- Primary Tax Form for Residents: Declaración Jurada (DGI Form 1102)
- Tax Year: January 1st to December 31st.
- Tax Deadline: April 30th.
- Currency: Uruguayan peso (UYU)
- Population: Approximately 3.5 million
- Capital City: Montevideo
- Primary Language: Spanish
- Tax Treaty with the US: No
- Totalization Agreement: Yes
Firstly, physical presence in the jurisdiction for at least 183 days. Note that the calculation of the 183 days Uruguayan authorities does not discount transitory departures of the individual from the country. According to the national government, “transitory departures” are considered to be those that are for less than 30 days and in exceptional form.
Secondly, tax residence can be triggered by establishing in Uruguay the base of economic activities. That means, the individual must believe that he/she generates higher incomes in Uruguay than in any other country. However, the regulations expressly exclude income considered to be pure capital. Therefore, these incomes must be due to activities and work carried out in Uruguayan territory.
Thirdly tax residence can be triggered by making Uruguay the center of “vital interests”. In this country there is a presumption that a person has the basis of his/her vital interests in Uruguay when his/her spouse and, where applicable, the minor children under his/her parental authority usually live in the Uruguayan territory.
The main taxes in Uruguay are:
- Income tax: Income tax is levied on individuals and businesses on their income from Uruguayan sources. The income tax rates for individuals range from 0% to 36%, depending on the level of income. Businesses are subject to a flat income tax rate of 25%.
- Value-added tax (VAT): VAT is a consumption tax that is levied on most goods and services sold in Uruguay. The standard VAT rate is 22%, but there are reduced rates of 10% for certain essential goods and services, and an exemption for exports.
- Wealth tax: A wealth tax is levied on individuals with a net wealth of more than UYU 10 million (approximately USD 250,000). The wealth tax rates range from 0.7% to 2.75%, depending on the level of wealth.
Uruguay has a number of tax treaties in place with other countries, which can help to reduce the overall tax burden on taxpayers. Uruguay also has a number of special tax regimes, such as the free zone regime and the software development park regime, which offer additional tax benefits to businesses.
Uruguayan residents are taxed on all their income generated in country. However, since 2011 Uruguayan residents are also taxed on the income generated by some investments abroad considered “movable assets,” including securities, loans, deposits in bank accounts, etc. So dividends and interests paid to them from abroad by firms and individuals.
However, since 2012 there is a 10 year exemption (or “tax holiday”) on foreign income for the first 10 years of tax residence.
Alternatively, a taxpayer can elect to be taxed on their income from movable assets abroad at the rate of 7% (instead of 12%, which is the standard tax rate for this type of income), without a time limit.
Therefore, a new tax resident in Uruguay will have the choice of (a) not being taxed on his/her income from abroad (dividends and interests) for a maximum of ten years after the year when he/she became resident; or (b) paying income tax for dividends and interests paid from abroad at the rate of 7% since the year in which he/she became resident and as long as he/she maintains the status of fiscal resident -which may be well beyond the 10 years of the tax holiday.