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.

In my previous post, I quoted attorney Mark Teuten as saying, in part, that housebhold goods…”can be brought in free of tax within 6 months of the grant of permanent residence.” That seems pretty clear to me, but it obviously is NOT CLEAR to some people.

The duty-free exemption only applies for the 6 month period AFTER you get your permanent residency, NOT while your residency is pending!!!! If you bring in household goods before your permanent residency is granted, you will be required to put up a deposit ranging from hundreds to even thousands of dollars.

If you are not sure about your residency status here are some ways to check:

1. If you don’t have a cedula, you don’t have permanent residency.
2. If your cedula has words on the back like “provisoria” or “in tramite”, you don’t have permanent residency.
3. If your cedula has “Residcencia Legal” on the back, you DO HAVE permanent residency.

You might get your cedula quickly, especially if you are handicapped. But, in my experience, you will not get your permanent residency in less than about 1 year. My friend and coworker Borko received his 365 days after arriving here and his was the quickest of which I am aware.

People are being told things other than this, especially by some less than professional “Immigration Consultants”. It may be that there is a language problem, or it may be that they are simply economical with the truth. That is not for me to judge.

An old Southron saying applies here, “I have no dog in this fight!”

My goal here is simply to help others avoid the mistakes I have made–which are legion–or about which I know–which are legion times 10!

Attorney Mark Teuten graciously volunteered to do the legal research for us and provide us with a definitive answer:

… article 2 of Decree No. 119/004, which regulates Law No. 16.340 states that household goods, in reasonable quantities according to the opinion of the Custom’s authorities, can be brought in free of tax within 6 months of the grant of permanent residence.

Please note, a vehicle is NOT INCLUDED in the definition of “household goods” and cannot be imported duty-free!

If the law changes, or when the application of the law changes, I will write about it here as quickly as possible.

Mark is the first lawyer to be simultaneously qualified in the UK and in Uruguay. This background means he is uniquely placed to advise clients coming from countries with different legal systems.  He is a British-born attorney and moved to Uruguay in 1990.  His law firm is small, but that means you get hands-on personal service (with which I have been perfectly satisfied).  Mark concentrates on residency, real estate, intellectual property and general business matters.  I highly recommend him. Mark is also the secretary of the British Society, and can sometimes be seen at our Thursday night open house meetings.  http://www.teutenabogados.com

Nevertheless, it is my responsibility to report both the good and the bad, so that you don’t make some of the same mistakes that I have or that I have seen others make.

One of those mistakes is being caught in the language bait-and-switch. This happens when you visit a company or professional firm to discuss doing business with them. The person with whom you meet speaks good English and you have no trouble communicating with him. You leave with the impression that this person will be the one with whom you are working.

The next time you contact them you speak to someone or receive an e-mail from someone who speaks English as badly as I speak Spanish. You get frustrated; especially because you are paying more than local rates in order to deal with English speakers. (This is especially common in larger firms or companies that claim to specialize in dealing with foreigners.) Ultimately the situation deteriorates and then collapses, and you are worse off than when you started, and certainly poorer.

While this has happened to me, it has not had the impact it might on others because I have an office full of bilingual people. But this could be disastrous for you.

My suggestion is that when you consider doing business with a company or firm with an English-speaking “front man”, you find out EXACTLY who will be doing the work for you, and that you insist on meeting that person and speaking with that person, BEFORE you agree to hire them or buy from them. Then, make sure that this is confirmed in writing.

I guarantee you, this piece of advice will save you hours of frustration, and, for those of us who do such things, hundreds less curse words to tell our confessor about… (My confessions usually start out, “Bless me Father, for I have sinned. I have taken the Lord’s name in vain, 250 times, this morning…)

On Monday I collected my new permanent Cedula at the DNIC. On Friday, exactly 1 year after arriving in Uruguay, or go will get his permanent Cedula. The Copperhead has been notified that his permanent residency has been granted, but he does not yet have an appointment to get his permanent Cedula.

It took me a bit under two years to get my residency. It took Copperhead a bit over two years to get his residency. But it only took Borko a year to get his. Why?

We made some mistakes when we started and we followed bad advice. After months of getting nowhere we switched to someone who could really do the job. When they reviewed our files they found all kinds of technical problems, and had we not hired them, we might still be mired in the bureaucracy. As it stands, because of the terrible “professional advice” we got, neither myself nor Copperhead were able to take advantage of the ability to bring in household goods duty-free within the first six months–for us, that is gone forever.

Borko was different–we started him out with real professionals. Granted, he wasn’t able to bring in household goods either, but that was simply because we didn’t think they would allow him to bring in the machinery to distill Serbian grappa here in Uruguay…

I hope all of my readers profit from my stupid mistakes, and don’t make the same ones. I would far prefer that they make other stupid mistakes that I can write about.

More than 15 days after arriving at the port of Montevideo, and some 12 days later than I was promised by the “professional” whom I had hired specifically to handle the matter, I have my van. I almost had it yesterday—in fact, Borko was even called to the port to pick it up. But, when he got there, the person who had to sign off on the release had left for the day.

Fortunately, Santiago found a very nice gentleman in the Customs Staff who was extremely helpful and got the van released today. I owe him a great debt of gratitude. (I will not print what I owe the “professional” I hired…)

Of course, it was originally promised before Christmas, then on the third of January, that on the 11th of January, that on the 15th of January, and last week… I had been assured that the holiday season would not delay the processing of the van to customs. Of course the 12 days of delay were blamed on the holiday season.

Nevertheless, I guess all is well that ends well. The Southron is now fully equipped and ready to begin explorations of the great unknown Uruguay and the hinterland. I already have my first trip planned. As soon as I can, I am going into the hills above Piriápolis to take a look around. I am thinking of looking for a weekend to place there for next summer. It is about an hour from the office and less than an hour from Punta del Este. That makes it convenient for regular use any time I feel like getting out of the city.

My plan is to make that the first of many trips exploring the entire coastal littoral with a few excursions into the heart of the pampas. I am hoping to get a new G3 modem for my laptop next week, which means I will be able to send reports from the road–I always wanted to be a roving correspondent…

AMAZINGLY the Government wants us to tell them the things that we think need to be improved here to make it more attractive for immigrants.

SO LET ‘ER RIP!!!! Send me you complaints and irritations and I will compile them and pass them on. If you don’t do this, don’t ever complain to me….

When was the last time George Bush did this?

Please send your complaints to Southron@UruguayLiving.com.

One of the realtors (an American) told me about a man by the name of Richard Blum, an American Expat who offered a cheap call back service to the US—he had an arrangement with one of the big VoIP companies.  What he was doing was technically illegal in Costa Rica, but it seemed like all the Americans knew about it and used it.  So, we met him and paid him in cash for the service.

During the course of that meeting we talked about the availability of internet and specifically of broadband service. He told me he had inside connections in the state telephone company and that he could get us broadband service like he had—for a fee.

I paid him US$1500 as a consulting fee.  That was supposed to get us a 1MB broadband connection and was supposed to include any “honorariums” that needed to be paid to people in the state-owned phone company.

I never got the 1MB connection.  Ten months later, after dozens of phone calls and innumerable broken promises, I ended up with a 128KB line—one-eighth of the bandwidth I had been promised.

By then, of course, I had checked around and found other people that Richard Blum had scammed; almost all of whom were newbies from North America.

Richard was a cannibal:  one that preys on his own kind and consumes them for his own benefit.

Costa Rica was so full of cannibals that it was as dangerous dealing with expats as it was with locals—the major difference was that the expats lied in more fluent English…

Unfortunately, there are cannibals here in Uruguay as well!

The first one that comes to mind is a Russian who lives on the Coast between Montevideo and Atlantida.  He has been scamming poor Russians who want to better themselves and charging them US$4000 or more to help them get their residency here.  Then when they do, he tells them it was gotten by bribery and that if he is not paid “protection” he will have their residency revoked and they will be deported.

I do not know how many people he is victimizing, but I know of one family that gave up and returned to Russia because of this would-be Russian Mafioso.  When they refused to pay his protection, they were harassed, then threatened, and then he sued them in labor court claiming they owed him US$5000 per month as a “translator”.

I hope he is investigated and expelled from the country—the last thing Uruguay needs is the Russian mafia—even in a weak and haphazard form…

Right now, he is the only cannibal in Uruguay I know about. But, there seem to be cannibal wanna-bes in the works.

I have heard about some other immigrants here who are going to set themselves up as “immigration consultants” and then offer their “expert services” to newcomers, despite the fact that these so-called experts have been here less than a year!

I hope that these rumors are not true.  I hope that I did not hear what I think I heard.

But if I the rumors are true, and the would-be cannibals become actual cannibals, you will hear more about them here.  I suggest they get into real estate speculation instead.

It is absolutely imperative that we in the immigrant community police ourselves, or there will be a scandal and the doors will close, or the bar for entry will be raised that much higher—all so a few flim flam artists can make a buck.

After all, this is Uruguay, not Wall Street…

(Lest someone accuse me of hypocrisy in publishing my book, I hasten to point out that it is a true account of my own personal experiences here, and not an expert opinion on anything.  The book does have expert opinions, but they were supplied by qualified professionals, not by me.  Let me be clear on one thing: no one makes any profit on UruguayLiving.com, UruguayDailyNews.com, SociedadSouthron.net or any of our associated Uruguay projects!  These projects are totally paid for by the Capital Conservator Group as a public service without any outside support.)

As of this past May, immigration is only accepting 10 new applicants per day. By their definition, a “new applicant” is someone who is turning in all of the paperwork to go “en trámite”. It’s the day you get your fingerprints taken. On this day, you need to go to the main information desk and get a special number—1 through 10—printed on a green card. During my last few visits, they’ve had two agents working on these 10 new applicants, and 1 working on everyone else.

For all other business, such as checking on visa status or consultations prior to turning everything in, continue to take one of the old numbers off the roll. As usual, those who’ve taken a wrong number need to take another number and start the wait over.

The agent at the desk told me that this action was implemented to relieve the over-burdened system, and is not intended to limit the number of immigrants coming to Uruguay. She did not know how long this process would remain in place.

We have asked our law firm to follow up on this and will report more as we learn about it.

With great sadness, I must announce that Miguel and Fatma Silva have been permanently removed from our list of recommended professionals. This removal is based on clear and indisputable facts, of which I want you to be aware you so you can make your own decision regarding them.

As you will recall, the Copperhead and I hired the Silvas as our immigration consultants in order to secure our residency. You will further recall that we reported to you about their work in the most glowing of terms. We also reported on their success with others. In fact, to date, I have received no complaints about their work as immigration consultants; though I have in one other matter.

The problem is simply this: someone from my office, usually Santiago or the Copperhead, spoke with the Silvas, or sent e-mail to them at least every other week asking about the FBI clearance letters for which the Copperhead and I have been waiting since last August. The response has always been, “we check at least every other week, and they are not in yet”.

After 10 months, I decided to have someone else verify the status of our application. I authorized our law firm to get that information, and to my great dismay was told that the FBI clearance letters for both Copperhead and I had been at immigration since February 23, more than four months ago. Obviously, the Silvas had NOT been checking ” at least every other week”!

I was stunned, and the Copperhead was very angry: I had my cedula “in tramite”, while all the Copperhead had was his visa.

Several days after our attorneys discovered the truth, I got an e-mail from the Silvas saying that our FBI letter had just come in. Obviously, one of their contacts at immigration had warned them that someone else had been poking around in our file.

We asked Santiago to meet with the Silvas in order to hear their side of the story before we reacted. He called many times on both of their phones without a single response. Finally, at my direction, he sent them an e-mail explaining what we had found out. As of this writing we have still had no reply…and that lack of response is deafening.
.

If the FBI reports had come in only a month or even six weeks before, I would have given them the benefit of the doubt. But, four months is simply too much. If they had told me the truth, I would’ve forgiven them. But they did not. They lied about checking every other week. They lied about the FBI reports having just come in. And because of those lies, I have lost all trust in them and consequently can no longer endorse them.

I have given much thought to an appropriate public response, and I have decided to ban the Silvas from the blog, the forum, and our other websites, but I have decided against placing them on a blacklist. I wish them well, but will personally not trust them again. My preference is to deal with this matter once and then move on.

• If you have hired the Silvas as your immigration consultants, I am NOT suggesting you fire them–I am suggesting you learn from my disappointing experience!

• If you are considering hiring the Silvas as your immigration consultants, I am NOT telling you not to do so–I am suggesting that you take my experience with them into account.

The bottom line is this: as of now the ONLY immigration consultants recommended by UruguayLiving.com is the law firm LVM, which is listed on UruguayLiving.INFO under both attorneys and immigration consultants.

http://www.uruguayliving.info/ul-i/immigrationconsultants.htm