US Expats in Uruguay: Navigating Taxes in 2023
- Life as an Expat in Uruguay
- Uruguay at a Glance
- US Expat Taxes in Uruguay
- Who Has to File Taxes in Uruguay?
- Who Qualifies as a Tax Resident in Uruguay?
- Income Tax in Uruguay
- Other Tax Situations in Uruguay
- What Tax Forms do US Expats in Uruguay Need to File?
- Essential US Tax Forms for Expats in Uruguay
- Do the US and Uruguay have a Tax Treaty?
- Does Uruguay Have a Totalization Agreement with the US?
- Navigating Tax Compliance for US Expats in Uruguay
Life as an Expat in Uruguay
Situated idyllically between Brazil, Argentina, and the Atlantic Ocean, Uruguay offers a mildly warm climate, beautiful spanning beaches, and many urban jungles to explore. It’s also a great place to live if you want to minimize your tax burden. With more than 3.5 million residents in this country and generally no taxes imposed on foreign-earned income, you’ll want to understand how Uruguay taxes for US expats work to remain tax compliant.
In this guide, we’ll take you through all the crucial details you need to know regarding paying and filing your expat taxes in Uruguay.
Uruguay at a Glance
- Primary Tax Form for Residents: Declaración Jurada (DGI Form 1102)
- Tax Year: January 1st to December 31st.
- Tax Deadline: April 30th.
- Currency: Uruguayan peso (UYU)
- Population: Approximately 3.5 million
- Number of US Expats: Estimated 3,000 to 5,000
- Capital City: Montevideo
- Primary Language: Spanish
- Tax Treaty: No
- Totalization Agreement: Yes
US Expat Taxes in Uruguay
Americans living abroad typically must pay their US taxes and taxes to the foreign country where they reside. However, every country has its own tax rules; some even have treaties and agreements with the US.
Uruguay does not currently have a tax treaty with the US, which means US expats in Uruguay are on the hook for paying US and Uruguay taxes on their income. However, some US tax breaks may help reduce your US tax bill, which we’ll walk you through later.
How much can you expect to pay in income tax in Uruguay? Here is how taxes for expats in Uruguay are calculated.
Who Has to File Taxes in Uruguay?
Whether a resident or non-resident of Uruguay, you typically have to pay income tax. However, Uruguay typically does not levy income tax on any income earned outside the country. So if you make foreign income, it may be exempt from taxation (there are some exceptions).
Who Qualifies as a Tax Resident in Uruguay?
If you’re a resident of Uruguay, you’ll owe tax on both Uruguay and foreign income. However, non-residents are only on the hook to pay tax on income earned in Uruguay. Non-residents are not taxed on their foreign-earned income.
Uruguay Resident Qualifications
You are considered a country resident in Uruguay if you meet specific requirements, including the following:
- You have stayed more than 183 days in Uruguay in a calendar year. Random absences will be taken into account unless you can prove a tax residence in another country.
- You have economic activities or personal interests in the country of Uruguay, regardless of whether they are direct or indirect.
It is presumed that if a person is defined as a resident of Uruguay, their spouse and dependents are also considered residents of Uruguay.
The 183 days are defined as all days in which the person had a presence in an Uruguayan territory; the time of arrival or departure does not apply. Days spent going to or coming from another country are not computed into the 183 days.
A fiscal residence in another country must be proven by a certificate issued by the fiscal authority of that country. If that amount is less than fiscal interest in Uruguay, you will be considered a resident.
Non-resident Qualifications in Uruguay
If you lived in Uruguay for less than 183 days, you’re typically not considered a resident and instead labeled a non-resident. As of July 2007, all Uruguayan-sourced income is taxed, regardless of resident status.
Income Tax in Uruguay
Uruguay’s income tax is based on a progressive scale — the more money you earn, the higher your income tax rate:
Individual Income Tax Rate in Uruguay
|Income tax bracket||Tax rate|
|0 UYU – 433,776 UYU||0%|
|433,777 UYU – 619,680 UYU||10%|
|619,681 UYU – 929,520 UYU||15%|
|929,521 UYU – 1,859,040 UYU||24%|
|1,859,041 UYU – 3,098,400 UYU||25%|
|3,098,401 UYU – 4,647,600 UYU||27%|
|4,647,601 UYU – 7,126,320 UYU||31%|
|7,126,321 UYU and up||36%|
Other Tax Situations in Uruguay
Self-employed people may have to pay social security contributions based on their income in Uruguay.
Companies in Uruguay pay a corporate income tax rate of 25%.
Value-added Tax (VAT)
All consumers in Uruguay pay a value-added tax on goods and services, similar to the sales tax in the United States.
In Uruguay, the general VAT rate is 22% (some exclusions apply).
Wealth tax in Uruguay ranges from 0.1% to 0.4% (for residents) and 0.7% to 1.5% (for non-residents). Different rules apply depending on where you live in the country.
There is no inheritance tax in Uruguay.
Property tax rates range from 0% to 0.3% in Uruguay, depending on the value of your property.
In Uruguay, employers contribute 12.625% of an employee’s salary to social security funds. The employee will pay between 18.1% to 23.1% into social security.
What Tax Forms do US Expats in Uruguay Need to File?
As a US expat living in Uruguay, you will need to file a personal income tax form with the Uruguayan tax authority. The specific tax form you need to file will depend on your individual circumstances, such as your residency status and sources of income.
If you are a resident of Uruguay, you will typically need to file a tax return between June and August of the year following the tax year. The Uruguayan tax year runs from January 1 to December 31. As a resident, you will need to report your worldwide income, including any income earned in the US, on your Uruguayan tax return.
If you are a non-resident of Uruguay and have earned income in the country, you will typically need to file a tax return by May of the year following the tax year. Non-residents are only required to report income earned within Uruguay on their tax returns.
In addition to the personal income tax form, you may also be required to file other tax forms depending on your individual circumstances. For example, if you own a business in Uruguay or have rental income, you may need to file additional tax forms.
Essential US Tax Forms for Expats in Uruguay
As an expat living in Uruguay, it’s important to be aware of the US tax forms that you must file to comply with tax laws in both countries. Here are some essential tax forms that you need to know about:
- Form 1040 is the primary US tax form for individuals, which must be filed annually by US citizens or green card holders, regardless of their location. You must report your worldwide income on this form, including income earned in Uruguay.
- Form 2555: This form is used to claim the Foreign Earned Income Exclusion (FEIE) for US expats in Uruguay who meet certain criteria. The FEIE allows you to exclude a certain amount of your foreign-earned income from US taxes.
- FinCEN Form 114: If you have financial accounts in Uruguay with a combined value of $10,000 or more, you must file this form with the US Treasury Department. This form is known as the Foreign Bank Account Report (FBAR).
- Form 8938: This form is used to report foreign financial assets if their value exceeds certain thresholds. You must file this form with your US tax return if you have foreign assets worth more than $200,000.
Filing these tax forms can be complex and time-consuming, especially if you are not familiar with the US tax system.
Do the US and Uruguay have a Tax Treaty?
Unfortunately, the United States and Uruguay do not currently have a tax treaty in place. This means that US expats living in Uruguay may be subject to double taxation, which occurs when the same income is taxed by both the US and Uruguay.
However, there are some ways to potentially reduce the impact of double taxation. For example, the US allows expats to claim the Foreign Tax Credit, which can be used to offset US taxes on income that has already been taxed by Uruguay. Additionally, Uruguay offers certain tax credits and deductions to foreign residents to avoid double taxation.
Does Uruguay Have a Totalization Agreement with the US?
Yes, Uruguay and the United States have a totalization agreement, also known as a Social Security agreement. This agreement ensures that individuals who have worked in both countries are not subject to double Social Security taxation.
Under the totalization agreement, US expats who work in Uruguay or vice versa are only required to pay into the Social Security system of their country of residence. This means that they will not be required to pay Social Security taxes in both countries for the same work.
Navigating Tax Compliance for US Expats in Uruguay
We hope this guide helped answer your questions about the tax regulations for US expats living in Uruguay. But taxes can be complicated — especially when living in a foreign country — so if you still have questions, feel free to contact Greenback Expat Tax Services.
Contact us, and one of our customer champions will gladly help. If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.