UruguayLiving.com

¡Feliz Año Nuevo! Happy New Year!  Prosperu annu nou! Felice anno nuovo! Gutes neues Jahr! Feliz Ano Novo! Guets Neus!

Living in Uruguay | No Comments »

Living in Uruguay | No Comments »

The first two answers are easy: 1) my health is gradually improving and my business is doing well; and 2) I like living in Novi Sad very much, I have made friends here, and most importantly I can go to Liturgy at the Orthodox Church every Sunday and holy day–something I could not do in Uruguay. It is too early to tell whether, in the long run, I will like Serbia better than Uruguay: but it certainly is less expensive to live here, easier to do business here and the Internet technology is both better and far cheaper here.

When I opened my offices in Uruguay I made a promise to my employees that “I would not close the office there until and unless it was impossible to continue to operate my business from there.” Very simply, that happened! The Banco Central of Uruguay continued to increase its pressure on my business so that after spending more than US$200,000 to comply with their requirements they still forced our offices to close.

On a personal level, I was deeply hurt when I imported my handicapped van to Uruguay, based on the formal advice of a very prominent professional in Uruguay; which advice was simply put, lies; the result of which was that my handicapped van was forfeited to the Uruguayan Aduana (Customs Service) as “contraband” for which I was additionally fined about US$14,000 (and they still have the Van)!

This had the effect of destroying all of my plans for traveling around the country and writing my second book about Uruguay.

It would not be unfair to say that I have strongly bitter feelings toward both that professional and certain agencies of the Uruguayan government.

Nevertheless, I have not surrendered my Uruguayan residency, nor do I intend to. I will return. And I still maintain various personal and residential connections to Uruguay.

For those of you who were surprised at my circumspection in this writing, I must inform you that in Uruguay there is a slander and libel law which makes it a criminal offense to say or write negative things about people, companies or the government, EVEN IF THOSE THINGS ARE THE TRUTH! Faced with such a medieval law I can do no more without wasting money defending myself in court and possibly having my residency revoked.

I still care very much for Uruguay and proudly display the Uruguayan flag along with my Southron flags in my living room here in Novi Sad. You will be seeing me again as soon as time and health permit.

I wish all of you and the Oriental Republic of Uruguay the best in all things!

–The Southron

Lest there be any misunderstanding, the “professional” to whom I referred is NOT Dr. Mark Teuten who remains my attorney and for whom I have the highest respect.

Business, Living in Uruguay | No Comments »

The Southron commissioned the following report to be prepared by the ONLY attorney he recommends, Dr. Mark Teuten of Teuten Abogados (http://www.teutenabogados.com/ebrochure/english/index.html).  It is offered here for your information.

Introduction:

The Executive has sent a text to the Uruguayan parliament which would incorporate major changes in the current regime of Income tax, Asset tax and also in the regime of bank secrecy. These proposed changes are detailed below, but it must be highlighted that the proposed law is just that, a proposal, and it is likely, or at the very least possible, that changes be made in the law before it is approved. And even if it is approved there will still be lots of areas which are unclear and which will have to be clarified by the Regulating Decree and then by the actual practice of the Tax Office and subject to judicial decisions. So at this stage nobody knows how many areas will be resolved. What is clear is that the draft law was presented to parliament without any prior consultation with anybody in the private sector and that as soon as it was presented it caused alarm bells to ring. It remains to be seen though what if any modifications will be made.

In the introduction to the proposed law, the Executive state that the aim of the law is to make the law more equitable and to encourage investment. In this respect it states that there should be no difference between what a resident pays according to whether they have their money in an account in Uruguay or abroad, rather the amount of tax payable should vary according to the person’s ability to pay. As to encouraging investment and employment it states that they should favour investments within Uruguay in order to channel domestic saving towards domestic productive investments.

Subject to the above the main modifications proposed are:

1. INCOME TAX FOR PHYSICAL PERSONS

At present income is taxed on the basis of source and only income of Uruguayan source is taxed. This criteria for taxation is at the heart of the Uruguayan tax regime, but the proposed law would modify the criteria by including as taxeable income, income which arises from financial instruments abroad e.g. interest on bank deposits, loans or dividends. But, only this source of income would be taxed. Thus pensions would be exempt, as would income from rent of properties abroad and income from employment.
The rate of the proposed tax is 12%.   However if the taxpayer can show that he has already paid 12% or more in tax in the country where the income was paid, then no tax will be payable. This is so whether or not Uruguay has a double tax treaty with that country.

The tax is not payable by company’s, however the law foresees mechanisms to avoid evasion by making payments via a company. It MAY though be possible to avoid tax by making payments through a foreign trust, but this is only a possibility. This will depend on the final text of the Law and Regulating Decree and also on the exact terms of the trust – for example, discretionary trusts would appear to be more likely to claim exemption.

The tax is payable by physical persons who are resident in Uruguay. Residence in this context, means resident for tax purposes, and does not mean simply that a person has been granted the status of legal resident in Uruguay. For tax purposes somebody is resident in Uruguay if they spend over 6 months of a year in Uruguay.

2. ASSET TAX (IMPUESTO AL PATRIMONIO)

This tax is at present a tax on individuals who have a particular amount of assets over a threshold. It only covers Uruguayan assets. Under the proposed law, this would be extended to cover all kinds of financial assets abroad.

However it should be noted that the extension is only applicable to Uruguayan citizens, as the law is presently drafted. So residents are at present excluded.

Also in order to calculate the assets on which tax will be paid, the law refers only to taxing a portion of the assets – between 10-20% depending on the total amount of assets – and then payment must be made at the appropriate rate on that volume of assets.

The maximum rate of tax payable under this tax is 2.5%, meaning that the maximum amount of the tax would be 2.5% of 20% of the financial assets abroad i.e. 0.5% per annum.

3. CHANGES TO BANK SECRECY PROVISIONS

Bank secrecy has been at the heart of Uruguay’s financial system for many years. The proposed law makes quite major changes in this system. The argument for these changes is that without such it will be impossible to properly control tax payments.
Under the proposals there are two new situations in which bank secrecy can be lifted:

i) When the Tax Office makes a founded request to the Courts, but not only in cases of supposed fraud, as is the situation at present, but also to control payment. Also the law says that after 60 days if the judge has not made an order then it is to be understood that he has granted the request. The Tax Office can then proceed to request information from the Central Bank, which will in turn ask the banks with which the person has accounts and they will have 15 days to reply, subject to sanctions if they do not.
ii) When a foreign country with whom Uruguay has a Double Tax Treaty or a Treaty to Exchange Tax Information makes a request. At the present time Uruguay has such Treaties with Germany and Hungary. Treaties have been signed and will probably come into force in 2011 with Mexico, Spain and Portugal. Uruguay is in the course of negotiating Treaties with the following: Switzerland, Belgium, South Korea, Malta, Finland, India, Malaysia, Liechtenstein, Ecuador, Chile, Costa Rica, Vietnam and Luxembourg. The intention is to have at least 12 Treaties signed and in force which in theory would be enough to have Uruguay removed from the grey list of OECD countries subject to possible restrictions and sanctions.

CONCLUSION:

The above represents a summary of the draft bill presented to parliament. Since it was presented though, there has been a noticeable silence. There has since been some consultation with the private sector, but it is not known what modifications if any will be made. In any event the law itself will only provide a framework with many details being left to the Regulating Decree and also the practice of the Tax Office itself.

Business, Cost of Living and Prices, Immigration, Law, Living in Uruguay, Taxes | 2 Comments »

The following was sent to me by a local attorney.  I am not sure whether the information is correct of not.  I am still in “watch and see” mode, but I hope he is correct.

Unfortunately, much of what the press articles and blogs have been saying is 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.  A different, adjusted draft, was finally prepared.  And that draft is still a work in progress, and is being adjusted in the Senate´s committee.  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:

Taxes on corporate vehicles’ offshore assets: On May 28^th, the Ministry of Finance, where the bill proposal is being discussed, issued an official statement clarifying one issue of the proposed bill: that 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.

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).

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 1^st, 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 or double taxed.
• The likelihood is that on income tax the tax will be circumscribed to Uruguayan citizens, and the government is considering adjusting the text of the bill, possibly to grant tax credits, so no one is taxed twice.
• And remember, it would only be on some types of income: interest on deposits and dividends.  So, any other type: salary, capital gains on sale of shares or property, pensions, lease, income, etc. are all excluded.

Even if he is correct, I still think the proposed law is a bad idea and another step down the slippery slope…

Business, Expats, Law, Living in Uruguay, Taxes | 2 Comments »

After more than 4 years of living in Uruguay and promoting it to the world as a good place to live and in which to invest, I must now, in all fairness, tell you that things have changed…for the worse.

In the last four years I have seen a negative trend that leaves me shaking my head in wonder as Uruguay’s government does everything it can to make this country poorer. Prices have increased, and property prices have become ridiculous. From a business point of view, everything has become harder and more expensive.

But, THE WORST IS YET TO COME. Uruguay’s government has announced that it is giving up its traditional territorial taxation and will start taxing the worldwide income of its residents—including investment income.

In fairness, according to a friend of mine in the governing party, Uruguay was bludgeoned into this change by the OECD countries, especially by the USA and the EU, which threatened to ban Uruguay’s agricultural products if this new taxation was not enacted.

Nevertheless, the impact of this new tax law will be huge, especially on expats and immigrants who moved here based on the principal that their foreign investment income and pensions would be tax free.

The flight has already begun; even people who have gotten their permanent residency have left and more are planning to leave.

Those who can afford two homes in two different countries are debating whether it is worth living here less than 183 days per year, in which case they would not be tax resident (assuming Uruguay uses the OECD model on which the tax is based); and then living someplace else for less than 183 days (except the US which has different rules). With a couple of vacation days in a third country, they would then not be tax-resident in either place.

Those who cannot afford two homes are taking a hard look at Central America and Eastern Europe, depending upon their tastes and needs.

I am personally broken-hearted about this, but will probably still spend about 180 days here, and the balance in one or more of the other places in which I have business.

I wonder if anyone in government here has considered the results of this ill-advised decision?

Frankly, unless Uruguay provides some exceptions, like for pensioners, or at least concludes a series of double taxation treaties, without which some immigrants could find them paying taxes twice, the number of new residents will slow to a trickle, while the number of immigrants leaving, for at least a majority of the year will swell to a tidal wave that will have a huge negative impact on the economy as they spend their dollars or euros elsewhere.

I am taking a wait and see attitude before making any final decisions, but I am sifting through my options. I suggest you do the same.

Everyday Life, Expats, Law, Living in Uruguay, News, Taxes | 3 Comments »

This is almost your last offer to participate in organizing Sociedad Southron AC.  Since time is short before I leave for Europe I propose to have a luncheon meeting continuing into the afternoon as required on Friday 14 May, which is 8 days from now.

The meeting will be at my house in Pinar, I have a map for those wishing to attend with their own transport or by bus.  For those in Montevideo, who need transport, I will arrange to send a driver and the Land Rover both in and out.  Anyone coming from the East, we can easily collect at the last Peaje on the Interbalnearia.

Please encourage other people to come–Uruguayos and Extranjeros.  Please ask them to write me at this email address to confirm their attendance.

I look forward to seeing you!

Living in Uruguay | No Comments »

Last week I returned from a four week trip that included my first return to the US in 7 years, as well as trips to Panama, Belize and the Dominican Republic,  Thank God my health has so improved that despite being very busy and tired, I came back healthier than I left.  It seems like the I am finally on the mend on a more permanent basis.

I thought that perhaps after 7 years, I might experience some twinge of homesickness upon my return to Florida–but instead, I found it even more foreign than the last time I was there.

Read the rest of this entry »

Living in Uruguay, handicapped | No Comments »

As you know.my health has been an ongoing challenge for many years.  While the health care here was not the reason I moved to Uruguay. it has certainly been a major benefit.

Even in the midst of pain, there was one really humorous situation that I thought would be a good way to restart my missives here.

Those who are residents here know that you need your Cedula (National ID) number for EVERYTHING, even more than one uses a social security number in the US.  The Cedula is used in business as well as the government and the same number is used on your driving license and even passport.

Because of that, and because the numbers are simply issued in order, my Cedula number is relatively high, reflecting about 50 years less than my age–this caused a really funny incident some months ago.

I was having some health problem or another so one of the staff here called SEMM, the Ambulance/traveling doctor service connected with my health insurance at COSEM.  The SEMM operator didn’t bother to look at my file, but assigned a doctor based simply on my cedula.  As such, they sent a pediatrician, (it’s a good thing that Cedulas don’t indicate sex or they might have sent an obstetrician).

When the doctor arrived at the main gate she asked “¿donde esta el bebe?”   Someone explained the mistake, but the doctor said that since she was here, she would take a quick look at me to ensure the next doctor sent was the correct one.

As she came into my room, my assistant explained the foul up and after greeting the doctor, I told here “Soy el bebe grande.” (I am the big baby).

Later that day another doctor appeared better qualified to treat “el bebe grande”.

(To those who speak better spanish than I, I apologise for any acentos I have missed or mistakes in translation–perhaps I have simply become too accustomed to “masomenos”.

Humor, Living in Uruguay, Medical Care | No Comments »

This will be brief.  But I have been locked out of this blog for 6 months.  I am back, my health is improving and I will start writing again.  I have more than a few stories to tell.

This coming weekend is a 4 day holiday, so I hope to make up for some lost time on this blog.

Living in Uruguay | 1 Comment »