To attract more foreign investment to the country, Uruguay has made it easier to become a tax resident there. If tax reduction is your objective, the favorable tax rates offered by this South American country could be an option worth exploring. You can learn more in our Ultimate Guide on Uruguay Citizenship and Residence.
Look elsewhere if your home country doesn’t provide you with the tax breaks you’re after. Uruguay welcomes new tax residents, and you will likely find the fiscal authority more generous, including market value-dependent property tax between 0.25% and 1.2%.
Nomad Capitalist deals with plenty more tax-friendly jurisdictions. We help HNWIs legally lower their taxes as part of a structured, holistic plan. We’re here to serve you.
Keep reading to find out more about tax residency in Uruguay, benefits, and requirements.
Uruguay sits between Argentina and Brazil and is situated on the southeastern coast of South America. Montevideo is the Uruguayan capital, and the country’s estimated population in 2023 is 3,500,000.
A Southern Hemisphere country, Uruguay enjoys a midwinter in July. Its temperatures don’t go below 50°F (10°C). The thermometer in midsummer January can hit 80°F (26°C) and above, though.
Uruguay enjoys a GDP per capita in South America that is surpassed only by Chile. That’s thanks to a surplus of beef and wool, which have attracted a global following. Bullish president Luis Lacalle Pou claims the Uruguayan economy is growing at almost twice the rate as the international one.
Uruguay is an interesting destination for foreign investors. Taxes in Uruguay are based on the source principle, so the General Taxation Directorate does not tax foreign-source income and assets located abroad.
These benefits of tax residence in Uruguay are that there is a “window period” of not being required to pay taxes on foreign income or the other option, to waive this window period and pay just 7% on foreign income and dividends.
The window period is 11 years (10 years plus the year you become a tax resident), for which time individuals are not required to pay taxes on any foreign income, so although Uruguay is technically a country that would require this, thanks to these exemptions, there is no tax payable. After the 11-year period, 12% is payable on all foreign dividends and interest. Alternatively, there is an option to waive the window period, and you pay 7% on foreign dividends and interest as long as the individual is a tax resident.
The other advantage is accessible tax residence in Uruguay, with no requirement for spending much time in the country, which is ideal for people who frequently travel.
A very unique feature of the tax system is there is no double taxation: Uruguay credits taxes paid overseas on those dividends and interest.
Become a Nomad Capitalist client, and our team will help you legally reduce your tax rate offshore, protect your assets, invest overseas, and obtain a second citizenship.
So in order to become a tax resident and realize all of the benefits listed above, you either need to spend 183 days, purchase property there, or make a business investment and create 15 jobs.
The Uruguayan Tax System includes indirect and direct taxes, generally defined by the source of income. Indirect taxes are the main source of government revenue.
Individual income tax is charged on income obtained by residents and non-residents in Uruguay. This includes any earnings from work done, property owned, or rights economically used in Uruguay. Depending on certain conditions, income generated outside Uruguay may also be subject to tax.
Uruguayan income tax is progressive, with rates ranging from 10% to 36%. Few expenses count as deductions (social security contributions and expenses for dependent children’s basic needs), so most income is taxed.
To be considered for the tax, a person must have resided in Uruguay for more than 183 days in the tax year, have their headquarters located or activities based in Uruguay, or have the center of their economic interests in the country.
The Income tax on non-resident individuals (IRNR) is charged at rates that vary from 7% to 25% depending on the type of income earned. Income earned by those located in low or no tax.
If you receive domestic income from Uruguay, personal income tax is charged directly on the income earned by individuals who live in there for more than 183 days out of the calendar year, have their primary operations or business based in the country, or consider Uruguay to be the center of their economic and vital interests.
Unless another country has recognized fiscal residency, an individual is regarded as a tax resident in Uruguay if economic activities are centered there.
There are two additional ways to become a tax resident:
- by buying property worth $380,000 or more and staying in the country for at least 60 days a year.
- by investing over $1.6 million in a company that creates at least 15 jobs.
Becoming a tax resident in Uruguay might work for you. Or maybe another jurisdiction makes more sense, and it largely depends on what exactly you are looking for.
Are you looking for a base in Latin America? Are you looking for an offshore jurisdiction with lower taxes? Or perhaps you’re looking for emerging markets to invest in real estate.
Whatever you’re looking for, our global team have wide-reaching expertise across multiple jurisdictions to help you find the best solutions for your needs. Contact us today about creating your own holistic Action Plan.
Yes, there are certain taxes you are liable for, and you won’t be happy to learn that there is no tax treaty in place between Uruguay and the US.
If you’re a resident of Uruguay, you’ll owe tax on both Uruguay and foreign-earned income.
However, non-residents are only taxed on income earned in Uruguay. Non-residents are not taxed on their foreign-earned income.
Yes. Uruguay doesn’t touch any investments and activities made outside the country. So, there is no outside income tax in Uruguay. The Financial Inclusion Law offers a 4% tax deduction on debit cards and 2% on credit cards.
Uruguay imposes a 12% withholding tax (WHT) on Uruguayan-sourced income obtained by non-residents, except in cases where the income is obtained through the operations of a Permanent Establishment in Uruguay.
We can advise you on a whole lot more than Uruguayan tax rates. As a Nomad Capitalist client, we can advise you on a wide range of options to help you find an offshore solution that fits you best.