Today, we return to the Americas and to one of my personal favourites: Uruguay.
The instantly recognizable flag of Uruguay portrays the nine original (now 19) departments of the republic, and in the corner we find a Sol de Mayo (Sun of May), which represents the sun shining upon a new nation.
The sun is a national emblem of both Uruguay and Argentine, the two sharing a very close history.
While Uruguay has had its fair share of challenges throughout history, it has nonetheless earned the moniker the Switzerland of South America for its comparatively stable finances, stable government (at least since 1984), penchant for secrecy, and relaxed, liberal social attitudes.
I don’t want to paint a picture of Uruguay being some perfect utopia.
It had a bloody, 12-year long civil war 1839 – 1851 after first gaining independence from Spain on the 18th of July 1830. After the war, the military gained in influence and political power. This was a mostly benevolent dictatorship, with the military using its authority to modernise Uruguay.
Towards the end of the 19th century, the military’s might started to diminish and civil politicians started gaining grounds again. Around this time, Uruguay saw large-scale immigration of mostly Spaniards and Italians, but also many other Europeans migrated to Uruguay, which was seen as stable and modern compared to Brazil and Argentina.
In 1903 a brief uprising was struck down by the government.
In 1933, following election of a new president and social dissatisfaction as a consequence of the Great Depression, a new constitutions was enacted which gave the presidency tremendous power. In 1938, an election was held which was won by the brother-in-law of the incumbent president.
Uruguay was neutral and played only a minor part in World War II.
Following a change in economic climate after the war and into the 1950s, the standards of living rapidly declined in Uruguay and social unrest followed.
Guerilla soldiers called Tupamaros grew in the late 1950s and 1960s. The organization robbed banks and conducted kidnappings and assassinations, in addition to trying to overthrow the government.
In 1968, a state of emergency was declared and in the years that followed, civil liberties were increasingly disregarded, culminating in the 1973 shift of power to a part-civilian, part-military totalitarian regime. While Uruguay was spared from the utter atrocities seen in similar regimes in the region, it is nonetheless a very dark time Uruguay’s history.
Uruguay returned to democracy in 1984 and has since been a very liberal and easy-going jurisdiction. The government managed to attract enormous increases in foreign investment in the 1980s and 1990s, which again raised the standards of living and financial well-being of the republic
The economy was hit hard in 1999 – 2002 due to Uruguay’s strong economic ties with the fiscally dysfunctional Argentina. Through it all, Uruguay remained stronger than most of its regional counterparts. China has since overtaken Argentina as Uruguay’s most important trading partner (after Brazil).
Geography and Demography
|Full Name:||República Oriental del Uruguay (Eastern Republic of Uruguay)|
|Other major languages:||Various indigenous|
|Type of government:||Unitary constitutional monarchy|
|Legal system:||Civil law based on Spanish civil code|
|GDP per capita:||22,000 USD|
|Currency:||Uruguyan Peso (UYU)|
Incorporation and Business
Practically squeaky clean.
Uruguay used to have a controversial, secretive legal entity that was used for significant tax evasion and possibly money laundering. Since the riddance of this entity, Uruguay has maintained a perfectly good reputation.
It is known to be a tax haven, but not an as egregious one as for example Panama.
Unlike for example IBC jurisdiction or more highly-specialized tax havens, there is no specific regulator for corporations in Uruguay.
From being enacted in 1948 until being removed in 2007, SAFI (Sociedad Anonima Financiera de Iversion) was a popular entity type in Uruguay. For this entity, mobile bearer shares were permitted.
The entity was technically tax free but was required to pay a license of 0.1% to 0.3% on its profits. To assess this number, each SAFI was required to file an annual and public statement.
In 1923, Uruguay enacted its first Free Zone legislations. The law was heavily revised in 1987 and again in 1988.
A SAFZ is a Sociedad Anonima (comparable to a Private Limited Company) incorporated in one of Uruguay’s free zones.
SAFZs are often exempt from tax (corporate tax, sales tax, concession tax, social security contributions) and need in such cases not need to file an annual financial statement, although this depends on free zone.
One director and one shareholder are required and there are no residency requirements. Corporate bodies are permitted.
The minimum share capital is 50,000 USD of which at least 5% (2,500 USD) must be paid up.
Incorporation is a slow process, often taking several months to complete. Plan ahead if you want an SAFZ.
An annual meeting must be held in Uruguay.
SA and SRL
A regular Sociedad Anonima is of course also available along with an SRL (Sociedad de Responsabilidad Limitada). It is very similar to other legislations in the region:
- Public record of directors, members, and shareholders.
- Annual meeting can be held anywhere.
- Can undertake any lawful activity (i.e. permits are only required for specifically designated fields).
Incorporation even of regular companies used to take weeks if not months but recent government efforts has sped up the process tremendously.
Companies can be exempt from tax by being formed and operating in a Free Zone or otherwise enjoy a territorial taxation system.
Record keeping is required by law and financial statements must be submitted along with an annual report.
There are various audit exemptions.
Companies are subject to public disclosure although some details about shareholders can be kept confidential.
This is the real allure of Uruguay for most people, especially people from Argentina. More than half of all non-resident deposits in Uruguay are estimated to belong to Argentinians. Many are drawn to Uruguay for its strict banking secrecy but also for its financial stability and ease of transacting compared to the situation in Argentina.
The drawback of this is that banking in Uruguay is very dominated by Spanish, far more than for example Panama which despite being a Spanish-speaking country has a banking sector with so much foreign capital and foreign business that English is well supported.
That said, banks in Uruguay are generally pleasant to work with and fairly sophisticated in their service offerings.
Open a Bank Account in Uruguay
It’s typically not a particularly arduous task to open a bank account in Uruguay. The banks are generally welcoming to foreigners and non-residents.
Due diligence is the same as in most places, although remote account opening is rare unless using an introducer (intermediary).
Very tight and the government is hesitant to make any concession. Uruguay is able to get away with this because once Argentinian deposits are excluded, there is very little wealth in any significant proportions from other jurisdiction.
This is in stark contrast to for example Switzerland, which was and continues to be under pressure from a wide range of nations.
While Uruguay has committed to AEOI, it has shown no signs of actually implementing it in any meaningful way. Requests for information under TIEAs are routinely rejected or answered in an incomplete manner, especially ones that come from Argentina.
Uruguay has signed up for FATCA and is compliant.
Banks in Uruguay
While Uruguay has a relatively large financial services sector, many international companies do not go through the hassle of obtaining a banking license and instead operate as payments institutes, wealth managers, or other non-bank institutes. Crèdit Andorrà and UBS are for example present in Uruguay as a representative office. The actual banking services are then carried out in another jurisdiction.
As for banks licensed in Uruguay, there are two state-owned banks:
Then remaining banks are nine privately-owned banks, predominantly foreign.
- Banco Bandes (Uruguay)
- Banco Bilbao-Vizcaya Argentaria BBVA (Spain)
- Banco de La Nacion Argentina (Argentina)
- Banco Itaú (Brazil)
- Banco Santander (Spain)
- Banque Heritage (Switzerland)
- Citibank (USA)
- HSBC (UK)
- Scotiabank (Canada)
Living in Uruguay
While standards of living are lower than in for example much of Europe and North America, life in Uruguay can nonetheless be very comfortable and convenient.
It has a culture very similar to Argentina and is generally very welcoming to foreigners.
Costs of living a relatively low, although going up in and around Montevideo. Infrastructure is generally good. There is a big difference between rural and metropolitan Uruguay. Compared to the region, mobile coverage and broadband need a lot of improvement to compete with for example Brazil, Argentina, and – especially – Panama and Costa Rica.
This is in no small part compensated for by Uruguay offering some of the most beautiful scenery on the planet, all with relative ease reachable from Montevideo.
While Spanish is the official language and one anyone aiming to settle down here should learn, it is possible to get by in Montevideo on English.
Citizenship can be obtained after between three years of residency for married couples or to five years of residency for singles or unmarried couples.
During these years, you are expected to spend significant time in Uruguay (at least six months a year; the more the better) and make a real effort to integrate, which is contrary to for example Panama where the definition of residency is much looser.
Personal taxation in Uruguay is largely territorial although there are a number of exceptions to be aware of such as income from movable assets being taxable even in abroad.
It is generally pretty easy to pay very low taxes in Uruguay or even live tax-free, if you have passive, foreign incomes or earn your living from services rendered abroad.
After spending 183 days in Uruguay in a 360-day period, you become tax resident in Uruguay. With this, you can apply for total tax exemption for the first five years.
While it doesn’t quite compare to Panama and Costa Rica in terms of ease of forming and running a business, its free zones can be a very interesting alternative to the international entrepreneur.
Living and banking in Uruguay are of generally high quality, although both are best enjoyed with a large helping of Spanish language skills.