Expat Taxes in Uruguay Today part 2 – Part one is here.
Understanding Uruguay Tax on Overseas Income
Overseas income tax is the sum of two taxes: global income tax and global solidarity contribution. International income tax is a 19% flat rate applied to all foreign income without deductions or exemptions, while global solidarity contribution is a 5% surcharge on gross worldwide taxable income.
Tax on interest from bank accounts paid abroad is also levied at a 10% rate. There is no minimum taxable income requirement for individual taxpayers unless preference items are claimed. Individuals residing in Uruguay must declare their worldwide income to Uruguayan tax authorities and file a tax return even if no tax is due or the taxpayer qualifies for exemption from tax under the terms of a double taxation agreement.
Non-residents are subject to Uruguay tax on Uruguayan-source income only. Interest income from bank deposits is subject to 10% tax if the payment is received by a non-resident individual unless paid by Uruguayan banks or by other financial institutions located in countries that have double taxation agreements with Uruguay. Without further ado, below are the things to know about tax on oversea income.
Uruguay Taxes on Overseas Income
Uruguay taxes income earned by its residents from sources outside of the country. This includes wages, interest, dividends, and capital gains. The tax rate on this income varies depending on the type of income and the taxpayer’s residency status. Non-residents are taxed at a flat rate of 25%, while residents are taxed at progressive rates ranging from 0% to 27%.
Tax Treaty Protection
Uruguay has entered into tax treaties with a number of other countries in order to avoid double taxation. These treaties typically provide for a reduced rate of taxation on certain types of income. For example, under the tax treaty between Uruguay and the United States, income from dividends and interest are taxed at 15%.
Tax Filing Requirements
Taxpayers are required to file a tax return in Uruguay every year regardless of whether or not they owe any taxes. The deadline for filing is May 15th of the following year. Returns must be filed in both Spanish and English, although translations of foreign documents may also be filed in Portuguese.
Tax Credits and Deductions
Uruguay offers a number of tax credits and deductions which can be claimed on the tax return. These include deductions for expenses related to income-producing activities, charitable contributions, and certain costs associated with housing.
Tax Forms
The tax forms in Uruguay can be confusing, especially for taxpayers who are not familiar with Spanish. The forms are available in both English and Spanish, but there are a number of different versions depending on the taxpayer’s residency status and income level. It is important to ensure that the correct form is used to avoid penalties.
Why Living In Uruguay as an Expat
Many like cultures like Uruguay because it is calm, peaceful, and not too busy. It can be nice to live where you won’t feel rushed all the time. It’s especially nice if you’re retired, as there are no real working hours, so you can sleep in late if you wish – something that may seem silly, but many people appreciate it.
You’ll be able to buy your groceries in peace, too, because it’s not very common for Uruguayans to have a lot of people over for dinner or else think that they are obligated to participate in huge parties often. Most gatherings are small, with just friends and family members. Therefore you won’t always find yourself attending events where you don’t really know anyone, which can be nice.
The cost of living in Uruguay is also relatively low compared to other countries. For example, rent for an apartment or house will likely be cheaper than what you’re used to, and the same goes for food and other essentials. This is another plus if you’re on a budget and like to live simply.
One of the most attractive things about Uruguay is that it is not very polluted and there isn’t really any smog or anything like that, which means you won’t have to worry about air quality too much. This can be a relief if you’re sensitive to such environmental issues.
It’s true that Uruguay isn’t perfect, and some things could be improved, but it’s still a great place to call home, especially if you’re looking for a change of pace. Why not give it a try? You may just find that you love it.
Frequently Asked Question about Expat Taxes in Uruguay
What is the tax residency status in Uruguay?
Your physical presence in the country determines the tax residency status in Uruguay. If you are physically present for 183 days or more in a calendar year, you will be considered a tax resident in Uruguay and subject to Uruguayan income tax on your worldwide income. If you are physically present less than 183 days, you will be considered a non-resident for tax purposes and will only pay tax on Uruguayan source income.
What taxes am I liable for in Uruguay?
Income tax, social security contributions, and value-added tax (VAT) are the main taxes in Uruguay. Income tax is levied at progressive rates, ranging from 0% to 35%. Social security contributions are payable at a rate of 11.5% on income up to USS 4,000 per month and at a flat rate of 22% for income above USS 4,000 per month. VAT is levied at 21% on most goods and services.
How do I pay my income tax in Uruguay?
You are required to file your tax return together with an estimated payment of the amount of tax that is due within three months after the end of each fiscal year. This is known as the ‘canon’ or minimum tax due to individuals and corporations. The monthly installments can be paid through the Banco de la República or commercial banks.
Can an expat become a resident of Uruguay?
Yes. An individual can live in Uruguay for six months per calendar year without being considered a “resident” for tax purposes, but after living here for five years, becomes a “resident” for tax purposes and is then taxed on worldwide income. Also, it is worth noting that if you become an Uruguayan tax resident, you are no longer taxed on your foreign-source income.
What types of income are taxable in Uruguay?
Generally, all types of income earned in Uruguay are taxable, including income from employment, self-employment, rent, royalties, interest, dividends, capital gains, and pensions. However, there are some exceptions for income earned from certain activities or investments.
How does one become a tax resident of Uruguay?
To become a tax resident of Uruguay, you must be physically present in Uruguay for more than 183 days in a calendar year. You will also be considered an Uruguayan tax resident if your center of financial interests is in Uruguay. Also, you can be considered an Uruguayan tax resident if your spouse is Uruguayan.
What kind of taxes do I need to pay in Uruguay?
Uruguay has a territorial tax system. This means that only income made and capital gains generated in Uruguay are taxable. Foreign-earned income isn’t taxed, which means you don’t have to worry about paying taxes on your worldwide earnings or investments. There are no inheritances or estate taxes in Uruguay.
Conclusion
Living in Uruguay is no cakewalk. The locals swear by mate and barbecues, and there’s a beach every few blocks. However, if you’re looking for a challenge and don’t mind the heat (it’s always hot), then this might be the place for you. Nonetheless, you need to understand the expat taxes before you relocate.
