Information on Taxes in Uruguay
Are you exploring options beyond your country’s borders?
If so, have you considered Uruguay?
Moving to Uruguay can transform a ho-hum retirement into an international adventure.
Many from North America and Europe have built satisfying new lives in Uruguay. It’s a proven idea. That said, moving, working, or investing in a new country is a big step. It’s a decision that deserves some research, which includes learning about local taxes that could apply to you.
To help you get started, the following is an introduction to taxes in Uruguay.
Taxes on your Retirement Income from Abroad
If you spend more than 183 days per year in Uruguay, you become a tax resident of Uruguay. If you’re a tax resident, you pay taxes in Uruguay on the money you earn in Uruguay. It’s the same as in most countries.
But what is good to know about Uruguay is this: its tax system is mostly territorial. So, you, as a tax resident of Uruguay, don’t need to report many types of income you earn outside of Uruguay in Uruguay. This includes rent income, capital gains, a retirement pension, and social security payments.
Since many countries require tax residents to report worldwide income, the principle of territorial taxation is a big plus to choose Uruguay as a retirement destination.
But, you do find one exception to Uruguay’s territorial taxation. It applies to financial instruments, such as interest and dividends. If you’re a tax resident of Uruguay, a 12% flat tax on such income is due no matter where it’s earned.
This rule, taxing interest and dividends anywhere in the world, is designed to discourage Uruguayans from keeping their savings offshore. However, if you’re a foreign retiree living in Uruguay, this tax usually has little impact.
That’s because you can deduct any taxes you pay on this type of income to another country, such as taxes paid to the U.S. if you’re a U.S. citizen.
So, if you paid 12% or more in tax to a jurisdiction outside of Uruguay, you would owe no taxes in Uruguay. If you paid less than 12%, you would pay the difference. You do not get double taxed.
Another thing to know. You get a generous grace period. This tax on interest and dividends only applies after you’ve been a tax resident of Uruguay for more than 10 years.
Taxes on your Employee Income in Uruguay
The personal income tax on wages is impuesto a la renta para personas físicas (IRPF). It only applies to income over $1,000 per month (at today’s exchange rates). The tax is progressive, starting at 10% and topping out at 36%.
Social Security Taxes
As an employee in Uruguay, you’ll pay into Uruguay’s social security system. Both the employer and the employee pay a portion of the total contribution. The employer’s part is an amount equal to around 12 percent of your earnings. Your part, as an employee, ranges between 19% and 24% of your earnings.
As an employee in Uruguay, one of your social security benefits is a healthcare plan with no deductibles.
Taxes on Real Estate in Uruguay
Many expat retirees living in Uruguay own a home. Also, many who live outside of Uruguay buy a vacation place or investment property, here.
If you own, rent out, or sell a property in Uruguay, you’ll owe certain taxes.
Annual Property Taxes
The municipal property tax is contribución inmobiliaria. Depending on the location and other factors, it can range from 0.25% to 1.4% of the property’s value. Since the rate can vary so much, it’s a good idea to learn about a property’s likely tax rate before you buy.
Impuesto a la enseñanza primaria is a separate property tax that funds primary education. The rate is usually low, approximately 0.1 percent to 0.3 percent of the property value.
Annual Asset Tax for Property Held by an Individual in Uruguay
Uruguay’s wealth tax is impuesto al patrimonio. It’s based on the net worth of your holdings in Uruguay. For individuals, this is usually your home and other real estate you may own in Uruguay.
The tax is based on a property’s “assessed” value, which is usually lower than the market value. The tax only applies to properties with a registered value of over $115,000 for a single person and over $230,000 for a couple. The registered value of a property is often less than the market value. If the property is your principal home, the tax is based on 50% of its registered value.
Taxes on Rental Income of Property Owned by an Individual
If you rent out a property you own in Uruguay, such as a home or apartment, you’ll owe a flat tax of 12% of the rent.
Capital Gains Tax for a Property Sold by an Individual in Uruguay
In Uruguay, capital gains on a property sale is considered the same as any income from capital assets. So, the rate is 12% of the gain.
The gain is calculated as the difference between the purchase price and the sale price. In Uruguay, the gain is also adjusted for inflation. So, you pay tax only on the real value gain, not on the currency inflation that occurred during the time you owned the property.
Uruguay’s National Sales Tax
Uruguay’s national sales tax is impuesto al valor agregado. It’s referred to by its Spanish acronym—IVA—and pronounced “EE vah”. The basic rate for IVA in Uruguay is 22% for most consumer goods.
Like most of the world’s countries—and unlike the U.S.—this sales tax is included in an item’s market price. It’s not added to the price at the cash register.