Uruguay – Tax residence options

Tax residence in Uruguay is regulated by the regulations regarding the Personal Income Tax (IRPF), Title 7 of the Ordered Text of 1996 and Decree 148/007. Unless the taxpayer proves his tax residence in another country by means of a tax residence certificate issued by the competent tax authority of that State, he will become a tax resident in Uruguay if he meets one of the following conditions:

1. That you stay in Uruguay for more than 183 days in a calendar year. To determine said period of permanence, all the days in which an effective physical presence is registered in Uruguay will be considered, regardless of the time of entry and exit (not counting those days when the person is a passenger in transit), and absences sporadic that according to Decree 148/007 will be those that do not exceed 30 calendar days, or
2. When the main nucleus or base of its activities or of its economic or vital interests reside in national territory. Regarding this cause, it is necessary to make some clarifications;

a) A person will be considered to have his or her vital interests in national territory, when the spouse and minor children who depend on him or her reside habitually in Uruguay, provided that the spouse is not legally separated and the children are subject to homeland. power. Establishing that in the event that there are no children, the presence of the spouse will suffice.

b) It will be understood that a person has in the national territory the main nucleus or the base of his activities, when he generates income in the country of greater volume than in any other country, not establishing the existence of the base of his activities when they are obtained exclusively pure capital rentras, even when all of their assets are located in Uruguay.

c) On the other hand, regarding the causal of economic interests, the regulation establishes that a person will be considered to be the basis of his economic interests in Uruguay, when he has in Uruguayan territory, an investment:

i) In real estate with a value greater than 15,000,000 indexed units, approximately USD 1,800,000 (US $ 1,800,000). Considering for these purposes the updated tax cost of each property.

ii) Direct or indirect, in a company with a value greater than 45,000,000 indexed units, approximately USD 5,400,000 (five million four hundred thousand US dollars), which includes activities or projects that have been declared of national interest, in accordance with the provisions of Law No. 16.906 of January 7, 1998 and its regulations. To determine the amount of the investment made, the valuation rules of the Income Tax of Economic Activities will be considered.

Practical considerations for the option of real estate.

• The properties must be purchased in the name of the natural person applying for tax residence, legal entities must not be used to acquire real estate.
• To calculate the updated fiscal cost, the purchase price of the property or properties must be considered, regardless of whether the purchase of the same is current or past, considering duly documented improvements for the calculation of the fiscal cost.
• The Certificate of Fiscal Residence can be obtained the following year, provided that, as of December 31 of each year, the person still owns the property. In this regard it is precious to mention that according to the consultation No. 6,038 issued by the General Tax Directorate dated July 20, 2017, it is not necessary to have the final purchase deed, just having signed and registered the promise of sale will be enough to apply the causal.
• There are no limitations for real estate to be rural or urban.
• The Certificate of tax residence can be obtained regardless of the method of financing purchases, the total price does not have to be fully paid to make the application.
• If the properties have been acquired in USD, for the purposes of calculating the value of the properties in UI, the exchange rate of the interbank dollar established by the BCU at the close of the day prior to the date of purchase of the estate.

Tax Holiday or Fiscal Holidays

In accordance with the provisions of article 6 Bis of Title 7 of the Ordered Text of 1996, people who obtain their status as tax residents in Uruguay, may choose to pay the Income Tax of Non-residents, for the fiscal year in which the change of residence to Uruguay is verified and during the following five fiscal years. Said option may be made exclusively in relation to the movable capital yields.

Regarding income from movable capital, it should be mentioned that as of January 1, 2011 in Uruguay, the extension was approved according to the source criteria, which until now was purely territorial. Establishing then that the income from movable capital from deposits, loans and in general from all capital or credit placement of any nature, obtained abroad, will be taxed by personal income tax.

Therefore, those who obtain fiscal residence in Uruguay will be exempt from taxing such income during the period previously described.