One of the most frequent questions when you set up a company in Uruguay is whether the chosen structure can use the small business regime, known as “minimum VAT” (IVA mínimo), designed to support businesses in their early stages. The SAS has become the preferred company type for entrepreneurs and SMEs thanks to its flexibility, speed and low incorporation and running costs. But can an SAS use the small business regime? And, more importantly, what happens when revenue exceeds the limits? This article answers these questions, covering requirements, advantages, obligations and transitions between regimes. If you are deciding which legal structure to choose and want to optimise your tax burden legitimately, understanding the scope of minimum VAT is key before making a final decision.

What Is the Small Business Regime (Minimum VAT)?

The small business regime — known as “Literal E” after the legal provision that creates it, or “minimum VAT” — is a simplified tax treatment that the Tax Office (DGI) provides for taxpayers with annual revenue below a cap expressed in indexed units (UI 305,000 under current rules; check the updated figure). Its main features are:

• Fixed monthly VAT: instead of calculating output and input VAT, the business pays a fixed monthly amount set by DGI each year (around UYU 5,660 a month in 2025), with reductions in the first years of activity in some cases.
• IRAE exemption: businesses in this regime are exempt from IRAE (corporate income tax).
• No input VAT credit: the VAT paid on purchases is not deducted, and the business’s invoices do not allow customers to deduct VAT either.
• Simpler administration: fewer returns and lighter formal obligations than in the general regime.

In the general regime, by contrast, companies charge VAT on their sales (22% or 10% depending on the goods or services) and deduct the VAT on their purchases, paying only the difference, and they pay IRAE at 25% on their net income. The small business regime therefore greatly reduces the tax burden and administrative cost for very small businesses, which can make a big difference to the cost of running a company in Uruguay in the early stages.

Can an SAS Use the Minimum VAT Regime?

This is the key point, and it must be checked before relying on it. The small business regime was traditionally designed for small sole proprietorships (empresa unipersonal) and personal partnerships, and the rules include restrictions by type of entity. The SAS, created by Law 19,820, is treated for tax purposes like other commercial companies under the types of companies in Uruguay, alongside the SRL and the corporation (SA). Whether a specific SAS can access Literal E depends on the current regulations and DGI’s interpretation, so confirm it with your accountant or through a DGI query before incorporating with that expectation.

If your priority is to pay the minimum possible tax while revenue is very small, it may be more convenient to start as a sole proprietor under a simplified regime and move to an SAS when the business grows. If, on the other hand, you need limited liability, partners or a corporate image from the start, the SAS in the general regime is usually the right choice — remembering that it does not pay ICOSA and can deduct its real expenses for IRAE purposes.

Whatever the case, inclusion in a simplified regime is not automatic: it must be requested from DGI when registering, and the conditions must be met. Many entrepreneurs buy a ready-made SAS to start operating immediately; in that case, the company’s tax regime should also be reviewed at the outset.

Requirements to Enter and Stay in the Small Business Regime

Annual Revenue Limit

The main requirement is not to exceed the annual revenue limit set by the rules, expressed in UI and therefore updated in pesos over time. It corresponds to modest revenue, intended for very small businesses. If the business expects to exceed it, it cannot join the regime, or must leave it once it exceeds the limit.

It is essential to monitor accumulated revenue closely during the year. Exceeding the limit requires moving to the general regime under the conditions and deadlines set by the rules, and failing to do so on time can lead to adjustments, fines and surcharges.

Type of Activity and Other Conditions

The regime does not apply to every activity or every taxpayer: there are exclusions linked to the type of entity, certain activities and the business’s characteristics. Before setting up the company, check that your planned activity and structure are compatible. A common mistake is assuming any venture qualifies, when the nature of the operation or the legal form may be an obstacle. This should be analysed case by case.

What Happens When the Business Exceeds the Revenue Limit?

Exceeding the annual revenue limit has immediate tax consequences. The business must move to the general regime: it will charge VAT at 22% (or 10% on goods and services at the reduced rate), deduct the VAT on its purchases and pay IRAE on its net income. The change is mandatory and must be declared to DGI.

The change brings additional obligations: more frequent returns, more formal VAT records and stricter control of supporting documentation. The business must also adapt its invoicing system and accounting processes to calculate input and output VAT correctly.

In practice, moving from the small business regime to the general regime increases the effective tax burden, mainly because IRAE starts to apply. However, it also allows the business to recover the VAT on investments, equipment and professional services and to issue invoices with itemised VAT that business customers can deduct. That is why many growing businesses see this step as a sign of maturity. The rules also provide for a gradual transition in the VAT paid by businesses leaving the small business regime.

The key is to avoid surprises: project revenue in advance, monitor accumulated income monthly and plan the change of regime ahead of time. Ongoing professional advice on business taxes is the best way to prevent tax contingencies.

Advantages and Limitations of the Small Business Regime

For very small businesses, the regime offers tangible benefits: a fixed, predictable monthly VAT amount, no IRAE and much simpler administration. It is especially attractive for small service providers, consultants or retailers with low revenue.

However, it also has important limitations. Not being able to deduct input VAT can be costly for businesses with significant taxable purchases: importers, manufacturers or businesses investing in machinery, vehicles or technology. The revenue limit is low and can quickly become restrictive if the business grows successfully.

Another factor is how customers see it. Companies in the general regime often prefer suppliers who issue invoices with itemised VAT so they can deduct it. Although this is not a legal limitation, it can affect commercial opportunities. That is why the choice of tax regime should be assessed in the context of your commercial strategy and customer profile.

Frequently Asked Questions

Can I voluntarily leave the small business regime before exceeding the limit?

Yes. A business can opt into the general regime, which may be useful when rapid growth is expected, significant investments with VAT are planned or customers require invoices with itemised VAT. The change must be processed with DGI and takes effect under the conditions set by the rules.

Can a business return to the small business regime after being in the general regime?

Only if it meets the conditions again under the rules in force, which include restrictions on returning. Check the specific case with your accountant before planning on it.

Does the small business regime affect IRAE or ICOSA for an SAS?

The small business regime affects both VAT and IRAE: businesses that legitimately use it pay the fixed minimum VAT and are exempt from IRAE. A company in the general regime, by contrast, pays IRAE at 25% on its net income. As for ICOSA, the SAS is not subject to this tax in any case, unlike the SA.

Conclusion

The small business regime (minimum VAT) is a valuable tax tool for very small businesses: a fixed monthly VAT amount, no IRAE and simpler obligations. But it is not a “10% VAT rate”, and its availability depends on the type of taxpayer, the activity and revenue below a low limit, so whether an SAS can use it must be checked case by case. Exceeding the limit requires moving to the general regime, with its advantages and requirements. The key is to assess your specific case, project realistically and decide based on your business model, cost profile and growth strategy. At sociedadesanonimas.uy we have incorporated more than 500 companies and support entrepreneurs — Uruguayan and foreign — at every stage, from choosing the company type to ongoing tax management. Book a consultation with our team to design the most efficient structure for your project. We work 100% online and your company can be operational within a day.