Uruguay has published Decree No. 140/022, which extends the temporary reduction in the VAT rate by 9 percentage points on certain activities/operations in the tourism sector (i.e., a reduced VAT rate of 13% considering the 22% standard rate). The reduction was originally provided from 16 November 2020 in response to COVID-19 and subsequently extended multiple times. Most recently extended from 1 October 2021 to 30 April 2022 by Decree No. 318/021, the VAT reduction is now extended until 30 September 2022.
The VAT reduction applies for gastronomic services when provided by restaurants, bars, cafes, and the like, or by hotels, inns, hostels, etc., provided that the services do not include lodging. The reduction also applies for catering services for parties and events, vehicle rentals (without driver), and mediation services for the leasing of real estate for tourist purposes. For taxpayers subject to the small business tax regime, the reduction is determined by applying a discount of 7.38% on the total transaction amount. The VAT reduction is subject to the condition that payment is made through credit cards, debit cards, or electronic money instruments and similar.
Note, the VAT reduction is based on the provisions of Decree No. 537/005, which provides a reduction in the VAT rate by 5 percentage points for the mentioned services. For taxpayers subject to the small business tax regime, the reduction as per Decree No. 537/005 is determined by applying a discount of 4.1% on the total transaction amount.