Uruguay is offering 10 Year Tax Holiday for new residents 🇺🇾

Summary

In this video, the host discusses Uruguay's tax holiday for new residents, offering a rare 11-year break on foreign financial income, including dividends and interest. Uruguay, known for its stability and quality of life, allows new residents to avoid taxes on foreign income by qualifying through various residency options like spending 183 days a year, investing in real estate, or creating jobs. The tax holiday is automatically granted for 11 years, with an option to pay a reduced 7% rate afterward. The video covers how to qualify, the benefits, and practical tips for relocating to Uruguay while saving on taxes.

Takeaways

• 😀 Uruguay offers a unique 11-year tax holiday for new residents, which includes zero tax on foreign financial income like dividends, interest, and capital gains.
• 😀 The tax holiday was introduced to attract wealthy expats, retirees, and investors, with the holiday period extended to 11 years in 2020.
• 😀 Uruguay's tax system is territorial, meaning residents are only taxed on income earned within Uruguay, while foreign income remains untaxed by default.
• 😀 New tax residents in Uruguay can enjoy 11 years of zero tax on foreign financial income starting from the year of their move, plus the following 10 years.
• 😀 Residents can opt to pay a flat 7% tax on foreign financial income after the 11-year holiday period, or revert to the standard 12% tax rate.
• 😀 To qualify as a tax resident, individuals can meet one of six conditions, such as spending 183 days in Uruguay or investing in real estate or business.
• 😀 The 183-day route requires individuals to live in Uruguay for half of the year, while the real estate path involves investing $390,000 in property and spending 60 days per year in the country.
• 😀 Business investors can qualify by investing $1.7 million in a business that creates 15 full-time jobs.
• 😀 The process for claiming the tax holiday is automatic once residency is confirmed, with a tax residency certificate issued by Uruguay's tax authority.
• 😀 The tax holiday is applicable to foreign financial income, such as rental profits, dividends, and interest, but local income like wages is subject to Uruguay's progressive personal income tax.
• 😀 Uruguay is politically stable and economically solid, with a high quality of life, making it an attractive destination for individuals seeking tax breaks and a peaceful lifestyle.

Q & A

What is the tax break offered by Uruguay for new residents?

Uruguay offers a tax holiday for new residents, which provides zero tax on foreign income, such as dividends and interest, for up to 11 years. This is designed to attract retirees, digital nomads, and investors.

How does Uruguay's tax system work?

Uruguay has a territorial tax system, meaning that residents are taxed only on income earned within Uruguay. Foreign income, such as rental income from properties abroad or capital gains, is not taxed by default, though foreign financial income (like dividends or interest) has been taxed at 12% since 2011.

What is the difference between the old and new tax holiday rules in Uruguay?

Before 2020, the tax holiday for new residents lasted 6 years (the move year plus 5). However, in 2020, the rules were changed to offer a longer tax break, extending it to 11 years for those who become tax residents after January 1st, 2020.

What are the qualifications for becoming a tax resident in Uruguay?

There are six ways to qualify for tax residency in Uruguay: 1) Spend 183 days in Uruguay in a year; 2) Base your spouse or dependent children in Uruguay; 3) Invest $390,000 in real estate and stay 60 days annually; 4) Invest $1.7 million in a business that creates 15 jobs; 5) Make Uruguay your main income hub; 6) Show vital interests in Uruguay, such as family or social ties.

How do I apply for the tax holiday once I become a resident?

Once you qualify as a tax resident, the tax holiday is automatically applied for the first year and runs for 10 additional years. You don't need to apply separately for the tax break, but you must request a tax residency certificate from the General Tax Directorate (DGI) and prove your residency status.

What documents do I need to prove my residency in Uruguay?

To prove residency, you will need documents such as your passport, residence permit (if applicable), and proof of your qualifying condition (e.g., lease agreement, property deed, travel records, or school enrollment).

What foreign income is exempt from taxation under Uruguay’s tax holiday?

Under Uruguay's tax holiday, foreign income such as dividends, interest, rental profits, and capital gains from overseas investments are exempt from taxation for up to 11 years.

Can I opt out of the tax holiday and pay a flat tax rate?

Yes, new residents can opt out of the tax holiday and instead pay a flat tax rate of 7% on their foreign financial income. This option has no time limit, but the regular tax holiday lasts for 11 years.

What happens after the 11-year tax holiday ends?

After the 11-year tax holiday expires, foreign financial income will be taxed at 12%. Alternatively, you can opt to pay the flat 7% tax rate permanently on your foreign income.

What local income taxes apply in Uruguay?

Local income in Uruguay, such as wages earned in the country, is subject to the country's progressive income tax (IRPF), which ranges from 10% to 36% depending on the amount. Social security contributions also apply, ranging from 19% to 24% for employees, with an additional 12% contribution from the employer.