Because freelancers are not our employees and we don't pay taxes on payouts, they must declare any income received through Mellow by themselves.
To carry on tax accounting in Uruguay for your Mellow income, you need to:
Tax residence
An individual is considered an Uruguayan tax resident if they meet at least one of the following conditions:
Presence in the country for more than 183 days.
The base of their activities, or economic or vital interests, lies in the Uruguayan territory (for example, when one derives from Uruguay more income (which can't be exclusively passive) than in any other country).
An investment in Uruguay (unless one proves one's fiscal residence in another country) that complies with one of the following conditions:
More than 45 million indexed units* in a company with projects or activities directly or indirectly promoted by the Investment Law.
More than 15 million indexed units in a company (certain other conditions apply) or properties located in the Uruguayan territory.
More than 3.5 million indexed units in real estate property, provided that the individual is present in Uruguay for at least 60 days.
* Unidad Indexada (UI) is an indexed or accounting unit that was introduced in Uruguay during a period of high inflation, which is adjusted daily based on the rate of depreciation of the national currency, UYU (Uruguayan peso).
Tax number and payment details
To carry on reporting in Uruguay, individuals must have an identification number (número de cédula para personas), which is assigned at birth or in the process of obtaining an identity card (Cédula de Identidade, CI). To get this document, follow the guide.
To carry on entrepreneurial activity as a sole proprietor in Uruguay, you need to register in the Register of Tax Payers and obtain a RUT number (Registro Único Tributario). To learn about how to get this number, follow the link.
Mellow gives Uruguay-based freelancers the ability to make payments to bank accounts (the full list of methods can be found here), which requires entering the number of one of the following documents:
Registro Único Tributario (RUT): Number according to the Single Register of Tax Payers, can be issued to both physical persons engaged in entrepreneurial activities and legal persons (Mellow doesn't allow for entering a company number). The number is formed by 12 digits (11 digits containing a unique number + 1 verifying digit to avoid repetitions). Learn more.
Cédula de Identidad (CI): Identity card of an individual (use if no RUT), which all residents of Uruguay are required to have. The document number is formed by 8 digits (7 digits + 1 verifying digit to avoid repetition), with old ID numbers containing only 6 digits plus a check digit. Learn more. This document can be issued in electronic form, in which case it's called Cédula de Identidad Digital en Uruguay. This digital ID card contains the same information as a traditional CI card, and it has a number of advantages like being legally equivalent to a notary-certified written signature. The document number, just like a CI, consists of 8 digits. Learn more.
Pasaporte uruguayo (PASS): Identity document issued to Uruguayan citizens traveling outside of Uruguay (note that trips to Chile, Bolivia, or the Mercosur countries can be done using a CI card). Learn more.
Documento Extranjero (DE): Document certifying the identity of a foreign citizen registered with the Uruguayan state authorities.
IMPORTANT! The name of the bank account's beneficiary and the document number must belong to the holder of the Mellow account (who is an individual, not a company).
Freelancer in Uruguay: Taxes and contributions
Tax obligations in Uruguay depend on the freelancer's status and/or fulfillment of certain conditions. Uruguay has 2 tax statuses for Mellow users to choose from:
IMPORTANT! Mellow does not have the option to choose a tax status for freelancers based in Uruguay, but you can fill in your tax ID in your account.
Read on for more details.
Individual
Individuals (personas) represent a tax status that doesn't require additional registration.
Individual income tax is levied on income received by resident and non-resident individuals. The source principle for levying taxes includes income derived from activities within the Uruguayan territory. However, there are specific cases where income generated outside Uruguay is subject to tax (for example, income received via Mellow is subject to Uruguayan tax based on the source principle that applies to activities within the country). We recommend contacting the General Taxation Directorate (Dirección General Impositiva, DGI) or local consultants about your specific work/services in Mellow.
Individuals pay income tax as IRPF or IRAE:
Income tax on resident individuals (Impuesto a la Renta de las Personas Físicas, IRPF) is levied annually on income derived from work and assets located in Uruguay. IRPF is collected jointly by BPS (Banco de Previsión Social) and DGI. For tax calculation purposes, income is divided into two categories, with the tax rate figured separately for each:
Category I: Income stemming from capital (i.e., income from capital investments) or real estate (i.e., rent).
Category II: Income stemming from work (provision of services / performance of works), both for hire and independent. Income received via Mellow falls under this category. The tax rate is progressive and ranges from 10% to 36% (there is a non-taxable minimum):
Taxable income, UYU | Tax rate, % |
up to 433,776, or 7 BPC (Contributions and Benefit Units) per month | 0 |
433,776–619,680 | 10 |
619,680–929,520 | 15 |
929,520–1,859,040 | 24 |
1,859,040–3,098,400 | 25 |
3,098,400–4,647,600 | 27 |
4,647,600–7,126,320 | 31 |
from 7,126,320 | 36 |
With IRPF, only a few expenses are allowed as deductions (such as social security / healthcare contributions and a notional amount corresponding to education, health, and housing of dependent underage children), in the amount not exceeding 30% of income.
The tax is paid every two months / bimester (for example, one bimester corresponds to January and February) in the form of advance payments during the month following a bimester. Payment calculation instructions can be viewed here: advance, annual.
Reporting in the form of IRPF returns under Form 1102 is to be filed online based on the ID number (CI) and in accordance with the filing deadlines.
Liability: Failure to fully or partly pay the tax within the prescribed deadlines entails penalties in the amount of 5% to 20% of the unpaid tax (depending on the payment date) and a monthly surcharge that is capitalized on a quarterly basis.
Individual IRPF payers whose income exceeds the annual threshold of 4 million indexed units must switch to IRAE (learn more) starting from the first month of the next fiscal year (they can also do so voluntarily at any income level).
Income tax on economic activities (Impuesto a las Rentas de las Actividades Económicas, IRAE) is levied at 25% of income or net profit in a given fiscal year derived from economic activities of any nature.
To opt for IRAE, you need to notify the General Taxation Directorate (DGI) within 3 months of starting the activity yielding income that's subject to personal income tax (if you do this after 3 months, you'll only be able to apply IRAE starting from the next financial year).
Deductible expenses include only those that are documented and paid out of taxable profit.
The tax is paid monthly in the form of advance payments (learn more).Returns are filed under Form 1050.
Useful links: More on IRAE; FAQ; IRAE for income from FX gain.
Sole proprietorship
Sole proprietor (Empresa Unipersonal) constitutes a tax status for small businesses (pequeños contribuyentes) that you need to register for (see "useful links" below). It offers the following regimes:
MONOTRIBUTO
Monotributo is a simplified tax regime with fixed payments to Banco de Previsión Social (BPS) that combine taxes and social contributions (contribuciones especiales de seguridad social). BPS sets the amount of monotributo payments (for those who started their activities before or after February 1, 2021), with no reporting necessary.
To make use of this regime, a sole proprietor must meet the following conditions:
Income in the fiscal year must not exceed 183,000 indexed units (learn more).
Activities are to be conducted on a smaller economic scale, with restrictions on:
Points of sale (1 max)
Office space (no more than 15 sq m)
Premises location (shopping centers are forbidden)
Activities are to comply with the official list.
Goods/services are to be sold only to end users (exceptions apply).
Useful links: FAQ; Monotributo registration.
MONOTRIBUTO SOCIAL MIDES
Monotributo social Mides is a simplified tax regime that foregoes reporting and requires the taxpayer to make fixed payments to Banco de Previsión Social. It caters to those below the poverty line or in a situation of socio-economic vulnerability. BPS sets the amount of monotributo payments (learn more), with no reporting necessary.
To make use of this regime, a sole proprietor must meet the following conditions:
Income in the fiscal year must not exceed 183,000 indexed units (learn more).
Social vulnerability must meet the following criteria:
Being below the poverty line as defined by Instituto Nacional de Estadística (INE)
Complying with provisions on households in Article 2 of Law No. 18.227 dated December 22, 2007
No employees
Any type of activity outside of utilities or construction (but light maintenance works do fall under monotributo social Mides)
If the above requirements are met, applying for social monotributo is done at the Ministry of Social Development (MIDES).
Useful links: FAQ; Sole proprietor registration for monotributo social Mides.
GUÍA PARA TRABAJADORES INDEPENDIENTES
Guía para Trabajadores Independientes relates to the independent provision of services/works and is associated with the following taxes:
Personal income tax (Impuesto a la Renta de las Personas Físicas / IRPF) is figured and paid according to category II (see an individual's taxes).
Value-added tax (Impuesto al Valor Agregado / IVA) is levied at a general rate of 22% on the provision of services and on the circulation of goods within the limits of the Uruguayan territory. Exports are zero rated for VAT purposes. Under certain conditions, services provided via the Internet, technology platforms, computer applications, and so on are also taxed. If services provided to a foreign client are only made use of abroad, no VAT is levied (but income tax still applies). The amount of VAT payable is calculated as the difference between VAT on sales and VAT associated with the purchase of goods and services that amount to the cost of goods sold or services rendered.
Payment of tax. The tax for two months (a bimester) is to be remitted as a single payment during the next month (according to these dates). To learn more about advance payments and VAT, see here.
VAT returns are filed using the 1302 IVA Servcios Personales form, which is submitted online before the official deadlines.
These taxes are not applicable for people subject to income tax on economic activities (IRAE).
Useful links: Sole proprietor registration; Certificados de Crédito.
Additional info
Official website of the General Taxation Directorate (Dirección General Impositiva, DGI).
According to the country's legislation, if an independent contractor / freelancer performs work that the client has control over, then they are classified as an employee. That's why many resort to Employers of Record (EOR): these are companies that hire and pay talent on behalf of another company (EORs take care of payroll, benefits, taxes, and more; Mellow is not an EOR).
Income received via Mellow is declared based on certificates and invoices, and as per the offer agreement.
If you have any questions, get in touch via the chat in your Mellow account, or email [email protected].