Recently, the Directorate General of Taxation has published Law No. 19.637 with numerous tax amendments. The major change incorporated in the area of incentive regime that provides an exemption for income derived from Research & Development (R&D) activities in the fields of biotechnology, bioinformatics and software production. The changes to the incentive regime apply from 1 January 2018, although taxpayers that qualified under the original regime as of 31 December 2017 may opt to continue to apply that regime up to 30 June 2021, at the latest.

The application of the nexus ratio as per BEPS Action 5 is incorporated for the determination of the amount of income that may be exempt which includes that the numerator is the direct costs incurred by the taxpayer and services contracted with unrelated parties to develop an asset with a 30% uplift, and the denominator is the total costs incurred without the same 30% uplift. For income derived from the provision of services in relation to the above R&D activities, a full exemption is provided as long as the activity is carried out in Uruguay, which is considered the case where more than 50% of the expenses and direct costs for the provision of the services are incurred in Uruguay. In case of partial exemption, the deduction for expenses will be limited to the percentage of the net income that is not exempted.

For availing the exemption, the resulting assets must be covered by the regulations for the protection and registration of intellectual property rights. Previously goods and service must have been used exclusively abroad for availing the exemption.