Heard Montevideo, is pretty good. Some people I know who used to live in Spain, are going back to Uruguay now. These are quite clever people.
Here you go. We do have people out there if you need help. Check with accountants as this is a guide and not definately up to date.
Rental Income Tax
Uruguay is highly unusual in that no individuals are subject to income tax (whether residents or non-residents). However, the new socialist government under Tabare Vazquez has announced it will impose income tax on individuals, though details are not known yet.
The Tax Reform project will be in force on 01 July 2007. Capital income, including rental income, earned by individuals is subject to 12% tax. The taxable income is computed by deducting municipal taxes, impuesto a primaria (property tax for basic to education),notary fees of the lease contract and administration costs from the gross rental income.
Net Worth Tax (Impuesto al Patrimonio -IAP)
Individuals and families are (instead) taxed through the Net Worth Tax (Impuesto al Patrimonio),sometimes referred to as the "Property Tax", calculated annually on December 31 for individuals, households and undivided estates. The taxable base is the difference between taxable assets (including properties, assets and rights within the country) and deductible liabilities (debts with banks in Uruguay),and is fixed by assessment by the General Real Estate Registry. A non-resident is taxable at a flat rate of 2% of the property's net worth value that exceeds the prescribed tax-free amount (minimo no imponible or MNI),which is UYP1,560,000 (US$62,726) for 2005. The tax-free amount is doubled for couples filing jointly.
Property Tax (Contribucion Imobiliaria)
Individuals owning immovable properties in Uruguay are subject to a property tax, imposed by departmental governments. The tax base is the local cadastral value of the property, as determined by the collection office (local tax authorities). The tax rates vary depending on the department.
For the department of Montevideo, the country's capital and largest city, property tax is imposed at progressive rates ranging from 0.84% to 1.6275%, wherein the applicable rate applies to the whole taxable value. No other deductions are allowed. For nonresident property owners, a surcharge of 100% applies, wherein the effective property tax rates become 8.4% to 16.275%.
For nonresident property owners residing in neighboring countries of Uruguay, the surcharge is reduced to 50%. In a special area of the coast line that is a major tourist interest, the nonresident owners are not liable for the surcharges.
A tax for basic education is also levied on immovable properties in Uruguay, payable by the owners. The tax base is the cadastral value of the property as determined by the Cadastral Bureau. The tax rates vary from 0.15% to 0.30%, depending on the property value.
Corporate Route
Companies earning Urugayan-sourced income are subject to corporate income tax (Impuesto a las Rentas de la Industria y Comercio) at a flat rate of 30%. The taxable income is computed by deducting income-generating expenses from the gross income. Other allowable deductions include advertising costs, bad debts, commissions, gifts, goodwill, guaranties, interest expense, rents, representation expenses, research and development, remuneration (to owners, partners, directors),royalties and technical assistance, salaries and wages, service fees, social welfare, taxes on income-generating assets and activities, training costs, travel expenses, and depreciation expenses.
Business Net Worth Tax (Impuesto al Patrimonio -IAP)
The tax base for this tax is computed b deducting the company's total liabilities from its total assets. The tax rates vary from 1.5% to 3.5%, depending on the taxpayer's classification and the type of assets involved. The general tax rate is 2%.
Capital Gains Tax
Capital gains earned by individuals, even nonresidents, on the sale of property are not taxable in Uruguay until June 2007. Effective 01 July 2007, capital gains are taxed at a flat 12% rate. The taxable income is the difference between the sales price minus the acquisition cost, which is updated by taking into account the Consumer Price Index.
Corporate Route
Capital gains earned by companies through selling real estate properties are treated as ordinary income and subject to the corporate income tax rate of 30%. The taxable income is computed by deducting income-generating expenses from the gross income.
