New Law Improves Access to Tax Residency in Uruguay

In June 2020, a new decree was introduced to improve access to tax residency in Uruguay. The country is considered one of the most favorable places to obtain residency and a second passport. Uruguay is characterized by being a country open to investment with a migration policy that provides a framework of public, legal and economic security for foreign nationals. The scheme has been a success so far.

On 11 June of that year, President Luis Lacalle Pou announced Decree 163/20 in order to make the requirements for obtaining tax residency in Uruguay more flexible. A natural person who meets new eligibility requirements based on economic interest such as company formation in Uruguay can obtain tax residency in the country.

Key points from Decree 163/20 to obtain tax residency in Uruguay

The new Decree outlines 2 key conditions to obtain tax residency in Uruguay:

1. Investment in properties for a value greater than UI$3,500,000 (approximately USD$370,000) and an effective presence in Uruguayan territory for 60 days in the calendar year.
2. Direct or indirect participation in a company with a value greater than UI$15,000,000 (approximately USD$1,585,000) and that generates at least 15 new direct jobs in a dependent employment relationship.

Previous regulations for tax residency

Previously, Uruguayan regulations established that a natural person will be considered a tax resident in Uruguay if they could meet one of the following conditions:

• That the person remains in Uruguayan territory for more than 183 days during the calendar year. Sporadic absences that do not exceed 30 calendar days will still be counted in this calculation unless the person has proven tax residence in another country.
• That the base of the person’s activities or their economic or vital interests reside in national territory.

Note: In this context, the vital interests correspond to a person who habitually resides in Uruguay, their spouse and minor children

Economic interests correspond to a person whose activities generate a higher volume income from within the country than in any other country.

As a tax resident, the person’s investment meets one of the following characteristics:

Economic interests for investment in real estate

An investment in real estate valued at more than UI$15,000,000 (approximately USD$1,585,000), taking into account the updated fiscal cost in accordance with the Personal Income Tax (IRPF) regulations.

Economic interests for investment in a company with a promoted project

An individual who directly or indirectly owns an investment in a company for a value greater than UI$45,000,000 (approximately USD$4,755,000) and that said company owns activities or projects that have been declared of national interest according to the investment law.

New conditions for investments and tax residency

Following the above, decree 163/20 introduced additional eligibility criteria to obtain tax residency through investment:

1. Economic interests for investment in real estate plus presence in Uruguay

Possess an investment in real estate worth more than UI$3,500,000 (approximately USD$370,000) and an effective presence in Uruguayan territory of 60 days in the calendar year. The norm also establishes that in the event that no new acquisitions are made, the updated fiscal cost of each property will be considered.

2. Economic interests for company investment plus job creation

Possess direct or indirect participation in a company with a value greater than UI$15,000,000 (approximately USD$1,585,000) and that generates at least 15 new direct jobs in a relationship of dependency, full-time, in the calendar year and that do not imply a decrease in jobs in related companies.

In applying for tax residency in Uruguay, be sure to consider the following elements:

• Complying with any of the aforementioned grounds makes a person eligible for tax residency in Uruguay. This means they must adhere to the Uruguayan tax regime
• In the case of economic causes for investments, they apply unless the taxpayer proves his tax residence in another country
• International agreements are taken into account in order to avoid double taxation
• Obtaining exclusively pure capital income, even when all assets are located in the Republic, does not qualify a person for tax residency. Their activities must correspond to remuneration for tasks carried out in Uruguay.

Agreement signed with Argentina

Uruguay signed an agreement with Argentina to support Argentine residents to obtain tax residency in Uruguay.

This agreement states that:

• The person will be considered a resident in Uruguay if they have permanent housing at their disposal
• If the person has a permanent home in both States, they will be considered a resident of the State with which they have closer personal and economic ties
• If the person’s vital interests cannot be determined, or if they do not have a permanent home available in either of the States, they shall be considered a resident only of the State where they habitually live
• If they habitually live in both States, or does not live in either of them, they shall be considered a resident only of the State of which they hold national citizenship
• If the person is a national of both States, or not of either of them, the competent authorities of Uruguay and Argentina will resolve the case by mutual agreement.

Biz Latin Hub can help you get tax residency in Uruguay

Due to Uruguay’s new tax regime, legal certainty and ease of moving capital and doing business inside and outside the country, Uruguay is a leading economy offering opportunities not easily found in South American countries. With this decree, the country expects to see greater levels of investment from foreign parties.

Biz Latin Hub, a global back office company with a local perspective, offers a full suite of multilingual market entry and back-office services throughout Latin America, including accounting and taxation services in Uruguay.

Our local legal and financial experts take due care to ensure that your business complies with local regulation and is in the best position to succeed. Contact our team for personalized information to obtain your tax residency in Uruguay.

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