by Domingo Pereira*

In times of uncertainty and increasing taxation, individuals tend to look for alternative places for their tax residence. Because of its tradition of democracy, stability and peace, Uruguay historically has served as a “shelter” for people with diverse backgrounds. Importantly, Uruguay ranks at the top of democracy and global peace indexes, and Uruguay`s judiciary system ranks as one of the most independent. The absence of exchange controls, coupled with the free inflow and outflow of foreign currency, also explains Uruguay`s attraction.

Recently, many individuals from the MERCOSUR countries have expressed renewed interest in having Uruguay as their tax residence.

This note discusses the main characteristics of being tax resident in Uruguay.

  1. The basics

Under Uruguayan laws, individuals become tax resident in Uruguay when one of the followings conditions is met: (i) the individual spends more than 183 days in Uruguay during a given calendar year; (ii) the individual maintains his/her “core” of activities in Uruguay; (iii) the individual’s “vital interests” are located in Uruguay; or (iv) the individual has based his/her main “economic interests” in Uruguay.

  1. 184 days of physical stay in Uruguay

Only those days with physical presence in Uruguay are counted, regardless of the timing of entry and exit; the stays to be counted can be consecutive or not. Absences which do not exceed 30 days are considered part of the physical stay required to reach the 184-day threshold.

  1. Core of activities in Uruguay

An individual is deemed to have his/her core of activities in Uruguay whenever he/she has his/her most significant source of income from Uruguay, whenever he/she has income in Uruguay which exceeds the income earned in any other jurisdiction.

For purposes of these comparisons, investment income is not taken into account. The individual must receive some income from employment or business activities conducted in Uruguay (for instance, the salary received for being director of a Uruguayan company). Where the individual receives only investment income in Uruguay (eg, dividends from a Uruguayan company, or lease from a real estate property located in Uruguay), he/she will not be considered Uruguayan tax resident.

The comparison must consider income obtained in Uruguay with the income received in any other country. In the event the individual receives income in Uruguay, along with corporate/business activity and employment income, all of such items of income must be considered.

  1. Vital interests in Uruguay

An individual has his/her “principal interests” in Uruguay when his/her spouse and children live in Uruguay, provided that the spouses are not legally separated and that the children are under parental custody.

In the event the individual has no children, the presence of the spouse in Uruguay is sufficient to become tax resident.

  1. Main economic interests in Uruguay

 An individual is considered to have his/her “main economic interests” in Uruguay where he/she owns the following investments in Uruguay:

  • Real estate properties in Uruguay with a value exceeding approximately US$1.8 million (the tax value is determined as follows: acquisition price adjusted in accordance with the inflation rate).
  • Business activities valued at more than approximately US$5.6 million, provided that such activities have been declared “promoted” under Uruguay’s investment promotion regime.
  1. Five-year tax holiday

Uruguayan tax residents benefit from a tax holiday with respect to their foreign-sourced investment income.  This is the case for interest paid by foreign banks, interest paid by foreign borrowers, and dividends from non-Uruguayan companies.

This tax holiday is counted from the year following the one in which the Uruguayan tax residence was acquired. Therefore, as a practical matter, the tax holiday can extend beyond five years.


*Domingo Pereira is the Head of the Tax Practice of Bergstein Abogados, based in Montevideo.