Tax residency in Uruguay for digital nomads is an option for some digital nomads. Uruguay offers a tax efficient alternative to setting up tax residence in Paraguay.
Living in Uruguay
Before being able to claim tax residency in Uruguay, you first need to make sure you have the right to live in Uruguay.
Obtain residency permit
Most people can spend up to six months per year in the country without the need for a residence permit. If you want to stay longer, will need to obtain a residency permit first. In order to keep your residency permit valid, you will also effectively need to spend more than six months in Uruguay. To qualify for a permanent residence permit you need a minimum income of €1.500 per month and fulfil some other conditions.
If you want to test out the water, you can also opt for the digital nomad visa first.
Additional benefit of residency permit
Once you have your residence permit of Uruguay, you will also get easy access to the other MERCOSUR countries: Argentina, Brazil, Bolivia, Chile, Colombia, Ecuador, Paraguay, Peru and Venezuela. These countries have an agreement in place that makes it easier to travel between the different countries. In any case, I would always advise you to double check upfront before heading off.
Uruguayan tax rules
You should put Uruguay on your radar as a digital nomad because the country has some beneficial tax rules in place.
Tax residency in Uruguay
Uruguay considers you a tax resident if you spend more than 183 days in the country. Furthermore, you can also become a tax resident by having your vital interests in the country. Some elements that could help you in having a vital interest in the country is, for example, having a home and bank account available in the country.
Tax residency in Uruguay for digital nomads: tax rates
Uruguay applies what we call a territorial tax regime. That means that Uruguay only taxes Uruguayan-source income or income you generate locally. This means that with the right structure in place and if you organize yourself well, you could limit your tax burden.
For professional income that is subject to taxes, the income tax rates are progressive and go up to 36% if you make more than €185.000.
The tax rate for investment income generally amounts to 12%. Although, Uruguay applies a territorial tax regime, you will still need to pay taxes on foreign sourced investment income. Nevertheless, you get a tax credit for taxes paid abroad.
Tax residency in Uruguay for digital nomads: tax holiday
If you move to Uruguay you can also benefit from a tax holiday. In this respect you have two options. The first option is that you choose not to pay any taxes on foreign-source income at all. The second option is to opt for a reduced tax rate of 7% instead of the progressive tax rates. You can benefit from either of those advantages for a period of 11 years.
Tax residency in Uruguay for digital nomads: social contributions
Social contributions in Uruguay are a complex matter. They depend on your family situation, your job and the sector you work in.
Net wealth tax
Uruguay does levy a net wealth tax on individuals and corporations. The rate ranges between 0,1% and 0,3% depending on your total wealth.
VAT
The standard value added tax rate is 22%. However, VAT only applies if you offer goods or services within the territory of Uruguay. If your clients are based abroad, you don’t need to charge them VAT.
Setting up a company in Uruguay
You could also decide to set up a company in Uruguay. However, the corporate tax rate is 25%. As this isn’t an attractive tax rate, we won’t dive deeper into this option.
Tax residency in Uruguay for digital nomads: conclusion
If you look to relocate to South America, Uruguay could offer you some tax benefits. The main advantage is that you could benefit from their territorial tax regime. However, you should carefully consider your tax setup in order to assure you fully comply with all the rules in this respect. Feel free to book a call if you want to learn more.
