Tax residence is the link of a person (individual) with Uruguay as a result of certain conditions such as the time spent in the country; a family or vital interests; volume of income; investments in real estate; productive investments, among others, which imply that a person must take on the quality of taxpayer in the country.
Unlike the legal residence, it is not of a permanent nature and must be verified on a yearly basis. In addition, both types of residencies may or may not coincide in one person.
How is the tax residence verified?
The tax residence of the individual may be verified by compliance with one of the following criteria:
1. Prolonged stay of more than 183 days during the calendar year in Uruguayan territory.
This must be demonstrated by means of the Arrival Certificate issued by the National Direction of Migration and other documentation that is deemed pertinent.
2. Establishment of the nucleus or main base of operations in the national territory.
It may be accredited through a notarial or accounting certificate of total income, to which a taxpayer declaration must be attached (where the signature must be certified by a notary public) stating that:
The applicant has no other income other than those referred to in the certification.
If the applicant generates income in other countries, they must show that it is less than the income earned in our country. This comparison must be made country by country.
It must be clear that the income originating in our country is not exclusively capital income.
The aforementioned information must refer to the year or years for which the Certificate(s) is/were requested.
3. Due to economic interests.
The interested party must indicate whether they have investments in real estate or in companies with a promoted investment project, which complies with any of the following conditions:
Interest in real estate, valued at more than 15,000,000 index units (approximately USD 1,622,000), valued according to the regulations of the income tax for individuals, and updated by the variation of the Index Unit.
Direct or indirect interest in a company valued at more than 45,000,000 index units (approx. USD 4,866,000) with activities or projects declared of national interest (law 16,906). The valuation of the company must be made according to the rules of the income tax on economic activities.
In 2020, two additional grounds have been added that are not applicable if the taxpayer proves tax residence in another country:
In real estate, the value must exceed 3,500,000 index units (approx. USD 378,000) as long as this was carried out as of July 1st, 2020 (ratified by Decree 174/020) and in addition, the applicant's physical presence in Uruguayan territory during the calendar year must be of at least 60 days.
Directly or indirectly owning a share in a company valued at more than 15,000,000 index units (approx. USD 1,622,000), as of July 1st, 2020, and said company must have created (or shall create) at least 15 direct full-time dependent jobs during the calendar year. New jobs are those created as of July 1st, 2020, provided that they are not related to a job reduction in affiliated entities.
Once the tax residency in Uruguay is obtained, the new resident is included in the tax regime for residents in Uruguay with a temporary advantage over the others, which is called tax holiday: for the year in which they become a tax resident, and for the following 10 years, they do not pay personal income tax at a 7% rate on investment income (basically interest and dividends) originated abroad.
4. Residency due to the applicant's vital interests in the national territory.
This can be recognized through any documentation that is considered pertinent, such as the enrollment of the child or children in an educational institution, proof of medical insurance coverage, proof of membership in a sports club, etc.
If the residence is to be proven through the presumption of a spouse and underaged children, submitting the Residency Certificate of the family members and proving the marital status and filiation of the family members through copies of the designated certificates is enough.
How to obtain the Tax Residence Certificate?
In order to obtain the Tax Residence Certificate, the interested person must prove his/her tax residence in the country for the period for which he/she is requesting the certificate, in accordance with the regulations in force. The individual who requires a Tax Residence Certificate in Uruguay shall appear in person before the General Tax Directorate (DGI for its acronym in Spanish) with the documentation proving their tax residence and two filled out copies of Form 5202 - Application for Tax Residence Certificate. If you require assistance you can refer to the instructions here.
General Tax Directorate Offices (DGI):
Montevideo: Av. Daniel Fernández Crespo 1534. Administration Division - Front Desk - 8th Floor.
Rest of the country: at any DGI office.