Taxes When You Buy or Sell a Business in Uruguay: VAT, Corporate Income Tax and Clearance Certificates
INGAR · · Guides
Short answer: when a going business is transferred, positive goodwill forms part of the seller's taxable result for IRAE (Uruguay's corporate income tax) and, under the criteria applied by the DGI (Uruguay's tax authority), it is subject to VAT at the standard 22% rate.
Don't stretch that rule across the whole deal, though: the DGI treats the transaction as the transfer of a bundle of assets. Each asset carries its own VAT treatment, and positive goodwill goes at 22%.
Three things have to be settled before you lock in a price:
- Which assets and liabilities are part of the deal.
- What their tax book values are.
- Whether the agreed price includes VAT or has it added on top.
That last distinction can shift tens of thousands of pesos — or dollars — from one side of the table to the other.
This article covers the transfer of a going business. Selling shares or partnership interests, and buying individual assets on their own, are governed by different rules.
What goodwill means for tax purposes
In everyday commercial terms, "goodwill" is the value of the customer base, the trade name, the location, the way the operation is organized, its earning power, and the contracts and relationships that survive the sale.
For tax purposes, though, it is calculated from tax book values:
Goodwill = agreed price − tax net worth transferred Tax net worth = tax book assets − liabilities assumed In other words: Goodwill = agreed price − tax book assets + liabilities assumed
The result can be positive, zero or negative.
And it won't always match goodwill in the economic sense. A machine may be worth USD 15,000 on the open market yet carry a far lower tax book value because it has already been depreciated — that gap increases goodwill for tax purposes and, with it, the VAT on the deal. It's one of the most common surprises in these transactions.
How VAT applies
VAT is levied on the domestic circulation of goods. For transfers of this kind, the DGI follows what's known as the atomistic approach: a bundle of assets is being sold, and each component is analyzed on its own terms.
| Component transferred | Treatment |
|---|---|
| Positive goodwill | VAT at 22% |
| Standard-rate goods | VAT at 22% |
| Reduced-rate goods | VAT at 10% |
| Exempt assets | No VAT |
| Real estate covered by the applicable exemption | No VAT, though other taxes may still apply |
The general rates are set out in article 34 of Title 10 of the Texto Ordenado 2023 (Uruguay's consolidated tax code).
The taxable base formula
Under the criteria set out in DGI Ruling 3437:
Total base subject to VAT = agreed price + liabilities assumed − exempt assets
That formula gives you the total amount subject to some rate. It does not mean multiplying everything by 22%: inside that figure sit assets at 10%, assets at 22% and goodwill at 22%.
A worked example
Tax composition of the business:
| Assets transferred | Tax book value |
|---|---|
| Exempt assets | $ 2.000 |
| Goods taxed at 10% | $ 3.000 |
| Goods taxed at 22% | $ 5.000 |
| Total assets | $ 10.000 |
| Item | Amount |
|---|---|
| Liabilities assumed by the buyer | $ 4.000 |
| Net tax book worth | $ 6.000 |
| Agreed price | $ 10.000 |
Goodwill: $ 10.000 − $ 6.000 = $ 4.000
Total base subject to VAT: $ 10.000 + $ 4.000 − $ 2.000 = $ 12.000
| Component | Base | Rate | VAT |
|---|---|---|---|
| Reduced-rate goods | $ 3.000 | 10 % | $ 300 |
| Standard-rate goods | $ 5.000 | 22 % | $ 1.100 |
| Goodwill | $ 4.000 | 22 % | $ 880 |
| Total VAT | $ 2.280 |
Applying 22% straight to the price would have produced $ 2.200 — close by pure coincidence, and wrong in principle. Change the mix of assets and the gap becomes enormous.
Is the price "plus VAT" or "VAT included"?
The contract has to say so, in as many words.
These are not the same thing:
Price: USD 100,000 plus any applicable VAT.
versus:
Final price, VAT included: USD 100,000.
In the first case the buyer puts up the price and the tax on top of it. In the second, VAT is carved out of the agreed figure and cuts into the seller's net proceeds.
This gets settled during negotiations and then carried consistently through the purchase agreement, the deed and the tax paperwork. Leaving it vague is the fastest route to an argument on signing day.
When goodwill is negative
Goodwill is negative when the price falls below the net tax book value of the net worth being transferred:
| Item | Amount |
|---|---|
| Tax net worth transferred | $ 6.000 |
| Agreed price | $ 4.000 |
| Goodwill for tax purposes | −$ 2.000 |
Under the criteria in Ruling 1626, negative goodwill proportionally reduces the taxable base of the taxed assets. With $ 3.000 at 10% and $ 5.000 at 22%, the −$ 2.000 is allocated pro rata:
| Component | Original base | Base after pro rata |
|---|---|---|
| Goods at 10 % | $ 3.000 | $ 2.250 |
| Goods at 22 % | $ 5.000 | $ 3.750 |
VAT: $ 2.250 × 10% = $ 225; $ 3.750 × 22% = $ 825; total $ 1.050.
For IRAE purposes, negative goodwill cuts in opposite directions for each side:
- For the seller, it is in principle a tax loss.
- For the buyer, the DGI treats it as taxable income (the position taken in Ruling 4599, which reversed the earlier stance in Ruling 3753).
That second point catches nearly every buyer off guard: buying cheap can generate a tax bill.
The seller's IRAE
Article 25, subsection F of Title 4 includes the result of selling a business or commercial establishment in gross income. Article 18 of Decreto 150/007 sets it as the difference between transaction price − tax book value of the net worth transferred.
The general IRAE rate is 25% on net taxable income.
In the example above, the deal produces a positive result of $ 4.000. Taken in isolation, and setting aside any other results for the year:
$ 4.000 × 25 % = $ 1.000 in IRAE
In practice the final figure emerges from the full annual return. It is not correct to say the seller pays 25% of the price, or 25% of the goodwill as a standalone tax.
The tax date of the sale is the date the business is actually handed over, and you have to be able to prove it to the DGI.
What it means for the buyer
You inherit the prior tax book values
The buyer does not get to assign fresh tax book values to machinery, inventory and other assets.
Article 44 of Title 4 and article 72 of Decreto 150/007 provide that the successor company keeps the seller's tax book values, valuation regimes, depreciation criteria and the time periods that matter for bad-debt write-offs.
Positive goodwill cannot be amortized
This one deserves particular attention, because it hits after-tax returns directly.
Positive goodwill is recognized as an asset for tax purposes, but it cannot be deducted through amortization. The prohibition comes from article 35, subsection G of Title 4 and article 94 of Decreto 150/007: goodwill shall not be amortized under any circumstances.
Put plainly: the seller books taxable income on that amount, and the buyer gets no periodic deduction in return. Which is exactly why the amount allocated to goodwill has to be hashed out before signing, not after.
The seller's tax losses don't come with the business
They belong to the taxpayer that generated them. They do not pass to the buyer along with the business (Ruling 3073, consistent with the Tribunal de lo Contencioso Administrativo, Uruguay's administrative-law court).
If a seller pitches their accumulated tax losses as an "asset" you'll be able to use, that claim is simply wrong — and it's worth checking what else in the proposal doesn't hold up.
Can the buyer recover the VAT?
Yes, provided the general conditions are met: the transaction is properly documented, the buyer is a registered VAT taxpayer, the assets and rights are linked directly or indirectly to taxable operations, and no specific limitation applies.
If the buyer's activity is entirely exempt, the VAT normally can't be credited and becomes a cost. Where taxable and exempt activities are mixed, a proportional deduction may apply.
And even when it is fully creditable, there's a financing cost: the money goes out at closing and only comes back in later returns. That timing gap belongs in the cash-flow model for the purchase.
Effect on net wealth tax
The purchase keeps producing consequences after the ink dries.
Positive goodwill is recorded as a non-amortizable tax asset, which can push up the buying company's taxable net worth.
The general rate of Impuesto al Patrimonio (Uruguay's annual net wealth tax) for most corporate taxpayers is 1.5% on net taxable worth, subject to exemptions, deductible liabilities, reductions and various specific conditions.
That doesn't mean you'll pay exactly 1.5% a year on the goodwill, but it does mean booking it can raise the tax burden going forward — a cost that almost never shows up in the initial analysis.
Could ITP apply?
Selling goodwill on its own does not trigger ITP (Uruguay's real-estate transfer tax). But if title to a property changes hands as part of the business, that transfer may fall within its scope.
As a general rule, 2% for the seller and 2% for the buyer, calculated on the base determined under Title 19 — not necessarily the market price.
It doesn't apply where the premises are leased and the lease is simply assigned or replaced. There are exemptions and special situations, all of which the escribano (the notary who handles property and business transfers in Uruguay) will review.
DGI and BPS clearance certificates
DGI special certificate. Article 149 of Title 1 requires one for the full or partial sale of commercial or industrial businesses. Failing to request it can leave the buyer jointly and severally liable for the seller's tax debt.
BPS special certificate. Article 664 of Ley 16.170 requires one to sell all or part of a commercial, industrial or agricultural business, and BPS is Uruguay's social-security agency.
The 15-day window. Article 153 of Title 1, which incorporates the regime set up by Decreto-Ley 14.433, requires the certificates to be requested within 15 days of the prospective buyer taking possession, a date that must be recorded in a notarial deed of record.
If the seller misses that deadline: a fine of 20% of the stipulated price may follow, they can be compelled to execute the deed, and the buyer or the acting professional is entitled to request the certificates directly.
The rules also lay out deadlines and substitute mechanisms for when the agencies fail to issue the certificates on time — we walk through those in how a business is legally transferred.
The buyer's exposure to pre-existing debt
Article 22 of the Código Tributario (Uruguay's tax code) makes the buyer jointly and severally liable for the predecessor's tax obligations, with two limits: liability is capped at the value of the assets received unless there is willful misconduct, and it expires after one year from the date the collecting agency learned of the transfer.
None of that replaces accounting, tax, employment and legal due diligence. The certificates are an essential part of the process, not the only safeguard.
Summary
| Item | General treatment |
|---|---|
| Positive goodwill | VAT at 22 % |
| Other assets | 22 %, 10 % or exempt, depending on their nature |
| Seller's result | Folded into the IRAE return |
| General IRAE rate | 25 % on net taxable income |
| Buyer's VAT | Creditable if linked to taxable operations |
| Amortization of goodwill | Not deductible for tax purposes |
| Prior tax losses | Do not pass to the buyer |
| Negative goodwill for the buyer | Taxable income (Ruling 4599) |
| Impuesto al Patrimonio | Booked goodwill can raise taxable net worth |
| ITP | May apply if real estate is transferred |
| Certificates | DGI and BPS special certificates |
| Tax liability | Capped at the value received unless willful misconduct; expires after one year |
Before you set a price
Hand your accountant and your escribano the following: a breakdown of every asset being transferred, their tax book values, the liabilities the buyer will assume, which assets are exempt and which are taxed, the seller's standing with DGI and BPS, the expected handover date, written confirmation of whether the price includes VAT or is plus VAT, details of the property or the lease, and the legal structure you've chosen.
The core advice in this article fits in a single line: don't negotiate a headline number and leave the tax allocation to be sorted out at the deed. How the price is composed drives the VAT, the IRAE and the buyer's tax position for years afterward.
How we handle these deals
The tax return is the accountant's job and the legal drafting is the escribano's.
What INGAR does is coordinate the two so that price composition, VAT and documentation are all on the table during the negotiation, letting buyer and seller see the real cost before they commit to anything.
It's also worth benchmarking against the market before settling on a price: the businesses for sale currently listed show what's being asked for comparable deals.
Frequently asked questions
Is VAT payable on the sale of goodwill?
Positive goodwill is subject to VAT at the standard 22% rate, under the criteria applied by the DGI. But the DGI treats the deal as the transfer of a bundle of assets, and each asset carries its own VAT treatment.
Is the goodwill price plus VAT or VAT included?
The contract has to spell it out. Agreeing on a price plus any applicable VAT is not the same as a final price with VAT included: it changes who bears the tax.
What happens if goodwill is negative?
Goodwill is negative when the agreed price falls below the net tax book value of the net worth transferred. The tax treatment differs from that of positive goodwill.
How is the seller taxed?
Article 25, subsection F of Title 4 includes the result of selling a business or commercial establishment in gross income, and article 18 of Decreto 150/007 sets out how it is calculated.
Can the buyer credit the VAT on the purchase?
Yes, provided the general conditions are met: the transaction is properly documented, the buyer is a registered VAT taxpayer, and the assets are linked directly or indirectly to taxable operations.
Is ITP payable on the purchase of goodwill?
Selling goodwill on its own does not trigger ITP. But if title to a property changes hands as part of the business, that transfer may fall within its scope.
Is the buyer liable for pre-existing debt?
Article 22 of the Código Tributario makes the buyer jointly and severally liable for the predecessor's tax obligations, with two limits: liability is capped at the value of the assets received unless there is willful misconduct, and it expires after one year from the date the collecting agency learned of the transfer. The DGI and BPS special certificates are a separate regime: failing to obtain them creates liability, but they are not what sets the one-year clock of article 22.
Keep reading
- Buying a business without inheriting its debts: Ley 2.904
- How a business is legally transferred, step by step
- What is goodwill really worth?
- What does it mean to buy a business's goodwill?
- What it costs to run a business with employees
Sources
- Texto Ordenado 2023, Title 4 — IRAE · Title 10 — VAT · Title 1 — certificates · Title 14 — Impuesto al Patrimonio · Title 19 — ITP
- Decreto 150/007 — IRAE regulations
- Código Tributario, article 22 · Decreto-Ley 14.433
- BPS — Special certificates
- DGI — Sale of a going business: VAT and IRAE treatment
General information, reviewed on August 1, 2026. DGI rulings reflect administrative criteria applied to specific cases. Each transaction's tax return is prepared by an accountant, and the transfer itself is executed with notarial advice.