Banking, Residency, And Taxation In Uruguay

“Kathleen, we have been doing our homework and think that Uruguay might be the right place for us and are planning a trip to check it out. Some of my research is indicating that many people are upset and leaving as a result of the government getting ready to impose stiff taxes on money coming in from outside the country. Apparently this is largely a result of pressure from the United States and the UK.

“Looks like another example of the USA flexing their muscles and screwing things up all around the world. At least it is not a war this time.

“Do you or Lief have any comments about what appears to be a huge change coming to Uruguay?”

–Bill S., United States

Latin America Correspondent Lee Harrison, part-time resident of Uruguay, responds:

“Overall, I still think that Uruguay is an excellent choice as an offshore destination. But I’ll offer a couple of observations that should be taken into account.

“One is that Uruguay has trended toward more taxes in recent years. For example, both the capital gains tax and the income tax are new since I moved to Punta del Este in 2006. That said, their implementation hasn’t really affected me or most other expats. The income tax applies only to Uruguayan-source income, and, after two property sales, I’ve found that the capital gains tax—as it’s actually implemented—is negligible.

“I would use caution when buying residential real estate in this country. Now is not the time to buy.

“Uruguay has recently abandoned bank secrecy for Argentine citizens. And Argentina has all but blocked the exchange of dollars within its borders, while, at the same time, the Argentine peso continues to plummet in value. These factors are combining to cause a slowdown in the crucial tourism sector, as well as in the property market. Prices are softening, and sales volume is low. Some projects are struggling.

“I haven’t heard of any pending tax on money transfers, although I do know that many Argentines (those who had undeclared funds in Uruguay) are withdrawing money before any disclosures are made to the Argentine tax authorities.

“Aside from those issues, Uruguay is an excellent place to obtain residency and a second citizenship. And I am still a fan of the banking system, with its free flow of capital and lack of controls. Uruguay also maintains a welcoming business environment and is a good place for low-tax offshore structures.

“And, most important, I’d say, living in Uruguay is a pleasure. The climate is gentle, the beaches are fantastic, the society is low in regulation, and the Uruguayan people are great—honest, welcoming, and friendly.”

Editor’s Note: Lee has prepared a complete update and analysis on the current and evolving situation in Uruguay for the June issue of the Simon Letter, in production now. If you’re a Simon Letter member, watch for your issue and Lee’s from-the-scene report later this week.