Tax residency in Uruguay

With the country’s new administration having recently approved the tax residency system in Uruguay, as a result new paths to obtain tax resident status and announcing legislation to double the current tax holiday period granted to new tax residents, to ten years.

• The two new paths to tax residency in Uruguay are the following
• The preexisting alternative paths to tax residency remain in place
• Benefits of obtaining Tax Residency in Uruguay
• Additional Upcoming Changes

Uruguay has historically granted local and foreign investors equal treatment and most importantly, it has implemented generous tax incentive schemes for companies investing in the country.

It has an open immigration policy, furthermore, the country favours the relocation of individuals and companies to Uruguay through various policies.

The two new paths to tax residency in Uruguay are the following:

1. Making a real estate investment of USD 380,000* or more, from July 1st, 2020 onwards, plus spending at least 60 days in the country during the calendar year.

2. Making an investment (directly or indirectly) in any company, of at least USD 1,650,000*, plus generating 15 new jobs. The investment must be made from July 1st, 2020 onwards.

The preexisting alternative paths to tax residency remain in place. They are:

3. Spending at least 183 days in Uruguay during the calendar year (given the way that short-term absences are accounted for, one can meet the requirement by spending 140 to 150 days in the country).

4. Making a real estate investment of USD 1.650.000* or more, without the need to spend time in the country.

5. Making an investment (directly or indirectly) in any company, of at least USD 4,950,000*, as long as the company’s investments have been declared of ‘national interest’ under an Investment Promotion Law which grants tax breaks to new investments (Act 16,906).

6. Generating higher income in Uruguay than in any other country (the comparison is made vis-à-vis other countries where the person generates income). Moreover, to qualify, the income generated in Uruguay cannot passive capital investments (i.e. real estate which generates rental income).

7. When the person’s ‘vital interests’ are located in Uruguay.

* The amounts are set in adjustable units; the U.S. dollar figures are approximations, but do not vary significantly over time.

Benefits of obtaining Tax Residency in Uruguay

During the first six years of tax resident status (the year in which the person obtained the status, plus an additional five), Uruguay grants a tax holiday: no foreign income is taxed.

From the seventh year onwards, Uruguay will tax only two types of foreign income: interest and dividends, at a 12% rate. And to avoid double taxation, the country automatically credits any taxes paid overseas over those dividends and interest.

Any other type of foreign income (lease income or capital gains, for example) is not taxed in Uruguay. And the country does not levy any asset or property tax on foreign assets.

Additional Upcoming Changes

In addition, Uruguay’s new administration has sent a bill to parliament (set for approval, shortly) extending the tax holiday period to ten years (versus the current five years). Or, alternatively to having a ten-year tax holiday, one may choose to be taxed at 7% (on foreign interest and dividends) when one acquires tax residency.

Lastly, those who are already tax residents and are under the current five-year tax holiday period may choose among both options, subtracting the elapsed time.

Juan Federico Fischer | Cecilia Ricciardi Juan | Ignacio Troccoli