The Different Ways to Get Tax Residency in Uruguay

Uruguay is an increasingly attractive destination for expats seeking both legal and tax residency.

With its stable political environment, territorial tax system, and transparent legal framework, the country offers numerous benefits for foreigners looking to optimize their tax situation.

This blog post explores the process of obtaining both legal and tax residency in Uruguay, the benefits of each, and how to navigate the system of obtaining tax residency in Uruguay.

Legal Residency in Uruguay

To live in Uruguay long-term, the first step is obtaining legal residency, which gives you the right to reside and work in the country.

Legal residency is the first step to obtaining tax residency, and the process to acquire it is relatively straightforward.

Obtaining Legal Residency

Required Documentation:
- A valid passport
- Birth certificate
- Proof of income, such as employment contracts, pension receipts, or investments
- A clean criminal record from your home country and any other country where you’ve lived in the last five years

These documents must be authenticated and translated into Spanish, if necessary. At Worldwise Capital, we assist in this process of obtaining residency from A-Z, ensuring you have the proper documentation before getting the process underway, and that your residency is processed swiftly upon your arrival in Uruguay.

Proof of Finances:
- You must demonstrate financial solvency, showing that you can support yourself during your stay in Uruguay. This is usually done by providing evidence of income from abroad, pensions, or employment contracts.

Residency in Uruguay During Application:
- While your legal residency application is being processed, which can take around a year, you must physically reside in Uruguay.

Once granted, you’ll receive a permanent residency permit in Uruguay.

Tax Residency in Uruguay

After obtaining legal residency, many expats pursue tax residency to benefit from Uruguay’s favorable tax regime.

Uruguay has a territorial tax system, meaning that residents are taxed only on income generated within Uruguay, not on their worldwide income. However, there are specific criteria to meet in order to gain tax residency.

How to Obtain Tax Residency

To qualify for tax residency in Uruguay, there are several pathways, and the criteria are generally straightforward. You must meet one of these requirements to have tax residency in Uruguay, as the legal and fiscal residency in Uruguay are different pathways.

183-Day Rule:
- You must spend at least 183 days in Uruguay within a calendar year to qualify for tax residency. The Uruguayan government considers short trips abroad as part of this period if the country remains your primary residence.
Center of Economic Interests:
- If you move your economic interests, such as your primary income sources or major business activities, to Uruguay, you can obtain tax residency. This option does not necessarily require spending 183 days in the country.
Real Estate Investment:
- By purchasing property valued at a minimum of UI 3.5 million (approximately USD 550,000, subject to change annually), you qualify for tax residency with a shorter stay requirement of two months per year. This is a popular route for those seeking to live in Uruguay while benefiting from its tax incentives.
Investment in Uruguayan Companies:
- If you manage or invest in a business that generates at least UI 15 million (around USD 1.7 million) in annual revenue, you also qualify for tax residency. This is particularly appealing for entrepreneurs looking to establish or expand businesses in Uruguay.

What Are UI (Indexed Units)?

UI (Unidad Indexada) are indexed units that are tied to the consumer price index in Uruguay.

The value of one UI is regularly adjusted to account for inflation, which makes it a stable unit for long-term contracts and obligations. The UI is commonly used in Uruguay’s legal and financial systems, particularly in real estate and investment transactions.

Benefits of Tax Residency in Uruguay

The main advantages of obtaining tax residency in Uruguay revolve around its territorial tax system and other favorable tax policies.

1. Exemption on Foreign Income

One of the key draws to becoming a tax resident in Uruguay is the exemption on foreign income. For the first 10 years of tax residency, Uruguay does not tax any foreign-sourced income, such as income from pensions, investments, or business activities abroad.

This makes Uruguay particularly appealing for retirees and those with passive income streams.

After the initial 10-year period, foreign-sourced income may be taxed at a flat rate of 7%, though there are still ways to minimize taxation through proper planning.

2. Low Tax on Local Income

While foreign income is tax-free for the first 10 years, Uruguayan-sourced income is subject to income tax.

Uruguay’s IRPF tax (Personal Income Tax) is applied progressively, with rates ranging from 10% to 36%, depending on your income level. However, even these rates tend to be lower compared to other jurisdictions with global income taxes.

3. No Wealth, Inheritance, or Gift Taxes

Uruguay does not impose any wealth taxes, nor does it have inheritance or gift taxes. This is a significant benefit for high-net-worth individuals seeking to protect their assets and pass them on to future generations without tax liabilities.

4. Investment-Friendly Environment

Uruguay is known for its transparent legal system and stable government, making it a secure place for foreign investment. Whether you are investing in real estate, agriculture, or local businesses, Uruguay offers a favorable environment with legal protections for foreign investors.

Banking in Uruguay

Uruguay has a well-developed and secure banking system that offers flexibility for expats. Once you obtain residency (either legal or tax), you can easily open a bank account in Uruguay.

Uruguay’s banking system is known for its strict privacy laws and robust financial services.

Residents have access to a wide range of financial products, including peso accounts and U.S. dollar accounts, which are common due to Uruguay’s dollar-friendly economy.

While it can be easier to obtain a bank account in Uruguay than in other countries of Latin America, we still recommend to obtain residency in Uruguay before opening a bank account in the country.

This will make your account opening process much smoother and faster, and ensure that you have a local account instead of a non-resident bank account, which may be subject to more AML paperwork.

My Final Thoughts on How To Obtain Tax Residency in Uruguay

Obtaining tax residency in Uruguay provides significant financial advantages, especially for those with foreign income streams.

While Uruguay is an excellent holiday or long-term living destination for the right person, Uruguay is a small and quiet country that offers excellent tax benefits, while providing quality healthcare and access to services.

While gaining tax residency in Uruguay may not be for everyone, if you are looking to invest or spend time in Uruguay, reach out to us for assistance in the residency or tax residency process today.

The Different Ways to Get Tax Residency in Uruguay