How to Invest in Uruguay Real Estate and Obtain Tax Residency
Uruguay is considered one of the most stable economies in Latin America. With the second-highest minimum wage, and the third-highest Human Development Index of the region, the country positions as an attractive destination for foreigners looking to settle, buy real estate, or obtain a tax residence in Uruguay.
Likewise, the cost of properties in Uruguay tends to be lower than in other Latin American nations and the purchasing process is not as complicated as in neighbouring countries. Because of this, many Argentinians have moved to Uruguay, and currently represent more than 25% of foreigners living in the country.
Why invest in real estate in Uruguay?
The Uruguayan government protects both the acquisition and the disposal of real estate, without discrimination based on the nationality or residence. In this way, Uruguay guarantees equal treatment to local or foreign investors buying property or settling in the country. However, keep in mind that there are some minimum variations regarding fiscal conditions.
Furthermore, there are no exchange controls in force in Uruguay and operations carried out in foreign currency have no restrictions. Besides, there are no obstacles or additional legal requirements when reaching commercial or financial agreements in foreign currency.
How to buy a property in Uruguay?
Foreign investors thinking in buying real estate in Uruguay may be able to do so in two different ways:
1. Without intermediaries
The real estate purchase process can be executed by:
- Residents and non-residents
- Local or foreign companies.
In both cases, the Uruguayan regulatory framework guarantees equal treatment and there are no restrictions for foreign investors seeking to buy properties in the country.
2. Invest in real estate with the help of a local expert
Investing in real estate in Uruguay will be much easier if you own a local or foreign company that operates in the country. However, the best way for buying real estate in Uruguay depends on the type of investment and the tax benefits that may be accessible in each case.
Consequently, it is recommended to work with a local legal expert that fully suits your needs.
Steps for buying a property in Uruguay
1. Choose the property you want to purchase. It is important to note that in Uruguay there are no restrictions on what type of properties foreigners can acquire.
2. Designate a public notary, who will be the person in charge of protecting the investors’ interests during the purchase process. Keep in mind that you can sign a power of attorney (POA) or designate a public notary to sign the necessary documents on your behalf.
3. The public notary must issue a deed of sale.
4. Before the property is transferred to the new owner, both parties must sign the deed of sale.
5. Register the property in the name of the new owner before the Public Registry of Property. This process can be carried out by the public notary.
6. Once the registration is made and the purchase process is completed, the new owner may request a Tax Residence Certificate from before Uruguay’s General Tax Directorate (DIG).
Note that all properties in Uruguay possess a unique number that identifies them, known as the ‘Padron number’, which also includes the exact location of the property, listed by the Cadastre Directorate or ‘Dirección de Catastro‘. It is important to rely on a legal expert to be clear about any additional costs and to ensure that the terms of the purchase are in full compliance with Uruguayan law.
Benefits when buying a property in Uruguay
Since June 2020, the government of Uruguay introduced some changes to the country’s regulatory framework to grant tax residence to foreign investors whose businesses where generating employment and improving the welfare of Uruguayan residents. Therefore, investment in real estate has become an effective way of obtaining fiscal residence in the country.
Decree 163/20: A new way to obtain fiscal residence in Uruguay
The decree 163/20 promotes real estate investment in the country, by granting tax residence to foreign investors if they:
- Make an investment in real estate of more than UI$3,500,000 (approximately US$370,000).
- Remain in the country for at least 60 calendar days.
- Own or manage a company with a value greater than UI$15,000,000 (approximately US$1,585,000), generating at least 15 new direct jobs trough a dependent employment relationship.
Keep in mind that real estate investments made before 1 July 2020, are not eligible for tax residence.
“Tax Holiday” scheme
The new bill proposes the following two options for foreigners who obtained their fiscal residence from the fiscal year 2020:
1. To pay income tax as a non-resident (IRNR-Income Tax for non-residents) for the year in which they obtain their tax residence and the following 10 years. During this period, the income from a foreign source will not be taxed. Income from Uruguayan sources will be taxed at rates of 7% (for dividends) or 12% (for the remaining income).
2. To pay income tax as a resident, both income from a foreign source and income from an Uruguayan source is subject to a 7% rate.
In addition to extending the term to 10 years from the fiscal year 2020, people who previously obtained tax resident status can also choose to pay income tax as a non-resident (IRNR-Income Tax for non-residents).
Live and do business in Uruguay by investing in real estate
By loosening the conditions required for foreigners to obtain fiscal residence in Uruguay while continue doing business, the country positions itself as one of the most attractive countries in Latin America to invest. Thanks to the government’s efforts, Uruguay maintains an active policy that encourages the arrival of foreigners who want to live, invest and do business in Uruguay by purchasing real estate.
Source: Craig Dempsey
CEO & Co-Founder | Biz Latin Hub