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.
I too am adopting a wait and see approach until we see the final law but I’d agree that its looking grim.
With all my dogs and cats I can’t really go for a second home in Europe so I suppose I’d better start looking at locations closer to Colonia.
Our governments really do seem to have the knack of killing geese which lay golden eggs.
Left by loei on June 18th, 2010
First of all, hello to everybody! I´m new here and this is my first comment!
I agree that this new tax law, should it come through -and it is likely it will-, is very negative. And don´t forget that the bank secret will also be partially lifted. We´ll wait and see…
Left by Karin on June 21st, 2010
Well, this is Uruguay!
I have been living here for about 4 years now and am still surprised how little change has happened it this time. And the change happened was to the worse.
Many goods and services available in neighboring countries like Brasil or Argentina are still not available, also because of extremely high import taxes. Infrastructure is developing at a very slow pace, even though taxes have increased substantially and tax income from new investments from abroad as well – in particular from Argentines who do not trust their government (is this sustainable?). Bureaucracy is getting the longer the worse! Efficiency of the state entities is an absolute disaster, probably at the level of former German Democratic Republic. And the state employees – which probably meanwhile are a majority of the population – think it is alright and the way it has to be!
I am sorry to say so, but not many things are working well here. The mentality seems to be to take as much as possible and as long as you can. Thinking and investing into the future is not the Uruguayan’s strength. Is it only short sightedness, or narrow mindedness, or even a lack of perspective or education?
Many more things to write here, but it does not change anything. And finally I am a guest here. With little contact to a population who seems to have a very different mentality than other Latin countries (better say yes, even if you mean now. And do nothing). I will remain a guest in this beautiful country, but not as a resident anymore.
I personally like the spirit of a country with the ambition to think and move ahead on a sustainable basis and change to the better economically, with clear taxation and jurisdiction.
Even better when you buy real estate at half the price! Prices have become ridiculous in Uruguay, and even more ridiculous considering the deteriorating quality!
Many more foreigners living here or considering moving to Uruguay might think the same. Is this good for Uruguay? I guess Uruguayans don’t care. They will learn it the hard way! Sooner or later Uruguayans will pay their price.
Left by Hans on May 8th, 2011