Last updated April 7, 2022
Dateline: Kuala Lumpur, Malaysia
If you’re looking for safety and low tax rates, there aren’t that many countries in the Americas that offer you both. But don’t worry, there are still some, including Uruguay.
Central and South America are often noted amongst the easiest countries to get a residence permit, and for good reason. For example, Panama’s Friendly Nations Visa program allows almost any westerner to become an instant permanent resident and apply for natural citizenship (naturalization) after five years.
Uruguay has a history of being an easy country in which to get legal citizenship. And by easy, we mean easy to qualify, easy to get approved, and easy to obtain citizenship — as long as you’re willing to put in the days to physically be there, that is.
However, with the tax exemptions that Uruguay offers to residents, it’s not a bad place to invest your time — citizenship or not.
If you find yourself interested in the “Switzerland of South America,” read on to find out more about Uruguay’s residence programs, tax breaks, and caveats for citizenship to determine if it’s the right place for you to plant a flag.
WHY URUGUAYAN CITIZENSHIP?
Uruguay is a country that is not talked about enough but has a great passport, and there are several different roads to residency. Plus, it is considered to be safe, calm, and has fantastic coastlines.
Uruguay is even arguably in the top five countries for expats better than New Zealand.
Located deep in South America, Uruguay is a relative bastion of economic freedom, especially when compared to regional neighbors like Argentina and Bolivia. Banks in Uruguay are reputable and while opening a bank account has gotten harder, it is not a bad place to deposit cash.
In fact, Uruguay doesn’t even feel like South America; beach towns like Punta del Este go crazy in the southern hemisphere’s summer months as rich Brazilians and Argentinians flood the beaches just as the jet-set elite flood Monaco in the European summer.
There are several cities to consider if you decide to live in Uruguay, such as Montevideo, Littoral, Coastal Uruguay, Atlantida, Piriapolis, and Punta del Este. Quiet countryside exists too if you’re looking for more tranquil options. In fact, if living on a farm is more your speed, you can benefit from investing in farmland in Uruguay. You will just want to ensure that you’re up to date on any potential water contamination issues or drought conditions.
Overall, Uruguay is a great country to consider for a second residency. From an easy application process to tax exemptions, to beautiful beaches – how can you go wrong?
HOW TO GET RESIDENCY IN URUGUAY
Uruguay is one of the best second residencies in Central and South America. In 2020, Uruguay even introduced a new Tax Resident Act to attract more people to become residents. Our R&D team is now very familiar with this program.
Getting a second residency in Uruguay is relatively straightforward; anyone with a monthly income of $1,500 can qualify, although the minimum amounts are higher than in Central American countries due to the higher cost of living.
If you are a family of four, the main applicant having an income of $2,000 is permissible. It’s advisable that the minimum income for a family of four be a total of $3,000 and/or over.
Married couples are at an advantage when obtaining residency in Uruguay, as “families” are invited to apply to become natural citizens after three years of residency. Single residents must wait five years to apply, according to Uruguayan law.
That puts the Uruguay residency program on par with Panama, Nicaragua, and many European countries in terms of wait time for single filers, and on par with Paraguay and Armenia for those who are married or have families. In fact, Uruguay is among the fastest options to get a second passport.
But not so fast.
Uruguay imposes steep physical presence requirements that countries such as Paraguay do not. My contacts who have Uruguay residency tell me that they were expected to spend at least 9-10 months in the country in their first year.
That means any business trips, trips to see family, or leisure travel must be jammed into two months in the first year. On an ongoing basis, Uruguay immigration expects you to be physically present in the country for at least six months every year to qualify for citizenship.
A recent program does offer an alternative. The new equity option that the Government of Uruguay rolled out in 2020 allows people that have their main economic interests in Uruguay to become tax residents by investing in real estate or an enterprise while spending a minimum of 60 days per year in-country.
Still, there is an upside to spending so much time in the country as Uruguay offers several tax incentives such as residence tax breaks, tax exemptions, and a tax-free holiday.
Otherwise, the 60-day option does come with a price tag.
HOW TO GET URUGUAY CITIZENSHIP?
The Uruguay passport is a rather good travel document, allowing the customary passport-free access to all of South America and MERCOSUR as well as visa-free access to Europe’s Schengen Area.
For four years at the beginning of the century, Uruguay citizens even enjoyed “visa-free” access to the United States via ESTA. The fact that Uruguay has among the highest incomes per capita in the Americas helped make that possible.
An Uruguayan passport no longer grants such access, but with very high visa approval numbers, Uruguay is once again a “roadmap country” being considered for visa-free access to the US again.
In short, Uruguay has a good passport. Add that to a friendly tax regime and you’ve got a sure-fire winner for your second passport… or so you’d think.
The road to Uruguay citizenship starts the same way the road to other Latin citizenships does: getting second residency and letting the hourglass shift away.
Applying for legal Uruguayan citizenship requires that you show proof that the country is your center of life.
Uruguay is NOT the place for “paper residency” where you can fly in and come back every once in a while before applying for naturalization, unless you choose the newest equity option.
While Uruguay is now keen on recruiting new residents, it is yet to be seen if this mindset translates to citizenship as well.
Past accounts suggested that not even those who have obviously made the place their only home can become Uruguayan citizens.
Sadly, Uruguay may not be the best country to get a second passport. The challenge is that Uruguay previously developed a reputation for not naturalizing foreign nationals who ask for it based on the guidelines.
TAXES ADVANTAGES IN URUGUAY
Proper tax credits and tax treaties can be used to your advantage to make sure you’re not double-taxed when moving to another country. However, only certain countries in the Americas offer tax-free options.
Uruguay happens to offer several tax benefits, which makes becoming a legal resident or a legal citizen one of the easiest ways to pay less taxes.
Let’s review how these can work in your favor.
URUGUAY TAX RESIDENCE
To qualify for tax residence in Uruguay, a person must meet one of the following requirements, as of 2020:
- Days Test: The person stays more than 183 days in Uruguay in a given year. These days must be consecutive, minus the exception of two “temporary absences”. Temporary absences count as a 21-day absence within a 30-day period and can occur twice within the year. Once a person fulfills the days test, they can request a Tax Certificate, which would allow them to leave the country.
- Family Ties: If the center of a person’s activities or vital interests are located in Uruguay, they can become a tax resident even if they don’t fulfill the days test. For instance, if a person’s spouse and children live in Uruguay and attend school there, that person can be eligible for tax residence.
- Equity: For a person to become a tax resident by having main economic interests in Uruguay, they must invest in real estate or an enterprise and stay in Uruguay for at least 60 days per year. The minimum amount accepted for a real estate investment is $390,000. The minimum amount for an enterprise is $1.7 million, so long as that company also creates 15 jobs throughout the year.
THE URUGUAY TAX-FREE HOLIDAY
Those that move their tax residence to Uruguay are eligible for a tax holiday on their foreign-sourced financial income. As of 2020, a tax residence act extended this holiday from six years (five years + the year they became a tax citizen) to 11 years. After that, tax residents will pay a standard 12% personal income tax on foreign interest and dividends.
That means that Uruguay tax residents can live tax-free on any foreign-sourced income for 11 years.
Tax residents can also opt for a permanently reduced personal income tax of 7% rather than the 11-year tax exemption.
URUGUAY TAX INCENTIVES
Uruguay offers a host of tax incentives by industry. One such example is a tax exemption on investments in infrastructure, which can then benefit the tourism industry.
These exemptions can apply to hotels, resorts, and other establishments that qualify and include:
- An exemption from VAT. This can be on purchases of materials or equipment that were imported to equip or build the establishment. Or a VAT credit can be obtained for materials or equipment that was bought locally for the same purpose.
- A special depreciation for IRAE purposes
- An exemption from net worth tax for 10 years
STEPS TO OBTAINING RESIDENCY AND CITIZENSHIP IN URUGUAY
Once a permanent residence is granted in Uruguay, you are usually allowed to stay indefinitely.
To apply for residency, you will need the following national public documents:
- Identity Document that you entered the country with
- Entry visa (if your country requires it)
- Health card issued in Uruguay
- Vaccination certificate
- Clean police record
- Birth certificate registered in the Civil Status Registry
- Marriage certificate (optional)
- Proof of income
- Proof of address and intention to stay
- A passport-sized photo
- The current application fees
Note that all documents that are not written in Spanish need to be translated by a sworn translator in Uruguay, with an official stamp.
Once you arrive in Uruguay, you have two options for filing your residency application. You can file it through an online portal or you can file it at your city’s National Migration Office (NMO).
If you choose to file it in person, you will need to first book an appointment at the National Migration Office. On average, your appointment will be four to six months later.
While the process may differ slightly per city, you can expect to file all of your documents with the NMO on the day of your appointment. Your file will go through several stages, with the final answer generally coming in 12 to 18 months.
As for citizenship, the good news is that Uruguay allows multiple citizenships.
After you have been a resident for three to five years – three years if you’re married and five years if you’re single – you can apply for citizenship. The start date is the day that you arrived in Uruguay to file for residency.
To file for citizenship, you will need the following documents:
- Birth certificate
- Uruguay permanent resident certificate
- Proof of residence and social integration
- Proof of identity
- Proof of income
- Current application fee
Once you have gathered all of the necessary documents, you can file your citizen application with Uruguay’s Electoral Court. Depending on which office you choose to file at, you may need to make an appointment beforehand.
Generally, citizenship is granted within six months and a passport is issued.
THE PROS AND CONS OF URUGUAY RESIDENCY AND CITIZENSHIP
THE PROS OF URUGUAY RESIDENCY AND CITIZENSHIP
Easy residency. In the past year Uruguay has started to recruit foreign residents by creating even more tax incentives. This means that they are open to immigration and welcoming more people into their country. Plus, obtaining a resident status is a pretty straightforward process.
European lifestyle. Due to its close historical ties with Europe, Uruguay not only feels a lot like Europe but it also has some of the benefits of a high-class second passport. It is even referred to as “The Switzerland of South America”. During the summer, beach towns can even be likened to Monaco as wealthy tourists from the continent vacation there.
Tax advantages. Tax resident benefits in Uruguay are some of the best in the Americas. Not only will you get a tax holiday for several years but you will pay a low percentage on foreign-sourced income after that.
A good passport. Having a Uruguay passport will allow you passport-free access to all of South America and MERCOSUR, as well as visa-free access to Europe’s Schengen Area. In the future, it may also allow you visa-free access to the US.
Economic freedom. With political and economic stability, an open economy, and a solid banking system, Uruguayan residents can enjoy freedoms that not all countries in the Americas offer.
Location, location, location. Uruguay is one of the few countries that sits above the Guarani Aquifer, which is an extensive reservoir that contains an impressive amount of water. This is important as water can play a key role in agriculture and farmland investments.
THE CONS OF URUGUAY RESIDENCY AND BEING A LEGAL CITIZEN
Physical residence requirement. Unless you opt for the new equity option, Uruguay expects its residents to live in the country for the majority of the time. If you’re a global nomad or often do business the world over, then this option may be limiting for you.
Citizenship realities. While it may become easier to bypass processing roadblocks for Uruguayan citizenship, the past has proved that it is more difficult than it looks.
Cost of living. With a great location, beautiful beaches, economic freedom, and a European lifestyle comes a higher cost of living. In Uruguay’s case, it is only slightly higher, so you shouldn’t need to worry too much.
Visas for US travel. While Uruguay legal citizens were once able to enjoy visa-free access to the US via ESTA, this is not currently the case. Though, they may be considered again in the future.
URUGUAY RESIDENCY AND LEGAL CITIZENSHIP – FAQs
Who is eligible to become a resident in Uruguay?
Anyone can apply for residency in Uruguay, given that they meet the Days Test, Family Ties, or Equity requirements.
How long does it take to get residency in Uruguay?
Once you apply for residency in Uruguay, it will usually take 12 to 18 months to get approved. After that, you’ll be allowed to stay indefinitely.
Can I obtain Uruguayan citizenship via the residence program ?
After you have been a resident for 3 to 5 years, you can apply for Uruguay citizenship.
How can I get an Uruguayan passport?
To obtain an Uruguayan passport, you will need to successfully become an Uruguayan citizen.
Do I have to live in the country to qualify for residency?
Uruguay has strict rules for how many days you need to spend in Uruguay per year to qualify for resident status. Unless you choose the new equity option, you will be required to spend at least 183 days per year in Uruguay.
Do I have to pay taxes in Uruguay?
Some of the best tax breaks in the Americas are found in Uruguay. If you’re a tax resident, you can enjoy living tax-free for up to 11 years through a tax holiday program. After that, you’ll only pay a minimal percent on foreign-sourced interest and dividends.
Are there alternative ways to get residency in Uruguay?
In 2020, Uruguay introduced a new Tax Residence Act that allows people to become tax residents through a real estate or enterprise purchase. There is a price tag associated with this choice, but it is an option.
Do you think Uruguay is right for you?
If you are a global nomad or need to attend to business in various parts of the world, Uruguay may not be the best fit due to the time investment requirements. However, with the latest equity option rolled out in 2020, there may be an option for travelers like you yet.
On the other hand, if you don’t mind being physically present in Uruguay for the majority of the year, obtaining residency in Uruguay may not be a bad idea. It is possible to live there full-time and still pay no tax on worldwide income for eleven years, making it a great flag to plant as your primary residence in many cases.
Plus, with all those days in-country, you’ll have time to explore the quiet countryside, fantastic coastlines, and Monaco-esque beaches. All the while living tax-free.
However, you may want to reconsider if you’re seeking a passport. At least until their citizenship laws catch up to the new tax resident mindset.
If you’re a seven-or-eight-figure entrepreneur and convinced that the “Switzerland of South America” is right for you, reach out to the Nomad Capitalist team so we can help you consider what type of Uruguay tax resident you want to be.