Uruguay’s taxation of foreign residents:
A friendly system for those who relocate to the country
Foreign nationals who move to Uruguay need not worry about being subjected to taxes on all of their worldwide income, regardless of whether they already pay taxes elsewhere, as it occurs in many other countries.
Here is the complete set of rules:
Firstly, those who decide to spend more than 183 days per year in Uruguay (thus, becoming tax residents) will have a five-year window during which they will not pay income tax on any type of foreign income.
The five-year window starts running the year after one became a tax resident in Uruguay.
So, for example, if you become a tax resident in January 2013, you will not pay any income tax in Uruguay, on any type of foreign income, until 2019.
After the five years are up, if you are still a tax resident of Uruguay, then you would pay a 12% income tax on two types of foreign income: interest and dividends. Any other type of income is untaxed: capital gains, pensions or retirement income, lease income, etc.
Now, if you already pay income tax elsewhere (on that interest or on those dividends generated abroad), Uruguay does not tax you again (if you pay 12% or more, abroad). This is called the non-double taxation rule: Uruguay makes sure that you do not pay taxes twice. If you pay somewhere else, Uruguay does not tax you again.
There is no need for a treaty for this. Uruguay has chosen to unilaterally recognize any payment in any country (without the need for a treaty) when it comes to ensuring that you are not taxed twice.
The above rules apply to individuals. For Uruguayan companies (or corporate vehicles) that generate income abroad, there are no taxes to be paid in Uruguay.