Tax Residency in Uruguay
1. Criteria for Determining Tax Residency in Uruguay
According to Article 12 of Uruguay's Income Tax Law (Ley de Impuesto a la Renta), an individual is considered a tax resident if they meet any of the following criteria:
- Physical presence in Uruguay for more than 183 days in a calendar year.
- Domicile in Uruguay, as determined by the Civil Code.
- Habitual residence in Uruguay, as determined by the Tax Code.
For entities, tax residency is determined based on their legal domicile or place of effective management.
2. Impact of International Tax Treaties on Tax Residency Criteria
Uruguay has entered into several tax treaties with other countries to avoid double taxation and promote cross-border economic activities. These treaties may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
Key Provisions in Tax Treaties
- Article 4 of the Uruguay-Argentina Tax Treaty: Defines the term "resident" as an individual who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, or any other criterion of a similar nature.
- Article 4 of the Uruguay-Brazil Tax Treaty: Provides that an individual is considered a resident of Uruguay if they have a permanent home available to them in Uruguay.
- Article 4 of the Uruguay-Chile Tax Treaty: Establishes that an individual is considered a resident of Uruguay if they have their habitual abode in Uruguay.
Rationale for Treaty-Specific Modifications
These treaty-specific modifications aim to provide clarity and prevent double taxation by establishing clear rules for determining tax residency in cases involving cross-border activities. They reflect the mutual agreement between Uruguay and the treaty partner country to facilitate tax compliance and enhance economic cooperation.
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