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Taxes in Uruguay for expats: Which should I pay?
Discover the ins and outs of the Uruguayan tax system. These are the taxes in Uruguay for expats, for individuals and businesses.
Thinking about moving to Uruguay or spending a long time there? The truth is, it’s a very welcoming country for expatriates. It’s peaceful, full of opportunities, and has economic stability. As if that wasn’t enough, its benefits for new residents and foreign investors make it the perfect destination for those looking to take care of their finances. If you’re seriously considering relocating, you should first understand all the practical details awaiting you upon arrival. Today, we want to talk about one that will significantly affect your quality of life: Taxes in Uruguay for expats.
In this article, we will go over the tax obligations you will have when you arrive. The taxes you’d pay as an individual, but also if you want to invest or set up a business. We’ll also cover the benefits! Join us to find out if it’s financially advantageous for you to live in the Switzerland of America.
Types of Foreigners in Uruguay
Before talking about taxes, do you know what type of foreigner you are? Although it may seem obvious, it’s important to pause and fully understand this matter. This will determine your tax obligations, the applicable rates, and, in some cases, the tax benefits you might be entitled to. Knowing these differences is key to planning your finances and avoiding surprises in the future.
In Uruguay, as in many other countries, foreigners are divided into two main groups: Individuals and companies or properties. Each group has its own characteristics and responsibilities.
People
When we talk about individuals, we refer to people, not companies or organisations. These are people with names and surnames who work, generate income, own property, or participate in economic activities in Uruguay. Depending on their tax status, foreigners can be residents or non-residents. This is important because, in addition to giving you certain rights (like access to the Uruguayan healthcare system, SNIS), it directly affects the regulations that apply to your situation. Within this category, we find different profiles:
- Skilled workers: Professionals who move to Uruguay seeking opportunities in key sectors such as technology, agribusiness, or finance. Montevideo and Punta del Este are popular destinations for this group, as many of the country’s international companies are based there.
- International students: Attracted by the country’s safety and the high level of its education system, more and more students are moving to Uruguay to study. The University of the Republic and other institutions offer highly regarded programmes in areas such as agronomy, health sciences, and business.
- Expat families: Uruguay is known for being a peaceful country with a robust education system and a safe environment. This makes it an ideal destination for families seeking stability and quality of life.
- Retirees: Some foreigners choose Uruguay to retire, attracted by its mild climate, affordable healthcare services, and welcoming communities. Areas like Colonia and Maldonado are especially popular among this group.
Companies or properties
On the other hand, we have companies or properties. They have different tax obligations compared to individuals. To properly manage their responsibilities, it’s important to understand how they are taxed. What types of companies and properties are there in Uruguay?
- International company branches: Thanks to its economic stability and strategic location within Mercosur, Uruguay is a key gateway to the South American market. That’s why many multinational companies establish offices and operational centres in Montevideo.
- Startups and entrepreneurs: This country encourages entrepreneurship through tax incentives and support programmes like Startup Uruguay. This attracts foreign entrepreneurs in sectors such as technology, renewable energy, and digital services.
- Real estate: Punta del Este and Montevideo stand out for their dynamic real estate markets. Whether for second homes or rental investments, properties in Uruguay are an attractive option.
- Agribusiness projects: Uruguay is world-renowned for its agriculture and livestock industries. It is common for those seeking a reliable economic return to invest in productive land in areas like Durazno or Rocha.
Taxes for Foreign Individuals in Uruguay
Now that we’ve reviewed the different types of foreigners who pay taxes in Uruguay, let’s move on to discussing taxes. Let’s start with those you will have to pay as an individual. Just like anywhere else, they depend on your tax status (resident or non-resident) and the type of income you will generate. The Uruguayan tax system is relatively simple, with its main focus on income generated within the country. Additionally, it’s no coincidence that Uruguay has become an attractive destination for foreigners looking to change their residence or invest—it offers quite a few incentives.
1. Personal Income Tax (IRPF)
IRPF is one of the most important taxes for individuals in Uruguay. This tax applies to income generated within the country from employment, rental properties, investments, and pensions. The rates are progressive and depend on the type and level of income:
- Employment income: Taxed between 0% and 36%, depending on the bracket.
- Capital income: Such as interest and dividends, taxed at fixed rates between 7% and 12%.
- Rental income: Taxed at a fixed rate of 12%.
Example: If you work in Uruguay and your annual salary is €15,385 ($16,200), the first €14,980 ($15,900) would be exempt from tax. The remaining income would be taxed between 10% and 15%, depending on the bracket.
2. Wealth Tax
The wealth tax applies to the total value of assets owned by individuals exceeding the established minimums. For tax residents, this tax applies to both assets in Uruguay and abroad. For non-residents, it only applies to assets located within the country. The rates range from 0.7% to 1.5%, depending on the value of the assets.
Example: If you own properties in Uruguay valued at €256,410 ($272,000), you might pay around €1,795 ($1,890) annually for this tax.
3. Non-Residents Income Tax (IRNR)
If you’re not a tax resident in Uruguay, IRNR is the tax you’ll pay on income generated within the country. The applicable rates are as follows:
- Rental income: 12 %.
- Capital income: Between 7% and 12%.
- Temporary professional services: 12 %.
4. Other Relevant Taxes for Foreigners in Uruguay
In addition to these two more well-known and relevant taxes, there are other levies that might impact your finances if you plan to live, invest, or engage in economic activities in Uruguay.
- Value Added Tax (VAT): Applies to most goods and services in the country at a standard rate of 22%. However, certain essential products such as basic food items, medicines, and transportation have a reduced rate of 10%. This tax is already included in the final price of the products, so no additional calculations are required.
Example: If you spend $256 (€235) at a supermarket, you will be paying $56 (€51) in VAT. - Real Estate Transfer Tax (ITP): Applies to the buying and selling of properties. This tax is equivalent to 2% of the property’s cadastral value and must be paid by both the buyer and the seller. It is important to verify the cadastral value with the authorities to avoid surprises.
Example: If you buy a house with a cadastral value of €102,564 ($107,100), you would need to pay €2,051 ($2,118) in ITP. - Real Estate Contribution Tax: This is an annual tax that applies to properties in Uruguay. Its amount depends on the cadastral value of the property, and the rates range from 0.25% to 0.35%, depending on the location and the policies of the local government.
Example: For a property in Montevideo with a cadastral value of $179,487 (€164,000), you could pay between $449 (€410) and $628 (€575) per year. - Specific Internal Tax (IMESI): Applies to goods such as fuel, vehicles, tobacco, and alcoholic beverages. The rates vary significantly depending on the product. It is directly reflected in the sale price and can influence your purchasing decisions. Example: If you buy a vehicle, the IMESI (Tax on Motor Vehicle Sales) can account for up to 100% of the sale price, depending on the characteristics of the car.
- Local Taxes: These are taxes or fees that each department imposes for specific services such as waste collection, street maintenance, and driving licences. The amounts and conditions vary depending on the region where you reside.
- Inheritance and Donation Tax: Uruguay does not impose taxes on inheritances or donations.
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Tax Benefits for Foreigners in Uruguay
Especially for those looking to reside, work, or invest in the country. These benefits can help reduce your tax burden and optimise your finances.
1. Exemption of Foreign Income
One of Uruguay’s main advantages is that it does not tax income earned outside of the country. This means that foreign tax residents only pay taxes on income generated within Uruguay. This benefit is particularly attractive to digital nomads in Uruguay and retirees receiving income from abroad.
2. Double taxation treaties
Uruguay has agreements with several countries to avoid double taxation. These treaties ensure you won’t pay taxes twice on the same income in both your home country and Uruguay. The treaties generally apply to income such as dividends, interest, royalties, and salaries.
3. Exemptions for New Tax Residents
Uruguay offers a special regime for new tax residents. They can opt for a total exemption from the IRPF on foreign income for the first ten years of residency. Alternatively, they can choose to pay a fixed annual rate of $12,000 (€11,000) on their global income.
4. Incentives for Retirees
Foreign retirees who move to Uruguay can benefit from tax exemptions in certain cases. Furthermore, foreign pensions are not subject to IRPF.
Taxes for Foreign Companies or Properties in Uruguay
That’s the tax situation you’ll face if you move to Uruguay. But what happens if you set up a business or make an investment? As you can imagine, the taxes that companies operating in the “Switzerland of America” must pay are different from those applied to individuals.
1. Property Transfers Tax (ITP)
The ITP (Property Transfer Tax) is levied on the buying and selling of properties in Uruguay. It is applied at a rate of 4% on the cadastral value of the property. The final amount is split equally between the buyer and the seller.
Example: If you buy a house with a cadastral value of €128,205 ($134,000), you would need to pay €2,051 ($2,118) in ITP.
2. Wealth Tax for Companies
Companies in Uruguay are subject to the wealth tax, which is levied on the net value of their assets. The rates vary depending on the type of company. For public limited companies (sociedades anónimas), the rate is 1.5%.
Example: If your company has net assets valued at $256,400, you will need to pay $3,846 if it is a public limited company.
3. Value Added Tax (VAT)
Companies that offer goods or services in Uruguay must collect VAT. The standard rate is 22%. However, as mentioned in the previous section, certain essential products and services are taxed at a reduced rate of 10%. End consumers bear this tax in the price.
Example: If your company invoices $25,640 (€23,500) per month for services subject to 22% VAT, you will need to remit $5,640 (€5,140) to the government.
4. Business Income Tax (IRAE)
The IRAE applies to companies for income generated within Uruguay. The general rate is 25% of the payroll.
Example: If you buy a house with a cadastral value of €102,564 ($107,100), you would need to pay €2,051 ($2,118) in IRAE.
5. Non-Residents Income Tax (IRNR)
Are you a property owner but not a resident? If you are in Uruguay on a visa or are a non-resident, the income generated by your assets or activities in the country is subject to the IRNR. This primarily applies to income from rentals and temporary professional services at a rate of 12%.
Example: If you rent an apartment in Montevideo for $769 per month, you will pay $92 per month in IRNR.
Tax benefits for foreign companies in Uruguay
If you’re reading this article because you’re thinking of setting up a business, you’ll be pleased to know that Uruguay also offers tax incentives for foreign companies looking to invest or establish themselves in the country. These incentives aim to reduce the tax burden, improve the profitability of projects, and promote economic development. These are the most stands:
Exemption from IRAE for free trade zones.
Companies operating within free trade zones in Uruguay are exempt from IRAE. They are also exempt from other taxes such as VAT and the wealth tax. These special areas (there are 11 throughout the country) are designed to encourage investment in sectors such as technology, logistics, and international trade.
Example: If your company generates profits of $25,640 per year in Zonamerica, you will be exempt from 25% of the IRAE. This equates to a saving of $6,410 annually.
Exemptions for investment projects
Through the Investment Law, companies that develop projects in priority sectors such as infrastructure, renewable energy, or tourism can obtain significant tax deductions. These deductions can reach up to 90% of the investment made.
Example: If you invest $128,200 in a solar energy project, you could deduct the entire amount from your taxable base for IRAE.
Benefits for service exports
Companies that export services are exempt from VAT on their international invoicing. This includes sectors such as technology, design, and digital marketing.
Incentives for tech startups
Uruguay promotes the creation of tech startups through programmes like Uruguay XXI and ANII, which offer tax benefits and access to financing.
Taxes on Foreign Investments in the Uruguayan Stock Market
Are you thinking of investing in the stock market? Although the country is known for its territorial tax system, gains generated by local investments are subject to certain taxes. These are the main taxes to consider if you decide to invest in stocks, bonds, or any other financial product in Uruguay.
Capital Gains Tax: This tax applies to profits earned from the sale of financial assets, including stocks and bonds. For non-resident foreign investors, the rate is 12% on the net profits generated in Uruguay.
Dividend Withholding Tax: Dividends paid by Uruguayan companies to foreign investors are subject to a 7% withholding tax. This is applied directly to the distributed amount.
Applicable Exemptions: In some cases, interest generated by bonds issued by the Uruguayan government is exempt from taxes for foreign investors. This makes government bonds an attractive option for those seeking to maximise their returns without incurring additional tax burdens.
Frequently Asked Questions about Taxes for Foreigners in Uruguay
You’re considered a tax resident in Uruguay if you spend more than 183 days a year in the country or have your main place of residence there. If your main economic interests—like employment or investments—are in Uruguay, you’ll also be seen as a resident for tax purposes. Consulting with a tax advisor will help clarify your situation. Remember to subscribe to the monthly plans from Holafly to ask any questions during your stay in Uruguay!
Non-resident foreigners are taxed only on the income generated in Uruguay. This includes rental income, salaries, capital gains, and interest. The IRNR (Non-Resident Income Tax) rate for non-residents ranges from 7% to 12%, depending on the type of income.
Yes, Uruguay offers tax incentives such as exemptions from IRAE and VAT for companies operating in free trade zones. Additionally, there are benefits for investment projects in strategic sectors like infrastructure, tourism, and renewable energy.
Uruguay has double taxation treaties with several countries, which helps avoid paying taxes twice. These treaties mainly apply to income such as dividends, interest, and capital gains.
No. In Uruguay, non-resident foreigners can fulfil their tax obligations without needing a local tax number. However, if you plan to establish tax residency or open a business, you will need to register with the Directorate General of Taxation (DGI) and obtain a tax identification number.
