Castellán

Uruguayan regulations, in article 6 of Title 7 of the Consolidated Text, corresponding to the Personal Income Tax (IRPF), establish that a natural person is a tax resident in Uruguay if they meet any of the following conditions:

1) Stay for more than 183 days during the calendar year in Uruguayan territory, counting sporadic absences (as long as they do not exceed 30 consecutive days);

2) That they establish in national territory:

-The main nucleus or the base of their activities, or
-The base of vital interests, or
-The base of economic interests.

Under what circumstances was a foreigner considered to have their economic interests in Uruguay?

Prior to the signing of the new decree, the established limit was exclusively:

-for an investment in real estate worth more than approximately USD 1,600,000;
-for a direct or indirect investment in a company worth more than approximately USD 4,800,000, which includes activities or projects that have been declared of national interest.

What changes does the new regulation introduce?

Decree No. 163/020 mentions the condition of establishing the base of economic interests in national territory, and adds two new hypotheses to establish tax residence. In this sense, it will be considered that a person establishes the base of their economic interests when they have an investment in Uruguayan territory with any of the following characteristics:

- in real estate, worth more than approximately USD 373,000, made as of July 1, 2020, and which also has an effective physical presence in Uruguayan territory during the calendar year of at least 60 days. In case of not making new acquisitions, the updated fiscal cost of each property may be considered.

- direct or indirect, in a company for an amount greater than approximately USD 1,600,000, made as of July 1, 2020, and which also generates at least 15 new direct employment positions, full-time, during the calendar year. In order to analyze the amount of the investment, the accumulated investment from the indicated date until the end of the corresponding calendar year will be computed. On the other hand, it is important to consider that new jobs will be understood as those generated as of July 1, 2020, as long as they are not related to a decrease in jobs in related entities.

The above refers to Uruguayan internal regulations that must logically be analyzed together, in each particular case, along with the International Agreements to avoid double taxation in force between Uruguay and the country in which tax residence is sought.

Final considerations

If we compare the new conditions added to the regulation by this decree, with the conditions already included previously, we can see that Uruguay has chosen to reduce by more than a quarter the minimum amount of investment in real estate and by a third the minimum amount of investment in companies in Uruguayan territory.

However, in the first case, the condition of complying with a physical presence of at least 60 days in Uruguay is added, and in the second case, the generation of at least 15 new jobs is added, requirements that are not established in the conditions already included in the regulation.

This regulation, as indicated by the decree, ultimately aims to promote foreign investment and job creation, which will result in an improvement in the general welfare of the country, in the context of the current health emergency.

 

Montevideo, June 17, 2020