Uruguay - Tax residence for staying in the country

As is already known, international removals have become in recent years one of the main tools for estate, tax and family planning. That is why in the following article we will stop to study one of the main reasons for obtaining tax residence in Uruguay and some practical aspects to consider when processing it.

As we have commented in previous articles, Uruguay, from its tax reform promoted in 2006, has differentiated the concepts of legal and fiscal residence and established incentives that have made them a very attractive jurisdiction when looking for where to establish the tax residence, especially for those citizens of neighboring countries such as Argentines and Brazilians. Among other stimuli promoted by Uruguayan legislation in this matter, we could mention the Tax Holiday – Fiscal vacations or its territorial tax system, beyond its legal security and political stability that has always characterized it.

On the one hand, in Uruguay legal residence is one that is linked to the place where an individual lives, granting, depending on what type of legal residence is obtained, certain civil rights in the country. While the fiscal residence will be the one that will determine what type of tax will be applied to a person and where it will be considered fiscally for the purposes of, for example, applying agreements to avoid double taxation.

General aspects for obtaining tax residence in Uruguay

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. To remain 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 vital interests in the 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 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 UI 15,000,000 (indexed units fifteen), approximately USD 1,800,000 (US dollars one million eight hundred thousand). Considering for these purposes the updated tax cost of each property.

II. Direct or indirect, in a company with a value greater than UI 45,000,000 (indexed units forty-five million), approximately USD 5,400,000 (US dollars five million four hundred thousand), 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.

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.

Practical aspects of staying in Uruguay

1. Considerations for counting the days of stay:

First, and as the regulations establish, it is important to mention that for the 183-day count, sporadic departures of up to 30 calendar days or less will be considered.

This means that if you have left the country for a period of 30 calendar days or less, these days that you stayed out of the country will count for the calculation of the 183 days, a number that must be reached in order to obtain the fiscal residence for the causal of the days.

Even the stays of a few hours in Uruguay will be computed for the count of 183 days, not so, the passengers who are in transit.

2. Certificate of Income and Expenses:

To verify permanence in the country, a certificate of income and expenses issued by the National Directorate of Migrations will be required, which will also allow a detailed count of the days of permanence before submitting it to the General Tax Directorate (DGI) for consideration. the application for the Certificate of Fiscal Residence.

3. Sporadic departures:

Regarding the criterion of sporadic departures, it is important to clarify that based on ruling 179/2019 issued by the Administrative Litigation Court (TCA), following a request for a Certificate of Fiscal Residence (CRF) processed before the DGI, What is the interpretation that the tax and administrative authorities give to this concept is established. Below, we leave you a brief explanation about the ruling issued and the criteria assumed by the authorities in Uruguay.

Specifically in this case, the person of Spanish nationality who sought to obtain the CRF presented documentation from which it emerged that he had physically stayed 76 days in the country, which added to the days he was out of it for periods of less than 30 calendar days, accumulated a total of 228 days in Uruguay.

In the first instance, the DGI understood that the word remain should be interpreted, indicating that it implies a situation of stability and duration over time and not something sporadic or accidental. Understanding then that the physical presence precisely requires the person’s permanence in the national territory, and that, although there is the possibility of computing sporadic departures of up to 30 calendar days, these should justly be occasional and sporadic, in isolation.

In this regard, and after having been rejected by the DGI the request presented by the Spanish citizen, and having exhausted the administrative route, he decided to start an action for annulment before the TCA. However, the situation continued unchanged and the TCA supported the criteria assumed by the DGI, maintaining firm the rejection of the request, maintaining that it is clear that the criterion of physical stay for more than 183 days in the country cannot cover situations where the Permanence becomes an exception, and sporadic absences lose their quality as they become the rule.

Therefore, and based on this ruling, we can argue that, although the regulations do not mention anything regarding departures of up to 30 calendar days, in the sense of the times that these can be carried out, it is not possible to assume an attitude where These departures are the rule in the person’s stay in the country, and the days when there is actually a physical presence there, are the exception.

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