Benefits and Ways to Otain It
Uruguay has updated its tax residence regime through three recent normative changes. On the one hand, two new ways have been established to obtain it. In addition, the exemption period for new tax residents has been extended (tax holiday) from five to ten years.
Ways to Obtain Tax Residence in Uruguay
In June 2020, two new ways to obtain tax residence were added:
a. Investments in real estate with a value of more than USD 510,000 if they are made from July 1, 2020. Along with this investment, a stay of at least 60 days in Uruguay is required in the calendar year.
b. Direct or indirect investment equal to or greater than USD 2,180,000* in a company that generates at least 15 new jobs. The investment must be made from July 1, 2020.
Without prejudice to the above, the previous ways to obtain tax residence are still in effect:
c. Staying in Uruguay for more than 183 days in the calendar year (due to the calculation of sporadic absences, tax residence can be obtained between 140 and 150 effective days).
d. Investment in real estate with a value greater than USD 2,180,000* without the need for a stay in Uruguay.
e. Direct or indirect investment equal to or greater than USD 6,530,000* in a company that develops activities or projects that have been declared of national interest, in accordance with the provisions of the Investment Protection and Promotion Law (Law 16,906).
f. Generating income in Uruguay in a greater volume than in any other country (the comparison is between Uruguay and each country in which income is eventually obtained). The income generated in the country cannot be exclusively capital.
g. The person’s vital interests are based in Uruguay.
Advantages of obtaining tax residence in Uruguay
a. For individuals who became tax residents as of 2020, the country grants a ‘tax holiday’ during the first eleven years (the year in which tax residence was obtained plus a ten-year period). The individual is not subject to income tax on foreign-sourced income during this period.
b. In the twelfth year, only interest and dividends are taxed at a rate of 12%. To avoid double taxation, the regulation provides for an automatic tax credit for taxes paid abroad on such dividends or interest.
c. Other income, such as foreign-sourced rental income or capital gains from real estate and financial assets abroad, are not subject to taxation in Uruguay.
d. Alternatively, it is possible to choose not to be covered by the exemption for eleven years, in which case the individual will be subject to a reduced rate of 7% from the year in which tax residence is obtained.
e. Uruguay does not tax the ownership of assets abroad.
*The values are indexed units; the dollar value is approximate.
Benefits for individuals who have already acquired tax residency
Individuals who have already acquired tax residency in Uruguay and are in the exemption period or have already completed it, may request an additional exemption period of 5 years, conditioned upon proving a real estate investment in Uruguay of at least USD 510,000 and registering a stay in the country of at least 60 days.
Details:
- Tax residency is a dynamic condition; each year in which one wishes to prove tax residency in Uruguay, one must fulfil any of the mentioned causes.
- The tax residency certificate is the document that proves that an individual is a tax resident of a country each year and is obtained on an annual basis.
- Tax residency is independent of legal residency. It is possible to be a tax resident and not a legal resident, and vice versa.
- The value required for real estate or business investment causes is personal and individual.
Andersen in Uruguay
Our firm has a team of over 90 professionals who provide support and consultancy to foreign investors, under the standards of excellence that Andersen represents globally.
Our areas of practice include:
- Legal, corporate, and litigation advice.
- Tax and accounting advice.
- Notarial advice.
- Legal and tax residency.
We have three offices in Uruguay: Montevideo, Aguada Park (Free Trade Zone), and Punta del Este.
To obtain further information and answers to frequently asked questions, please visit our website’s Fiscal and Legal Residence section (https://uy.andersen.com/residencia-uruguay.php) Or consult our professionals.
Juan Federico Fischer
Cecilia Ricciardi
Juan Ignacio Troccoli
Montevideo, March 2023.