The renewed economic instability, the uncertainty, the constant change in the rules of the game and, fundamentally, the domestic tax pressure put on the agenda with unusual force the issue of international moves.
With emblematic cases such as that of Marcos Galperín, who moved last year, Uruguay appears as the main destination: according to official data, In the last year alone, more than 5,000 applications for legal residence of Argentines were processed before the consulates of the neighboring country and many of them have already processed their tax exemption in the AFIP with the aim of paying taxes exclusively on the other side of the Río de la Plata.
In this context, there are plenty of tutorials, “step by step” and advice in general to obtain residency, but there are intangibles, qualitative aspects that must also be taken into account when making a decision of these characteristics.
The most important thing is that it be an orderly process. And it is the most difficult because, when you move, you do it with a purpose that does not always have as its focus the patrimonial issue; There may be family, work, quality of life reasons, but the impact on our heritage is obviously the same.
It is important to know, for example, what consequences the move will have in two places: where I am going to start residing but also in the address where I am now if I want to lose the residence that I currently have. That is, what happens when I arrive and what happens when I leave. We are talking about an international move.
It is necessary to analyze these two edges from the very origin of the decision since – if things are not done well – a person can end up being a tax resident in two countries at the same time, which may not be terrible if they are countries that they have an agreement to avoid double taxation, but where this is not the case it can be very bad because you will have to pay taxes in two countries.
Usually, agreements to avoid double taxation allow, for example, that the tax paid in one country be considered as a tax credit in the other country. This is precisely the case of Argentina and Uruguaywhose agreement on the exchange of tax information and to avoid double taxation entered into force on February 7, 2013. But beware that this is not something automatic and only applies in the case of taxes that are the same in one country and in the other (for example, the income tax), but not to taxes that could exist in one country but without a correlate in the other.
The attractiveness of the neighboring country has a lot to do with tax issues, especially seen from Argentina.
For comparison, it should be understood that in Uruguay the “Income Tax” is taxed only on the income obtained within its borders, there are tax-free zones and the “Wealth Tax”, comparable to that of Argentine Personal Assets, is calculated but after deducting debts and only on the assets located there. In addition, there is no Gross Income Tax, nor the one applied to the check, nor the “COUNTRY Tax”, nor are there withholdings on exports.
The spread of these advantages caused the most recent flood of Argentines to Uruguay, which at the same time caused a whole series of oversights. A very common one is that of people who intend to move to Uruguay Convinced that only with a fiscal residence in the new country, she solves her entire departure from Argentina, that is, from “her old residence”.
The confusion comes from the fact that, conversely, who wants to stop being a tax resident in Uruguay just sign up somewhere else and get your sign off. In Argentina this does not happen: to unsubscribe you need to prove a legal and permanent residence in the country to which you state that you are moving your tax residence. The error arises, in turn, from not distinguishing the so-called “tax residence” from what is usually understood as domicile or legal residence, which should not be confused: One thing is the place where one lives and another is what one designates as headquarters to meet its tax obligations; they may or may not match. Obtaining legal residence does not imply obtaining tax residence and vice versa.
In Uruguay Legal residence is granted to those foreigners who intend to settle in the country, either for work, personal and/or tax interests. This concept is associated with the place where the individual lives. It is, essentially, an immigration issue that may or may not generate tax consequences.
There are two types of legal residence in Uruguay: the “temporary” one, where the period of permanence in Uruguayan territory will be no less than 180 days and for a maximum of 2 years, which can be extended, and the “definitive” one, which is obtained through a procedure for which the interested party must meet certain requirements. Among the main criteria in force for a natural person to be a tax resident and pay taxes in the neighboring country are the establishment of their base of activity, economic interests and also the center of vital interests (considering spouses and minor children).
This aspect of the “permanence mood” or “center of vital interests” is another element to take into account because it forms an element that, although quite subjective, is key and is not resolved only with the mere stay in number of days. If a person, for example, alleges that she went to live in Uruguay and that for that reason he will begin to pay taxes in that country, but it turns out that in Argentina he is still the director of a company, he has the children and the wife there, the car, the club, and he comes and goes only for the purpose of completing the number of days, the AFIP can presume that it is a maneuver and will not directly discharge you, or based on that presumption, it will re-register you.
Another aspect that is overlooked is the question of the “tax holiday” or “fiscal vacation” offered by Uruguay for new residents.
This allows the migrant not to pay taxes for a period of time, which in the case of Uruguay it is for ten years, if the full holiday is adopted, where zero taxes are paid for that period, or the other variant is to choose a rate of 7% indefinitely, that is, without a time limit”.
Uruguay took its idea of a tax holiday for new residents from the European experience, but with the peculiarity that the country only taxes personal income as generated abroad.
If you have shares in a company and this gives you profit, on that you do not pay or personal property, which in Uruguay It is the Wealth Tax, nor do you pay income tax, which is Income Tax.
*Martin Litwak He is a lawyer, specialist in wealth structuring and preservation, establishment of investment funds, international taxation and wealthtech. He is also founder and CEO of Untitled SLC and Smart Structuring.