How to obtain tax residency in Uruguay?
In this last time, we have found a notorious amount of cases of Argentines trying to obtain residence in Uruguay and of Argentine companies that settle their operations in the neighboring country- high net worth.
The answer to why they do it is very simple: taxes.
In Argentina, companies pay, mainly, the following taxes: (i) Income Tax (35% – if they distribute dividends -); (ii) Gross Income (average rate of 3%); (iii) Safety and Hygiene (average rate of 1%); (iv) Check Tax (of 1.2% – Micro and Small Companies do not pay it); and (v) Social Security (which can reach around 40% between Contributions and Contributions).
In addition, there are a number and diversity of regimes (information, retention, perception, etc.); added to that there are countless jurisdictions with their own norms and different from each other (the Nation, the 24 provinces, all the municipalities), that it becomes really impossible to comply with everything.
In the neighboring country, on the contrary, everything seems to be much simpler and less expensive.
The first thing worth highlighting, responds to the “Ficta Liquidation Regime” (“IRAE”) for companies based in Uruguay that have up to the US $ 500,000 of annual sales.
This tax would be equivalent to the Income Tax in our country and really what draws attention to these Uruguayan SMEs pay tax.
For example, when companies combine capital and labor income, they pay the following aliquots, according to the level of income (in dollars) they have:
As we can see, in the case of companies that bill up to US $ 250,000 (which pay 3.30% of Income Tax in Uruguay), if they were based in Argentina, only considering the Tax on the Gross Income (average rate of 3%), we would practically equal what is paid in the neighboring country.
The second big issue, responds to which income (in the income tax) and what goods (in the tax on equity) are reached by Uruguay and Argentina.
While in Argentina the residents of our country pay taxes for all the goods and all the rents they obtain, regardless of where they obtain them or where they are located (that is, both in the country and abroad), in Uruguay they are only taxed the Uruguayan income and assets.
For example, if a company based in Uruguay obtains an income for a service provided in Argentina, it does not pay taxes in the neighboring country.
On the other hand, if a company based in Argentina obtains an income for a service provided in Uruguay, it does pay taxes in our country.
The same happens if an Uruguayan has assets (real estate, cars, bank accounts, etc.) in Argentina: he does not pay taxes in Uruguay.
On the other hand, as all Argentines who have laundering properties in Punta del Este know, all those goods do pay Personal Property Tax in the country.
Finally, regarding Consumption Taxes, in addition to VAT, in Uruguay there is the “Internal Specific Tax”, which is levied in only one stage of the commercial chain (the first), unlike Gross Revenue in our country, that is taxed at all stages (industrial, wholesale trade, distribution, retail), significantly increasing the cost of goods and services.