Okay, the title may be a little dramatic… But, it could be the truth.
I just read an article in MercoPress about the proposed changes to the tax laws in Uruguay… This article completely blew me away.
Uruguay’s Economy Minister Fernando Lorenzo announced that a new bill has been drafted and is being sent for legislative consideration to tax overseas income and deposits.
“This means that once the bill is approved residents in Uruguay will have to pay income and wealth taxes on overseas income and from their share of assets in financial or other investments overseas” – Lorenzo
There is opposition to this, but there is good reason to do it.
The article goes on to state that an estimated U$S 8.18 billion is deposited outside of Uruguay from residents of Uruguay.
I don’t know what rate they are planning on taxing it at, but even if it was only at 10%… that would be an additional U$S 820 million a year injected into the country. That’s a LOT of money down here.
The article also goes on to state that the banking secrecy would also be loosened up to accommodate the tax office.
A formal request from a judge can open all banking records.
“The tax revenue office working with reasonably founded information or claims can have access to the taxpayers’ accounts once a Judge decides affirmatively to such a request.”
Pedro Bordaberry (who ran for President in the last election) and former Deputy Cabinet Chief Leonardo Costa are both strongly opposed to the legislation.
“Furthermore Uruguay lacks specific courts for tax issues and will be at the mercy of the officials from the Revenue Office and their interpretation of regulations, putting an unbearable pressure on the magistrates who don’t have the necessary technical support.” – Costa
“According to the draft I have read tax payers are left quite exposed and with limited rights. This is a very delicate terrain, since the country has a long tradition of protecting people’s rights (human, civil, fiscal) and the only purpose should not be to have us out of the OECD grey list.” – Costa
This could play out to be very interesting if the legislation is passed.
I have a lot of questions… a few off of the top of my head are:
- Would this include taxing SSI or a pension from the U.S. for retirees who live in Uruguay?
- Would we be “double taxed?”
- If it passes, when would it go into effect and for what tax period?
- How many people would leave Uruguay because of this?
Coupled with the dollar and euro losing value and inflation… I think the passing of this legislation could cause an expat exodus…
What’s your opinion?
You can see my comment on the Merco Press link….It blew me away, too, especially having just arrived and am busy integrating my family here with the aspirations of citizenship. This could be a deal breaker for not just me, but many friends on their way- we are a small drop in the bucket of who may join the exodus or not come at all. 82 million is A LOT, but making this a country one that imports capital and investment would seem more lucrative…including bringing jobs to support the infusion of capital. I am preaching to the choir here….what a HUGE mistake it would be. Where is the sovereignty?
Mary… We’re right there with you… We’ll be following this topic very close… I just read your comment on MercoPress… We’re the choir…
Welcome to Uruguay 😉
An well-respected Uruguayan attorney informs us that the article is worse than the reality. This has no legs at present, at is intended to apply only to Uruguayans with resources abroad. Ya veremos…
I sincerely believe that expats should not worry, this Bill shouldn’t reach them… It is intended only for Uruguayan residents with assets abroad, and to do otherwise would just be a great SNAFU…
.-= alex´s last blog ..Reunión Familiar =-.
I am hearing the same thing as priehl from my trusted sources here in Uruguay. I hope it doesn’t discourage anyone from coming here.
yes, I have the same attorney and remain hopeful, but this doesn’t help any optimism ( and I swear i am not a “the-sky-is-falling-type!) I know nothing is in stone, but this story is spreading exponentially and people are already changing their plans and taking Uy off their list…for now….
@ Mary… I just read the article there… That isn’t an optimistic article at all… It’s downright intimidating if you ask me. At the same time the press can spin things almost anyway they want…
But, who knows? If someone would have told me 8 years ago that in 2010 we’d have a black President named Barack Hussein Obama; I would have asked what the punchline to the joke was.
I’m curious with you being here for only 2 months, how does this make you feel? If you were to leave UY, where do you think you’d head to?
@Priel, Alex & SoCalGal… I’m curious as to why you think this legislation has no legs and about what your attorney friend said?
I’m also curious as to your opinions about what Astori said in the article Mary posted about UruguayDailyNews?
I just read both of those questions and I just want to let the 3 of you know, I’m really not trying to be an ass… It’s just that the 3 glasses of wine I’ve had won’t allow me to rephrase those in a better way right now. 😉
Well, having brought 2 kids, 2 dogs and all of my belongings, this “news” makes me more emotional than I want, that is for certain! I have looked into moving here for 5 years, went to Panama first, and then here, mainly because the culture seems more compatible and education is more of a priority-this country has great family ideals and the art of simple living. Panama was fine, this just seemed a better fit for a “homeland”, which is what our plans have been- citizenship. I also was looking into investing more here- but that is definitely on hold til the dust settles here and we know what is what. Not only do I feel less inclined to invest, I feel less inclined to stay. Ironically, there are many in Panama watching me as a “guinea pig”- they may be glad they didn’t jump right in. I do not know what I will do if this becomes law. I have been embracing this country to allow my children to try to start thinking of it as “home”. How do I continue to do that when we may be penalized for deciding to move here in a way I never expected out of UY. All I can say is , we’ll see….
Hi All !
Note I have just read an article at EL PAIS regarding this issue.
The bill to be sent for legislative consideration includes an article reading as follows –
“all those foreigners residing in Uruguay and having assets out of the country will be exempted of paying the wealth tax if those assets are personal ones (not corporate)”.
The wealth tax would be from 0.7% to 2%.
The income tax would arise to 12% and would be applied on deposits at banks out of Uruguay and assets in financial or other investments.
In addition, I have found out that by the time being, the only countries that have signed an agreement with Uruguay in order to share fiscal data and to avoid double taxation are: Canada, Mexico, Malta, Lichtenstein, South Korea, Spain, Portugal, Germany, Switzerland, Finland and Belgium.
Similar agreements are being negotiating with The States and the UK.
Iggy… Thanks, you are always a wealth of information… Do you by chance know when this is to be voted on?
I am an uruguayan who lives in the USA and HAD plans to move to Uruguay post retirement. The current government main purpose is to find new tax revenues. They have to support a very large public sector load and it is logical that they now move to tax any resident (be foreign resident in Uruguay or Uruguayan citizen) with income from foreign sources. The proposal (hidden in logic of insertion into the global financial system of transparency) is to tax 12 % of any income generated from deposits in countries outside Uruguay. As an uruguayan who has lived all my life outside the country, I find it outrageous and immoral to have to pay taxes on income that I generate outside the country. The country should be happy that I bring that income into the country and I consume products and services inside the country where I reside. The current Uruguayan government however, prefers that you be taxed so they can “distribute” that wealth themselves which begs the question: “Is the government more interested in collecting taxes to maintain the bloated public service or to attract foreign capital. They say it is the latter but I think it is the former. I am sadly rethinking my thoughts of retiring in Uruguay
It seems this weeek the bill would be sent to the House of Representants.
The legislative process is not short at all.
Firstly, the bill is received, then it is sent to a commission for further analysis, after that, it is returned to the house for approval. If that occurres, then the bill is sent to the Upper House (Senate), where there is a commission, etc, etc.
Represetants and Senators can ammend the bill, so the final result could be just the opposite than original bill.
By the way, there were some news during the weekend. For your guidance, the guys at the Ministry of Finances made some changes regarding foreigners residing in Uruguay and foreign companies. It seems that main target is to reach “natives´” deposits abroad, but avoiding to disturbe the interests of foreign companies, international investors or expats choosing URU to settle down.
Hey all there !
Please read as follows –
(source – EL PAIS – 01 JUN 2010)
ECONOMÍA by FABIÁN TISCORNIA
….tampoco se afectará a los extranjeros jubilados que vienen a residir a Uruguay y cobran sus pasividades, dijeron a El País fuentes del gobierno.
“foreign retirees coming to reside in Uruguay will not be charged, informed to EL PAIS some GOV sources”
UHMM, I wonder what happens to someone like me who has lived outside the country since age 5 and thinks of retirement in Uruguay. I hold dual citizenship so maybe I need to become a foreigner by not renewing my Uruguayan passport anymore 🙂
I guess I will wait to see what passes. knowing the politicians in Uruguay and the current uncertainty of this government, anything is possible.
I just read the article Iggy pointed of El Pais and the article just leaves me even more puzzled. On one side it says that the intent is NOT to tax the income from a pension, social security but later in the article it says its intention is to tax “deposits, investments,..” that are done outside of Uruguay. So, I am more confused. It seem to indicate that a social security check for example from the US would not be tax, but if I have bank accounts in the US or investments in a brokerage that produces income those will be charged a tax.
Again, with the current government, it will be impossible to determine what they are really going to end up passing. The certainty is that they are causing a lot of doubt in people considering Uruguay as a retirement option. My guess is that they will end up codifying tax requirements for income from foreign sources of residents (be foreign resident or native resident) – I hope I am wrong!
printed with permission- Good News!
Unfortunately, much of what the press articles and blogs have been saying is much more alarming than the reality. It has been said that Uruguay will tax:
· its corporate vehicles’ offshore assets
· foreign residents’ assets
· foreign residents’ income
That is incorrect.
The problem was originated because a draft of a proposed change to a tax law was leaked ten days ago. That draft is still a work in progress. And the proposed change only aims to tax the money that Uruguayans have abroad, not foreigners who come to Uruguay.
Here’s the exact situation of where the issue stands on the three supposed taxes:
Taxes on corporate vehicles’ offshore assets: Last Friday, May 28th, the Ministry of Finance, where the bill proposal is being discussed, issued an official statement clarifying one issue of the proposed bill: that there will be no new taxes on Uruguayan companies, and that their offshore assets will not be taxed. Explicitly: that nothing will change for Uruguayan corporate vehicles. So, Uruguay remains an offshore tax free jurisdiction.
Taxes on foreign residents’ assets: It has been made clear from the start that assets owned abroad by foreign residents in Uruguay will not be taxed at all. This was never in doubt. This is only for citizens (at a very small scale; and remember that this asset tax is gradually being phased out since 2007, and will disappear by 2017).
Taxes on foreign residents’ income: Some types of income (not all) generated abroad could be taxed. But the aim of the law is to tax the money that Uruguayans have abroad, not foreigners who come to Uruguay. The Ministry of Finance issued a second statement on June 1st, clarifying that the law will in no way jeopardize the country’s policy of attracting foreigners to relocate in Uruguay. And that their income will not be taxed. The likelihood is that on income tax (on some types of income: interest on deposits and dividends) the tax will be circumscribed to Uruguayan citizens.
I´ll be glad to keep you updated, if you´re interested.
Juan Federico Fischer
FISCHER & SCHICKENDANTZ
Rincón 487, Piso 4
Montevideo 11000, Uruguay
Tel: (+598) 2 915-7468 ext. 130
Cell: (+598) 99 925-106
Fax: (+598) 2 916-1352
@ Juan… Thank you for your well thought out and in depth response… I’ll send you an email…
If you are a US citizen , you have to file a tax return in the US every year. I did this from NZ and it was no problem. Your tax rate will never be higher than the tax rate where you live, in my case NZ.