Setting Up a Short-Term Rental or Tourism Business in Uruguay

In recent years Uruguay has become an attractive destination for real estate investors, especially in short-term rentals and tourism. High seasonal demand in Punta del Este, Colonia, Montevideo and other tourist areas, together with a stable legal framework and a de facto dollarised property market, has made the country a favourite of Argentine, Brazilian and European investors seeking predictable income and capital preservation. But operating correctly — with invoicing, permits and taxes in order — requires precise decisions from the start: choosing the right vehicle, understanding VAT on rentals and lodging, obtaining municipal and Ministry of Tourism authorisations and registering with DGI and BPS as applicable. This article is for investors and business owners who have decided to set up a company in Uruguay to manage short-term rentals and need to know how to structure the operation, which taxes apply, which procedures are mandatory and how to avoid common risks.

Corporate Structure: Which Company Type Suits Short-Term Rentals

The first decision is which legal form to use. Uruguay has several types of companies: the SAS, the SRL, the corporation (SA) and the sole proprietorship. The choice depends on the number of partners, the investment and growth plans, and also on the applicable tax regime.

For single owners or a few partners with one or several properties in short-term rental, the SAS is generally the most efficient option. It has no minimum capital, incorporation is fast (you can buy a ready-made SAS and start operating the same day) and, crucially, it does not pay ICOSA, the corporate control tax that SAs pay. The SAS allows a single shareholder, agile management and limited liability, protecting the investor’s personal assets.

The SRL is another classic alternative, especially if the partners prefer a more traditional structure. It allows flexible management, limits liability and does not pay ICOSA. It suits two or more partners actively involved in the business.

The corporation (SA) has advantages for larger projects or when outside investors are expected, but higher running costs: it pays ICOSA every year (a fixed annual amount), requires more complex governance and is subject to more formalities, including AIN review of its articles.

Finally, a sole proprietorship or simply renting as an individual can work for very small operations. An individual who only rents out property is usually taxed under IRPF on capital income (12% on net rental income, with withholding mechanisms when rented through agents), while providing lodging services with a business organisation may be treated as a business activity. In both cases there is no limited liability. To decide which legal structure to choose, analyse your specific situation with professionals.

Taxation: IRAE, VAT and Other Taxes

The tax regime is key to assessing net returns. Companies operating short-term rentals are subject to several taxes, and the treatment varies depending on whether the property is rented as such or with lodging services.

IRAE: Corporate Income Tax

All commercial companies (SAS, SRL, SA) pay IRAE at 25% on net taxable income. Net income is calculated by deducting allowable expenses from total income: depreciation of the property, maintenance, utilities, salaries, professional fees, insurance, commissions, financial expenses, etc. IRAE is paid in monthly advances and settled annually at year-end.

Keeping tidy accounts is important, since any expense without supporting documents may be challenged in an audit and increase the effective tax burden.

VAT: When Does It Apply?

This is the most delicate point. Leasing real estate is in general exempt from VAT. However, when the property is offered with lodging services (cleaning, change of linen, breakfast, reception, etc.), the operation may be treated as a lodging or hotel-type service, which is subject to VAT — lodging services are generally taxed at the reduced rate, and specific rules apply to services provided to non-resident tourists.

In practice, many short-term rental operations in Uruguay offer furnished, equipped properties with periodic cleaning and guest services, so it is essential to analyse with your accountant whether your operation is a simple lease or a lodging service, which VAT rate applies and how to invoice. If the operation is purely a lease (without services), it is exempt.

It is common for foreign investors to overlook this point and operate without invoicing or without settling VAT, which creates a risk of audits, fines and retroactive adjustments. Operating correctly from day one is the condition for professionalising the business and scaling it without surprises.

Other Taxes: Wealth Tax and Municipal Charges

Wealth Tax applies to companies’ net taxable assets at 1.5% a year, and property held for rental forms part of that base. This should be planned carefully, especially if you plan to buy several properties in the same company or the property has a high valuation. See our article on corporate wealth tax in Uruguay.

At municipal level, the property pays Property Tax (Contribución Inmobiliaria) regardless of whether the owner is an individual or a company, and municipal fees may apply depending on the activity and location.

Mandatory Permits and Registrations

In addition to incorporation and registration with DGI and BPS, operating legally in short-term rentals and tourism requires specific authorisations.

Ministry of Tourism Registration

Businesses providing tourist accommodation must register with the Ministry of Tourism (MINTUR) in the corresponding registry. This includes hotels, apart-hotels, hostels, cabins and tourist complexes and, depending on how they operate, short-term rentals with complementary services. Registration allows you to operate and promote yourself as a legal tourism provider.

Registration involves meeting minimum requirements for infrastructure, safety, hygiene and accessibility. The Ministry carries out inspections and assigns the corresponding category. Operating without registration when it is required can lead to administrative penalties and problems with booking platforms, which increasingly ask for proof of compliance.

Municipal Authorisation

Depending on the municipality, a municipal authorisation may be needed for tourist accommodation. In Montevideo, for example, certain activities require a location feasibility study (Viabilidad de Localización), which assesses whether zoning rules allow the activity, and in some cases an inspection of the property.

In resort areas such as Punta del Este, José Ignacio, Colonia or La Paloma, each departmental government has its own rules. Before buying or renting a property, check whether the area allows short-term rentals with services and obtain the corresponding authorisation. Ignoring this step can lead to neighbour complaints, fines and even being unable to operate.

DGI and BPS Registration

Once incorporated, the company must register with DGI to obtain its RUT (tax ID) with the corresponding activity and taxes (IRAE, VAT, withholdings), and with BPS if it will have employees or its managing partners must contribute. Depending on the services it hires and the rules in force, it may also act as a withholding agent. These procedures can be done online through the “Empresa en el Día” system.

Day-to-Day Operation: Invoicing, Payments and Accounting

Once the company is incorporated, authorised and registered, day-to-day operations begin. Some practical considerations that make the difference between professional and improvised management:

• Mandatory electronic invoicing: every company registered with DGI must issue electronic invoices. Guests must receive an invoice for each stay. Booking platforms (Airbnb, Booking) do not replace the Uruguayan invoice: the company must invoice the guest or, where applicable, follow the documented intermediation arrangement.
• Periodic returns: IRAE advances and VAT are filed periodically with DGI. Missing deadlines leads to fines and surcharges. Keeping an up-to-date tax calendar is essential.
• Accounting and supporting documents: every expense you want to deduct must be backed by electronic invoices in the company’s name. New investors often mix personal and business expenses; this is not acceptable for tax purposes and can lead to audit observations.
• Separate bank accounts: a business bank account exclusively for the business makes accounting traceable. For foreign investors, see our article on opening a business bank account in Uruguay.
• Clear contracts: each booking should be backed by a short-term rental agreement setting out conditions, price, services, cancellation policy and guarantees. This protects both owner and guest in disputes.

If you hire staff (reception, housekeeping, maintenance), the company must be up to date with BPS, issue payslips, pay employer and employee contributions and comply with labour rules. Informal employment is one of the most costly and frequent mistakes in the sector, especially in high season.

Considerations for Foreign Investors

Uruguay is particularly attractive for foreign investors: there are no general restrictions on non-residents buying urban property, capital moves freely, many real estate transactions are carried out in US dollars, and there is legal and political stability. However, non-resident investors should pay attention to some specific points:

• Tax residence and taxation at home: Uruguay taxes income from property located in Uruguay regardless of the owner’s residence. If the investor is a tax resident elsewhere (Argentina, Brazil, Spain, etc.), they must check whether that income is also taxed at home and whether there is a double tax treaty or agreement. Uruguay has treaties with several countries — including Brazil (in force since 2023) and Spain — that generally allow the tax paid in Uruguay to be credited at home.
• Repatriating profits and dividends: dividends paid by the Uruguayan company to non-resident shareholders are subject to IRNR at 7% to the extent they come from income taxed by IRAE. There are no exchange controls on transferring funds abroad, but banks require clear documentation on the source of funds and the link between the distribution and the company’s financial statements.
• Local representation: the law does not require resident shareholders or directors, but if the partners live abroad it is advisable to have a local attorney-in-fact or manager who can sign documents and deal with DGI, BPS, banks and suppliers, especially in high season when urgent operational needs arise.

Frequently Asked Questions

Do I need a company to rent out a single property on Airbnb?

It is not mandatory. An individual can rent out a property and pay IRPF on the rental income. However, if the rental includes lodging services and is organised as a business, the tax treatment changes and formal invoicing is needed. Setting up an SAS is quick and inexpensive, so many owners choose to formalise from the start, especially if they plan to grow or want limited liability.

What happens if I rent without registering with the Ministry of Tourism?

If your activity requires registration and you operate without it, you may face administrative penalties and difficulties with booking platforms, which increasingly ask hosts for proof of compliance. Without registration you may also be unable to access certain benefits or financing lines for the tourism sector.

Can I hold several properties in the same company?

Yes, it is common and often convenient, as it centralises accounting, optimises shared costs (management, marketing, staff) and simplifies tax management. However, as the assets grow, review the impact of the Wealth Tax and consider whether to spread the properties across more than one company for organisational or asset protection reasons.

Conclusion: Professionalise Your Short-Term Rental Business from the Start

A short-term rental or tourism business in Uruguay can be very profitable, but it requires the right decisions from the start: choosing the right structure, understanding when VAT applies, obtaining the Ministry of Tourism and municipal authorisations where required and keeping the operation compliant with DGI and BPS. Improvising usually costs more, through penalties, unpaid VAT or non-deductible expenses. At sociedadesanonimas.uy we have incorporated more than five hundred companies and can help you choose the right structure, handle the corporate and tax procedures and have your rental business operating correctly from day one.

Note: the information in this article is general and does not constitute legal or tax advice.