional blending and GloBE income/Adjusted Covered Tax adjustments), as the Draft Law only provides for the DMTT (and not an IIR or UTPR), it is specifically tailored to Uruguay’s domestic tax regime with a number of elements in the general GloBE rules not applicable for DMTT purposes.

Article 74 of the Draft Law states that it is intended to be compatible with the OECD Model Rules and Guidance and the Government intends to apply the Law so that it is implemented  and administered in a manner that is consistent OECD rules.

It also notes that the Government will suspend the tax if the GloBE rules are repealed or suspended by the OECD.

As noted below, very few aspects of the OECD Administrative Guidance are included in the Draft Law.

OECD Administrative Guidance

The only aspect of the OECD Administrative Guidance included in the Draft Law is the provision for Restricted Tier 1 Capital (Article 3.3 of the February 2023 OECD Administrative Guidance).

Safe Harbour and Penalty Relief Guidance

Article 72 of the Draft Law provides for Safe Harbour exclusions but states that the specific details of the Safe Harbours will be provided by Government.

Article 74 of the Draft Law also provides that the Government will exempt or exclude from  the DMTT those constituent entities located in Uruguay that are part of a multinational group  whose ultimate parent entity is located in a jurisdiction that has been exempted or excluded  from the IIR/UTPR under the OECD GloBE Rules.

Elections in the OECD Model Rules

The elections included in the OECD Model Rules that are provided in the Draft Law, include:

-Excluded Entity Election (Article 7 of the Draft Law)

-Stock-Based Compensation Election (Article 27 of the Draft Law)

-Election to use the Realization Method (Article 30 of the Draft Law)

-Election to Spread Capital Gains (Article 31 of the Draft Law)

-Consolidation Election (Article 33 of the Draft Law)

-Unclaimed Accrual Election (Article 49 of the Draft Law)

-GloBE Loss Election (Article 53 of the Draft Law)

-Prior Year Adjustment Election (Article 54 of the Draft Law)

-De minimis Election (Article 23 of the Draft Law)

-Substance-Based Income Exclusion Election (Article 16 of the Draft Law)

-Taxable Distribution Election (Article 70 of the Draft Law)

The following are not included:

-Tax Transparency Election

-Distribution Tax Regime Election

QDMTT Design Features

The GloBE rules have generally been replicated in the Draft Law, subject to some aspects that are not required domestically or do not need to be included as the IIR/UTPR is not being implemented.

Article 18 of the Law provides that the standard GloBE calculation rules for determining the top-up tax, but they are then subject to a number of adjustments. The adjustments are:

Stateless Entities

Under the OECD Administrative Guidance, a domestic minimum tax does not need to apply to Stateless Constituent Entities or permanent establishments to be a QDMTT. However, jurisdictions can impose a QDMTT on these entities when they are created under the domestic law of the jurisdiction (or where a permanent establishment has a place of business in the QDMTT jurisdiction).

Article 14 of the Draft Law implements this by applying the DMTT to Stateless Constituent Entities.

Taxes Pushed-Down

Tax paid or incurred by a Constituent Entity-owner under a CFC Tax Regime that is pushed down to a domestic Constituent Entity in the GloBE Rules must be excluded, as provided in the OECD Administrative Guidance. This should also prevents the pushdown of tax to hybrids, PEs and for taxes on distributions (aside from Uruguayan withholding tax on distributions). This is not currently included in the Draft Law.

Amended Top-Up Tax Calculation

Article 15 of the Draft Law amends the standard top-up tax calculation so that the determination of the QDMTT payable does not itself require the deduction of QDMTT (which would include an element of circularity).

QDMTT Allocation

The OECD Administrative Guidance provides that the QDMTT tax liability does not need to be allocated to constituent entities in any particular way providing it is allocated to at least one constituent entity subject to tax in the jurisdiction that is legally liable for the tax. Article 21 of the Draft Law provides that the allocation in Uruguay is based on the share of GloBE income in Uruguay.

Accounting Standard

Article 25 of the Draft Law provides that GloBE income for QDMTT purposes is based on the default GloBE rules. As such the financial accounting net income or loss is the net income or loss determined for an entity, prior to any consolidation adjustments in preparing the consolidated financial statements of the ultimate parent entity. There are no provisions in the law for the use of a local accounting standard.

Filing

Article 71 of the Draft law provides that each constituent entity located in Uruguay must file a return to the General Tax Directorate.

The return may be submitted by the constituent entity itself or by a local entity designated on  its behalf.

The return must include the following information relating to the multinational group:

a) identification of the constituent entities located in Uruguay, including their tax identification numbers;

b) information on the overall corporate structure of the MNE group, including controlling interests in entities owned by other constituent entities;

c) the information necessary for the DMTT calculation, including:

(i) the effective rate and DMTT of each constituent entity and JV;

(ii) the allocation of the DMTT;

(d) a record of the elections made.

The return must be submitted no later than 15 months after the last day of the fiscal year (18  months for the transitional year).