Uruguay Individual Tax Guide

Uruguay

Montevideo

EY

Avda. 18 de Julio 984 4th and 5th Floors Palacio Brasil P.O. Box 1303 11100 Montevideo Uruguay

Executive and immigration contacts

Martha Roca

+598 (2) 902-3147

Fax: +598 (2) 902-1331 Email: martha.roca@uy.ey.com

María Inés Eibe +598 (2) 902-3147

Fax: +598 (2) 902-1331 Email: ines.eibe@uy.ey.com

The exchange rate of the Uruguayan peso against the US dollar is approx imately UYU44 = USD1.

A. Income tax

Under the personal income tax law, effective from 1 July 2007, individuals are subject to income tax in Uruguay.

Resident individuals are subject to tax on their Uruguayan-source income. They are also subject to tax on certain foreign-source income, such as capital gains and work income, if certain condi tions are met. Income subject to the tax is divided into the catego ries of capital gains (Category I) and labor income (Category II).

The basic rate of personal income tax on capital gains is 12%.

Tax on labor income applies to income derived from dependent or independent work. A specified amount of income is not sub ject to tax. The tax is imposed at progressive rates ranging from 10% to 36%.

Income from pension funds is subject to the Tax of Assistance to Social Security. This tax is similar to the personal income tax.

Nonresident individuals are subject to income tax on their Uruguayan-source income at a rate of 12%. They are also subject to tax on their income from technical services performed abroad if certain conditions are met.

In addition, a 4% (2% for the seller and 2% for the buyer) trans fer tax is imposed on sales of real estate.

B. Other taxes

Net worth tax. In general, individuals owning assets in Uruguay must pay tax on their net worth at year-end at progressive rates ranging from 0.1% to 0.4% (for 2021). However, for nonresident

individuals who are not subject to nonresidents’ income tax, the rates vary from 0.7% to 1.5%. A tax-free allowance of UYU4,937,000 (for 2020; the amount for 2021 is to be deter mined) may be deducted.

Inheritance and gift taxes. Transfers of real estate by gift or inheritance are subject to the 4% transfer tax, except for inheritances from direct line of consanguinity, which is subject to a 3% transfer tax.

C. Social security

Contributions. Self-employed individuals pay social security taxes on notional amounts of income rather than on actual earn ings, except for professional self-employed individuals to whom a different regime applies. The amounts are established by law.

Contributions are paid by employers and employees at the rates set forth in the following table.

Employer Employee Self-employed Type % % %

Pension fund 7.5 (a) 15 (a) Variable (c) Medical care 5 3 to 8 3 to 8 Work Reconversion Fund (b) 0.1 0.1

Labor Credits Guarantee Fund (b) 0.025

(a) This rate applies to the portion of income that does not exceed approximately UYU202,693 (monthly). (b) These are taxes on salaries and are paid to the social security body (Banco de Previsión Social, or BPS).

(c) Self-employment contributions are calculated by deducting 30% of the total amounts invoiced. Pension fund contributions vary according to category.

Totalization agreements. To provide relief from double social security taxes and to assure benefit coverage, Uruguay has entered into totalization agreements, which usually apply for a maximum period of one year, with the following jurisdictions.

Argentina El Salvador Paraguay

Austria France Peru Belgium Germany Portugal Bolivia Greece Romania (c) Brazil Israel Russian Federation (d) Canada Italy Spain Chile Korea (South) (d) Switzerland Colombia Luxembourg United States

Costa Rica (a) Netherlands Venezuela (b) Ecuador

(a) This treaty has not yet been approved by Costa Rica. (b) This treaty is in force, but some dispositions were not regulated. (c) This agreement was recently ratified by the Uruguayan parliament, but it is not yet in force. (d) This agreement was signed but has not yet been ratified by the parliaments.

D. Tax filing and payment procedures

Married persons have the option to be taxed jointly or separately for purposes of the personal income tax Category II and the net worth tax.

E. Tax treaties

Uruguay has entered into double tax treaties with the following jurisdictions:

• Argentina (not a double tax treaty but a tax information exchange agreement with a clause to avoid double taxation; entered into force and effective since February 2013)

• Belgium (entered into force in November 2017 and effective since January 2018)

• Brazil (signed in 2019 but not yet ratified by both parliaments)

• Chile (entered into force in September 2018 and effective from January 2019)

• Ecuador (entered into force in November 2012 and effective since January 2013)

• Finland (entered into force in February 2013 and effective since January 2014)

• Germany (renegotiated and effective since January 2012)

• Hungary (effective since January 1994; obsolete in certain aspects)

• India (entered into force in June 2013 and effective since January 2014)

• Italy (entered into force in October 2020 and effective since January 2021)

• Japan (entered into force in July 2021 and effective from January 2022)

• Korea (South) (entered into force in January 2013 and effective since January 2014)

• Liechtenstein (entered into force in September 2012 and effec tive since January 2013)

• Luxembourg (entered into force in January 2017 and effective since January 2018)

• Malta (entered into force in December 2012 and effective since January 2013)

• Mexico (entered into force in December 2010 and effective since January 2011)

• Paraguay (entered into force in March 2019 and effective since January 2020)

• Portugal (entered into force and effective since September 2012)

• Romania (entered into force in October 2014 and effective since January 2015)

• Singapore (entered into force in March 2017 and effective since January 2018)

• Spain (entered into force in April 2011 and effective since January 2012)

• Switzerland (effective since January 2012)

• United Arab Emirates (entered into force in June 2016 and effective since January 2017)

• United Kingdom (entered into force in November 2016 and effective since January 2017)

• Vietnam (entered into force in July 2016 and effective since January 2017)

F. Temporary visas

Most foreign nationals must obtain valid entry visas to enter Uruguay. However, foreign nationals of certain jurisdictions do

not need entry visas to enter Uruguay if they stay for less than three months, or in some cases, if they stay for less than one month. These jurisdictions include the following.

Andorra Guatemala Peru

Argentina Guyana Poland

Armenia Honduras Portugal

Australia Hong Kong Romania

Austria SAR Russian Bahamas Hungary Federation Barbados Iceland St. Kitts and Belgium Ireland

Nevis

Belize Israel St. Vincent and Bolivia Italy the Grenadines

Brazil Jamaica San Marino

Bulgaria Japan Serbia Canada Korea (South) Seychelles

Chile Latvia Singapore Colombia Liechtenstein

Slovak Republic

Costa Rica Lithuania Slovenia Croatia Luxembourg South Africa

Cyprus Macau SAR Spain

Czech Republic Malaysia Sweden Denmark Malta Switzerland

Dominica Mexico Trinidad and Ecuador Monaco Tobago El Salvador Mongolia Turkey

Estonia Montenegro Vatican City Finland Netherlands Venezuela France New Zealand Ukraine

Georgia Nicaragua United Arab Germany Norway Emirates Greece Panama United Kingdom

Grenada Paraguay United States

Foreign nationals may enter Uruguay under temporary or perma nent visas.

Different types of temporary visas are available for an individual to stay in Uruguay in addition to the visa that may be required to enter the country (detailed above).

Temporary visas are available to the following temporary resident individuals:

• Migrant workers

• Scientists, researchers and academics

• Professional, technical and skilled personnel

• Students, trainees and interns

• Businesspersons, entrepreneurs, directors, managers and con sultants

• Journalists

• Sports persons

• Artists

• Religious individuals

Temporary visas are available to the following nonresident indi viduals:

• Tourists (foreigners entering the country for recreation, leisure or rest)

• Individuals invited by public or private entities because of their profession or art

• Businesspersons

• Members of public, artistic or cultural performances

• Members of international transport crews

• Passengers in transit

• Individuals in local border traffic

• Members of crews of fishing vessels

• Members of crews performing transshipments in the country

• Individuals who come for medical treatment

• Athletes

• Journalists and other professionals in the media

• All persons not included in the preceding items who are expressly authorized by the National Directorate of Immigration

G. Work permits

To work in Uruguay, an employee must have a Uruguayan permit. Although Uruguayan regulations do not provide a “work permit” as such, a foreign national may work in Uruguay under a perma nent residence visa, or under one of the temporary visas described above, for a period lasting the length of the employment contract. If the period is less than 180 days, a provisional identity sheet of the identity card should be requested.

An applicant may work in Uruguay while his or her work permit application and other papers are being processed.

No limitations are imposed on foreign nationals wishing to start businesses or head subsidiaries in Uruguay.

H. Permanent residence visas

Permanent visas are issued to foreign nationals who intend to establish permanent residence in Uruguay.

To obtain a permanent visa, an application must be filed either in the foreign national’s home country or in Uruguay, accompanied by the following documents:

• Passport or equivalent document

• Health certificate

• Proof of financial means

• Criminal records

• Identity card or document

• Birth certificate

• Uruguayan address certificate

After all documents are submitted, the approximate time for obtaining a visa is three to six months.

Under Law No. 19,254, permanent residence applications for nationals of Southern Common Market (Mercado Común del Sur, or MERCOSUR) countries and associated states and for eigners who have certain familiar ties to Uruguayan nationals must be processed by the Ministry of Foreign Affairs.

I. Family and personal considerations

Family members. The working spouse of a work permit holder is not automatically authorized to work in Uruguay; a separate appli cation must be filed at the same time as that of the expatriate.

Driver’s permits. A foreign national may drive legally in Uruguay with his or her home country driver’s license only while he or she is applying for a local driver’s license.

To obtain a local driver’s license in Uruguay, an applicant must pass a written exam on specific Uruguayan traffic rules, as well as a physical exam. However, there is a process for certain types of driver’s licenses by which a foreign national may revalidate his or her home country’s driver’s license in Uruguay. The driver’s license must be legalized and translated into Spanish when appropriate.

Uruguay has driver’s license reciprocity agreements with Italy and Spain.