Tax residence in Uruguay refers to the link of a natural person with the country, based on certain conditions such as length of stay, location of the family nucleus or vital interests, income and type of investments. This condition determines the obligation to pay taxes in Uruguay. Unlike legal residency, fiscal residency is not permanent and is evaluated annually, and a person may have both types of residency.
What is Tax Residency?
Tax residency implies that an individual is recognized as a taxpayer in Uruguay. It covers different aspects such as where the person spends most of his or her time, where his or her main economic interests are, and the location of his or her family and main activities.
Criteria for Proving Tax Residency
The process of accrediting tax residency is based on several criteria:
- a. Stay in Uruguay: More than 183 days during the calendar year, accredited by the Certificate of Arrival of the National Directorate of Migration and other relevant documents.
- b. Main Core of Activities: Accreditation through a notarial or accounting certificate of income, taxpayer declarations and comparison of income generated in Uruguay versus other countries.
- c. Economic Interests: Investments in real estate or companies with promoted investment projects, meeting certain minimum values in Indexed Units (UI).
In 2020, new conditions for tax residency were introduced:
- a. Investments in Real Estate: The minimum value required for real estate investments was lowered, with the condition of a physical presence in Uruguay of at least 60 days a year.
- b. Investment in Companies and Job Creation: Investments in companies that generate a minimum number of direct dependent jobs.
Tax Residency Benefits: The Tax Holiday
In order to encourage foreigners to settle in Uruguay, a favorable tax regime has been implemented in relation to passive capital income obtained from abroad, which is subject to Personal Income Tax (IRPF) and not to Non-Resident Income Tax (IRNR), applying a rate of 12%.
For those who have acquired tax residency since tax year 2020, they are offered the option of:
- Pay IRNR during the year in which the tax residence was established and the following 10 years (11 years in total), which is equivalent to 0% IRPF during that period, followed by IRPF at 12%, or
- Opt for personal income tax at a rate of 7% with no time limit.
For tax residents who settled before and were eligible for IRNR for 6 years, they are now given the opportunity to extend this benefit to 10 years, provided that:
- Make an investment in real estate after 1/22/2021 for a value greater than 3,500,000 Indexed Units (UI), approximately USD 470,000, and
- Maintain an effective presence in the country for 60 calendar days during the fiscal year.
In the calculation of the fiscal years, those in which the first alternative has already been chosen will be discounted.
Center for Vital Interests
Tax residency can also be accredited through the establishment in Uruguay of the center of vital interests. This includes enrollment of children in educational institutions, local medical coverage, membership in sports clubs, among others.
Presumed Residence for Spouse and Minor Children
The presentation of the Certificate of Residence of the family members and proof of marital status and filiation are sufficient to presume the individual’s tax residency.
Obtaining a Tax Residency Certificate
To confirm the tax residency of a legal entity, the documentation proving the tax residency must be submitted to the Dirección General de Impositiva (DGI) and Form 5202 must be completed. The application is made in person at the DGI offices, both in Montevideo and in the interior of the country.
The notarial certificate must include the following:
In the case of legal entities or organizations incorporated under Uruguayan law:
- Proof of incorporation under national laws.
- Proof of domicile in Uruguay during the required period, both fiscal and legal.
- Information on who legally represents the entity.
- Statement confirming that a redomiciliation abroad is not being processed.
For legal entities or organizations not established under Uruguayan law:
- Confirmation of completion of the formal procedures required by the current laws and regulations to establish domicile in Uruguay.
- Proof of domicile in the country during the requested period.
- Information on who legally represents the entity.
- Statement confirming that a redomiciliation abroad is not being processed.
This document must be submitted no more than 15 business days prior to the time of submitting the application to the corresponding Administration.
How Living in Uruguay Can Help You
Obtaining tax residency in Uruguay is a process that requires a detailed analysis of each person’s individual situation. It is important to consider all legal and financial aspects before making a decision.
At Vivir en Uruguay, we understand the complexity of these processes and offer expert advice on navigating the Uruguayan tax system. Our team of professionals is ready to help you evaluate your situation and guide you through every step to obtain your tax residency in Uruguay.
Opting for Uruguay as your tax residence offers numerous benefits and opportunities. With the right guidance and a clear understanding of the process, you can establish a solid foundation for your life in Uruguay, enjoying its tax benefits and welcoming environment.
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