Financial

Today’s blog post is a guest post by Juan Fischer, the managing partner of Fischer & Schickendantz. Juan wrote the following post to help alleviate concerns about the proposed tax legislation in Uruguay.

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 several 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:

1. Taxes on corporate vehicles’ offshore assets:
   • 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:
   • 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.
2. 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).
3. 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.

There you have it from an Uruguayan attorney… Please feel free to ask any questions in the comments below or to contact Juan directly here.

There has been a LOT of talk in Uruguay’s Expat Community about the new proposed income tax law in Uruguay.

I wrote a blog post when it was 1st announced last Wednesday, you can read the article here.

The Uruguay message boards and Uruguay forums have been buzzing with speculations of what is or isn’t and may or may not be happening.

There are people on both sides of the fence and everywhere in between, from supporting the measure to being strongly opposed.

There are a few well thought out speculations I’ve read and a few speculations which have obviously been charged with emotion.

Here are a couple of things that have been said and my opinions on them.

“Expat opinions don’t matter in Uruguay”

I would like to think this statement isn’t true… But it is.

I can’t speak for the rest of the world, but I think it’s a trend for people from the U.S. to feel a sense of entitlement to have a say in politics where they are living. It’s not a bad thing, it’s not a good thing… It is what it is.

Not having a voice in a decision that could potentially affect taxes is a very sensitive subject for people from the U.S. We have been brought up knowing our nation was founded because of unjust taxes being levied upon the people.

“Taxation without representation.”

The reality is, as an expat we have no representation in the U.S. Congress or U.S. Senate. We certainly don’t have any representation here in Uruguay or any other country.

As an expat who is not a citizen of Uruguay, regardless of what I bring to or contribute to the country, I shouldn’t have a say… Although I may not like or agree with decisions the country makes, it’s not my country.

“Expats infuse Uruguay with money it wouldn’t have otherwise. Imposing this tax will cause expats and foreign companies to leave Uruguay along with all of their money.”

I couldn’t agree with this statement more.

One really cool thing for us about Uruguay was the tax laws coupled with banking secrecy.

A big change (other than taxing) this potential law will bring is information sharing. Some people see no problem with governments sharing information with each other about their citizens, how much money they make and everything else under the sun. But that’s not cool in my book.

“The majority of expats who come to Uruguay are retirees.”

That may have been true… But with the age of the Internet and telecommuting, there is a trend of people leaving the U.S. and living abroad simply because we can.

Over the next several decades, I think it will be the norm for people to live wherever they want in the world… That is if the world doesn’t end in 2012, the NWO doesn’t exterminate 80% of the population or the aliens don’t take us to the mother ship.

We have the flexibility to live wherever we want as long as we have access to high-speed Internet. We know of several families here in Uruguay who are location independent too.

Because of inflation and the devaluation of the dollar, there are several families who have already left Uruguay. I believe imposing an income tax, upon overseas income, changing the banking secrecy laws and sharing information just may be the final straw to send a lot more people out of Uruguay and deter people from moving here.

At this point in time, with the information I’ve seen, I think the new Uruguayan income tax law will pass.

What are your thoughts?