The beautiful beaches, attractive riverside towns, vibrant capital, friendly people, and profitable property investments are reasons enough to investigate Uruguay.
But there’s even more to this fascinating, lesser-known country. If you’re looking for an environment where your money is safe, you and your family can feel secure, and taxes are low, this country should be on your short list.
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Uruguay is one of the most economically developed countries in South America, with a high GDP per capita. The Economist ranked it 21 out of 167 countries on the 2010 Democracy Index. And according to Transparency International, Uruguay is the second-least corrupt country in Latin America, a shade behind Chile.
Besides this, it’s also one of only a few remaining countries with a sound banking system that welcomes Americans—and it provides far greater financial privacy than one can have in the United States.
Uruguay enjoys an open, free-market economy, with no exchange controls or foreign currency limitations. Eighty percent of bank deposits in Uruguay are in U.S. dollars or euros. Prices for most big-ticket items like real estate and cars are denominated in U.S. dollars.
Becoming a legal resident of Uruguay is relatively simple. And after Uruguay grants you permanent resident status, you keep your status as long as you do not live outside of the country for more than three years.
As a resident of Uruguay, your tax burden is negligible. Residence for tax purposes is defined as anyone with 180 days or more of physical presence in the country in any given tax year, which is the same as the calendar year.
Credit is given for any tax paid to a foreign jurisdiction, whether or not Uruguay has a double-tax treaty in force with that country.
Interest on deposits and dividends that Uruguayan citizens earn abroad are taxed, but foreign residents living in Uruguay are not required to pay those taxes. The law specifically states that foreigners who relocate to Uruguay pay no extra taxes.
Taxes are levied on assets. Citizens (not foreign residents) pay a small tax on offshore deposits, securities, and loans. The rate is 0.07% to 0.5%. This tax, known as “IP,” is being phased out in annual steps and will end in 2017. It will not affect anyone obtaining citizenship after 2017.
Salary, capital gains on sale of shares or property, pensions, lease income, or any other type of offshore income are all untaxed.
Financial privacy in Uruguay is protected by one of the world’s tightest bank-secrecy statutes that forbids banks’ sharing information with any party, including the government of Uruguay or any foreign entities or governments, except in cases involving issues of alimony, child support, or alleged crimes.
However, Uruguay does comply with Article 26 of the Organization for Economic Cooperation and Development’s (OECD) model standards for tax-information exchange. That allows banks to exchange information upon proof of foreign tax evasion or tax fraud.
Uruguay limits these exchanges to countries with which it has signed tax-information exchange agreements (TIEAs), excluding both neighboring Brazil and Argentina. At time of writing it does not yet have a TIEA with the United States.
Editor’s note: Bob’s full offshore article appears in the current issue of International Living magazine. In it, he reveals the 3 things you need to know about taxes in Uruguay…as well as his recommended banking contact. If you want to learn more about low-tax Uruguay…and the dozens of other ideas we explore in the December issue..