OPEN OFFSHORE BANK ACCOUNT FOR NON RESIDENTS IN URUGUAY

by on 1 November 2017

Uruguay is one of the Latin American countries to have shown a significant upward trend in economic growth, while also successfully overcoming both regional and worldwide crises in the last ten years. Its advance has been boosted by reforms that have provided greater macro-economic stability. However, a series of aspects still need improving, and these are important for strengthening the country’s future growth and sustainability. One of these is financial depth.

The economics literature has highlighted the importance of broad access by the population to the products and services offered by banks in order to foster savings and facilitate investment and commercial activities, and to strengthen economic growth. Further, it is a channel through which the authorities can reduce the volatility of the GDP.

There are a number of reasons for this:

Financial institutions reduce the costs of identifying the most profitable projects and of monitoring their development. They also diversify savers’ risk by placing lendable funds in projects in different economic sectors. Hence, they incentivise savings by channelling funds towards attractive investments with a lower risk. Greater savings means larger sources of financing for investment, which favours the accumulation of capital and, thus, growth.

Banks provide the liquidity that investors need, thus reducing the rate at which productive projects are halted owing to temporary problems. This means greater investment, greater accumulation of capital and, consequently, greater growth.

The financial system widens the range of payment means, which facilitates transactions. This drives commerce and economic activity.

It boosts the effectiveness of monetary policy, favouring the implementation of countercyclical policies and the attainment of macroeconomic stability.

The financial system in Uruguay, however, according to a number of measures, is lagging behind the rest of Latin America, even if differing income levels per inhabitant are taken into account. In other words, the country has failed to take advantage of the opportunities of financial depth to bolster the growth of activity. What is to be done? How can this process be driven forward? The object of the following chapters is to describe the situation in Uruguay in terms of banking penetration and then, on this basis, make recommendations to help gradually improve the population’s access to the products and services offered by banks.

Uruguay’s Key Advantages 

Uruguay offers many advantages to the foreign or offshore resident, thus its reputation as “the Switzerland of South America”

Funds can enter Uruguay freely, that is, no withholding taxes or government fees affect transfers of money into the country.

Funds can exit the country, free of any taxes, at any point.  There are no waiting periods or permits to transfer money back out of the country.

One does not face currency risk, since funds in the country can (and usually do) stay in foreign currency (U.S. dollars and Euros being the main choice).  Over three quarters of the funds that Uruguayan banks hold are in dollars.

One needn’t be a citizen, a resident, nor be physically present in Uruguay, in order to own property in the country, or have investments or funds in a bank account in the country.

Assets in Uruguay can be owned by any type of foreign vehicle, with no disadvantage.  It’s common to see real estate owned by Panama, BVI or Delaware LLCs.

Obtaining Uruguayan Citizenship

Residency Is A Simple Process

Obtaining Uruguayan citizenship a simple process.   It starts with filing for residency (which is granted, on average, after a year).

Uruguayan residency is easy to obtain and the key requirements are three: one’s birth certificate (stamped by the Uruguayan consulate in the country of birth), a clean police record and proof that one can support oneself throughout the residency process (the “income requirement”).

To prove that one has a clean police record, he or she must present a police certificate from the country of origin and from those countries where one resided in the past five years (in the case of U.S. citizens, the U.S. record is requested in Uruguay, at the local Interpol office).

Income Requirement

The income requirement is fulfilled by proving that the interested party has yearly income of at least USD 6,000. This can be proved in a number of ways: a pension, a mutual fund, lease income from an asset inside or outside Uruguay, dividends of any nature, or a wage, to name common examples.  Uruguay’s immigration authorities scrutinize this requirement thoroughly, so the key is to prove it correctly, leaving no doubt to the authenticity and permanent or semi-permanent nature of the income source.

No Real Estate Requirement

It’s important to notice that Uruguay does not require that you own property or have investments in the country, in order to grant residency.  On the other hand, owning property does not eliminate the income requirement.

To file for residency, after gathering the necessary documents, one enters Uruguay as a tourist and files the request on a pre-appointed date, at the immigration authority (“DNM”).  From the moment a person applies for residency, he or she may stay in Uruguay indefinitely, and even request a national identification, which allows one to travel passport-less to Argentina, Brazil, Chile and Paraguay.  One may also, from day one, bring one’s household goods into the country, duty free.  Household goods do not include a car.

Citzenship

After five years of having filed for residency (three in the case of families) one can apply for citizenship.  This is done at Uruguay’s “Electoral Court”, and the requirement is that one have Uruguayan residency, and to have had a permanent connection with the country and no absence for more than six straight months, for three/five years (this is proved with documents and witnesses).  The citizenship application process is quick, and usually citizenship is granted within three months of one’s request.

Uruguay allows multiple citizenship, and the key benefit of citizenship is a Uruguayan passport, which allows for visa-free travel to all of Latin America and several European countries.

Retirees

A special law, 16,340, that applies to retirees with a government pension of over USD 18,000 per year guarantees a Uruguayan passport more rapidly.  For those who apply for residency under this law, a passport is granted after a year to eighteen months (the time the process usually takes).  But the hurdles and requirements are higher: besides the fact that income must be an official pension, and of at least USD 18,000 per year, one must also own a property in Uruguay valued at USD 100,000 or more.  This law also allows one to bring a car tax free, but this is not recommended, since bureaucratic delays can make the process very expensive.

Taxes in Uruguay

For foreign citizens, and for Uruguayan citizens with offshore income, taxes are a neutral issue

Foreign Source Income

Recent changes in Uruguay’s tax code, in July 2007, introduced personal income tax for individuals, but did not change Uruguay’s main tax rule: foreign income is never taxed (nor does it have to be reported). Uruguay will continue taxing only income generated inside Uruguay and some assets located inside the country.  Thus, for citizens and foreign nationals alike, any type of income obtained from a foreign source, or assets abroad, will remain untouched by the Uruguayan tax collector.  A U.S. pension, dividends or capital gains on stock in a Japanese company, interest from a CD in a European bank or real estate in Australia: they all remain untaxed. 

Uruguay’s Offshore Vehicles

Uruguay maintains a reputation as an efficient and trustworthy offshore jurisdiction, mainly through two instruments: offshore companies and free-zone companies.

Uruguay’s offshore vehicle is the standard Sociedad Anonima (SA) which is untaxed on its offshore income and offshore assets.  The only tax that a Uruguayan SA pays when used solely for offshore purposes is a flat tax, ICOSA, which amounts to the equivalent of approximately USD 390 per year.

The SA is a stock corporation, and it is simple to manage and run.  It may have one or many owners (shareholders), of any origin, one or many officers (of any origin), and its shares may be nominative or bearer-type.  There are no public records or requirements to disclose or register the shareholders of the company, even in the case of nominative-share companies. 

SAs are easy and inexpensive to incorporate, and usually investors purchase a readily incorporated (but not-yet-activated) SA, which can be made available and used instantaneously.

Its sole obligations are to:

Have at least one officer or director, who has to register with the tax authorities and the Public Commerce Registry

File tax forms twice a year

Residency Is A Simple Process

Obtaining Uruguayan citizenship a simple process.   It starts with filing for residency (which is granted, on average, after a year).

Uruguayan residency is easy to obtain and the key requirements are three: one’s birth certificate (stamped by the Uruguayan consulate in the country of birth), a clean police record and proof that one can support oneself throughout the residency process (the “income requirement”).

To prove that one has a clean police record, he or she must present a police certificate from the country of origin and from those countries where one resided in the past five years (in the case of U.S. citizens, the U.S. record is requested in Uruguay, at the local Interpol office).

Income Requirement

The income requirement is fulfilled by proving that the interested party has yearly income of at least USD 6,000. This can be proved in a number of ways: a pension, a mutual fund, lease income from an asset inside or outside Uruguay, dividends of any nature, or a wage, to name common examples.  Uruguay’s immigration authorities scrutinize this requirement thoroughly, so the key is to prove it correctly, leaving no doubt to the authenticity and permanent or semi-permanent nature of the income source.

No Real Estate Requirement

It’s important to notice that Uruguay does not require that you own property or have investments in the country, in order to grant residency.  On the other hand, owning property does not eliminate the income requirement.

To file for residency, after gathering the necessary documents, one enters Uruguay as a tourist and files the request on a pre-appointed date, at the immigration authority (“DNM”).  From the moment a person applies for residency, he or she may stay in Uruguay indefinitely, and even request a national identification, which allows one to travel passport-less to Argentina, Brazil, Chile and Paraguay.  One may also, from day one, bring one’s household goods into the country, duty free.  Household goods do not include a car.

Citzenship

After five years of having filed for residency (three in the case of families) one can apply for citizenship.  This is done at Uruguay’s “Electoral Court”, and the requirement is that one have Uruguayan residency, and to have had a permanent connection with the country and no absence for more than six straight months, for three/five years (this is proved with documents and witnesses).  The citizenship application process is quick, and usually citizenship is granted within three months of one’s request.

Uruguay allows multiple citizenship, and the key benefit of citizenship is a Uruguayan passport, which allows for visa-free travel to all of Latin America and several European countries.

Retirees

A special law, 16,340, that applies to retirees with a government pension of over USD 18,000 per year guarantees a Uruguayan passport more rapidly.  For those who apply for residency under this law, a passport is granted after a year to eighteen months (the time the process usually takes).  But the hurdles and requirements are higher: besides the fact that income must be an official pension, and of at least USD 18,000 per year, one must also own a property in Uruguay valued at USD 100,000 or more.  This law also allows one to bring a car tax free, but this is not recommended, since bureaucratic delays can make the process very expensive.

Taxes in Uruguay

For foreign citizens, and for Uruguayan citizens with offshore income, taxes are a neutral issue

Foreign Source Income

Recent changes in Uruguay’s tax code, in July 2007, introduced personal income tax for individuals, but did not change Uruguay’s main tax rule: foreign income is never taxed (nor does it have to be reported). Uruguay will continue taxing only income generated inside Uruguay and some assets located inside the country.  Thus, for citizens and foreign nationals alike, any type of income obtained from a foreign source, or assets abroad, will remain untouched by the Uruguayan tax collector.  A U.S. pension, dividends or capital gains on stock in a Japanese company, interest from a CD in a European bank or real estate in Australia: they all remain untaxed.