Update on Proposed Changes to Taxation System in Uruguay
Over the past few weeks we’ve had a lot of our regular OU readers email us and post comments asking about the new proposed tax changes in Uruguay, and how they could potentially affect expats living in or moving to Uruguay and their tax liability to the Uruguayan government. So we asked our legal advisor, Juan Federico Fischer, Managing Partner of Fischer & Schickendantz (www.fs.com.uy) to give us his thoughts on the matter.
“Unfortunately, much of what the press articles and blogs have been saying is more alarming than the reality. It has been said that Uruguay will tax three things: its corporate vehicles’ offshore assets, foreign residents’ assets, and foreign residents’ income.
That is incorrect. The problem originated when a draft of a proposed change to a tax law was leaked ten days ago. That draft is still a work in progress at the Executive level, and the proposed change only aims to tax the money that Uruguayans have abroad, and not foreigners who come to Uruguay.
Here’s the exact situation of where the issue stands on the three supposed taxes that some publications have incorrectly said are being modified:
Regarding taxes on corporate vehicles’ offshore assets: Last Friday, May 28th, the Ministry of Finance, where the bill proposal is being discussed, issued an official statement clarifying one issue of the proposed bill—that there will be no new taxes on Uruguayan companies, that their offshore assets will not be taxed, and that nothing will change for Uruguayan corporate vehicles. So, Uruguay remains an offshore tax-free jurisdiction.
Regarding taxes on foreign residents’ assets: It has been made clear from the start that assets owned abroad by foreign residents in Uruguay will not be taxed at all. This was never in doubt. The proposed changes will only affect citizens (at a very small scale; and remember that this asset tax is gradually being phased out since 2007, and will disappear by 2017).
Taxes on foreign residents’ income: Some types of income (not all) generated abroad could be taxed. But the aim of the law is to tax the money that Uruguayans have abroad, not foreigners who come to Uruguay. The Ministry of Finance issued a second statement yesterday (June 1st), clarifying that the law will in no way jeopardize the country’s policy of attracting foreigners to relocate in Uruguay. And that their income will not be taxed. The likelihood is that on income tax (on some types of income: interest on deposits and dividends) the tax will be circumscribed to Uruguayan citizens.”
We’ll keep you posted on further developments on these tax changes in the future. Meanwhile, if you’d like to get in touch with Juan, you can reach him at…
Fischer & Schickendantz—Attorneys at Law, Foreign Investment Advisors, (Managing Partner Juan Federico Fischer), Rincón 487, Piso 4, Montevideo 11000, Uruguay; tel. (+598)2-915-7468 ext. 130; cell (+598) 99 925-106; fax (+598) 2 916-1352; e-mail: firstname.lastname@example.org; website: www.fs.com.uy.