Private Wealth 2024 Comparisons

In general terms, the Uruguayan tax system relies on the source principle, meaning that only income derived from a Uruguayan source will be taxed. The applicable regulations establish that income from activities developed, property located, or rights economically used within the country are considered to be of Uruguayan source.

Although Uruguay generally follows the territoriality principle of taxation, there is an exception for individuals in relation to certain foreign-sourced passive income. Indeed, foreign-sourced income from movable capital, arising from deposits, loans, and in general, from any placement of capital or credit of any nature (dividends and interests) is taxable in Uruguay. Foreign-sourced capital gains from the alienation of income-producing assets (shares, financial instruments, any kind of property) are currently tax exempt.

In Uruguay, there is no specific gift tax. However, donations are considered as sales for tax purposes, and the donor is taxed on the difference between the fair market value of said good and the acquisition cost. This rule was included in the Tax Law to prevent abusive structures.

Further to the principles outlined, the specific tax regimes relevant to private wealth structuring are the following. 

• Wealth tax is imposed based on the value of assets as of 31 December each year. The rates are progressive, ranging from 0% to 2.75%, with a minimum non-taxable threshold of approximately USD155,000. Returns must be submitted by May, and advance payments are usually required. This tax applies to individuals based on their total net worth within the country.
• Non-resident income tax (IRNR) applies to income from Uruguayan sources of non-resident individuals. This includes business profits, employment earnings, capital gains and dividends, generally taxed at 12%, with specific rates such as 7% for dividends. As will be further detailed in 1.4 Taxation of Real Estate Owned by Non-residents, real estate owned by non-residents is subject to IRNR, making it essential to consider this tax when planning for property investments in Uruguay.
• For estates, the property transfer tax (ITP) applies to asset transfers at death, with a rate of 3% on inheritances and 4% on other transfers involving real estate. This tax must be paid by the heirs within a year following the decedent’s death, ensuring compliance with statutory obligations. Inheritance and transfer taxes are relatively low, making the Uruguayan regime attractive for estate planning.
• Trusts and foundations in Uruguay are taxed similarly to individuals and estates, under the source principle, therefore any income generated from Uruguayan sources is taxable. However, income from foreign sources is generally exempt, in line with the territorial nature of the tax system. These structures are used for estate planning and asset protection. Compliance with local regulations includes accurate reporting of income and assets, aligning with the transparency requirements to ensure proper tax treatment (as will be detailed in later sections).

Along with the principles that underscore the tax system and the specific taxes outlined, Uruguay has entered into double taxation treaties with 25 countries to reduce the potential tax burden on cross-border income. These treaties allow for tax credits for foreign taxes paid on dividends, interest and other types of income, thereby minimising double taxation. 

Additionally, Uruguay offers favourable tax treatment for new residents, who can choose between being taxed as non-residents or opting for a reduced personal income tax (IRPF) rate of 7% on foreign-sourced income from movable capital for up to ten years. This option, called tax holiday, provides a significant advantage for individuals relocating to Uruguay. Uruguay’s double taxation treaties and special regimes for new residents enhance its attractiveness for international clients.

Article 69 of the Uruguayan Constitution provides that institutions that provide private education and cultural services are exempt from all national and municipal tax. Therefore, foundations and civil associations that provide such services are exempt from all taxes.

To qualify for this tax advantage, entities must submit a formal request addressed to the Minister of Economy and Finance. This request must include a notarised certificate detailing various legal aspects such as legal nature, denomination, objectives, address, taxpayer registration number (RUT), legal status validity, approval and registration of bylaws, legal representation details, and registration confirmation in the Cultural and Educational Institutions Registry of the Ministry of Education and Culture. Additionally, sports institutions must provide proof of current registration with the National Sports Secretariat, while religious institutions need to demonstrate non-profit status and historical roots in the country.

Moreover, Uruguayan legislation allows for special tax exemptions on donations made to educational, health, child support, and social rehabilitation institutions. Typically, donors benefit from a tax waiver equivalent to 81.25% of the donated amount, while 55% applies to donations to private universities. This incentive aims to promote charitable giving while reducing the financial burden on donors.

It is important to note that the 2015 Accountability Law modified the fiscal benefits for donations to private universities from 2017 onwards, reducing the state’s contribution to 40% and allowing 60% to be treated as deductible expenses for the donating company. This adjustment aims to balance the cost burden between the state and the donor.

Furthermore, companies seeking to benefit from these tax advantages are generally limited to donating up to 5% of their previous fiscal year’s net income. An exception allows up to 10% for donations to educational institutions serving underprivileged communities or child support organisations, provided the donations match or exceed those made in the previous fiscal year.

There are no opportunities for income tax planning in Uruguay. When it comes to capital gains the cost is not adjusted to reflect fair market value. For certain types of transactions, such as capital gains derived from the sale of assets (apart from real estate), a notional result may be applicable; 20% of the sale price of the transaction is considered as the taxable result, and a 12% tax rate is applied deriving in an effective tax rate of 2.4% over the sale price of the transaction.

In relation to the possession of real estate or its alienation by a non-resident, several taxes shall be considered.

Wealth Tax

This tax levies on Uruguayan assets exceeding the minimum threshold set by law. For the computation of property values, the cadastral value is considered, which is typically lower than the acquisition/market value. For individuals, the tax rates are progressive, as outlined below.

The tax rate for individuals and undivided successions that applies to:

• property worth up to USD120,300 is 0.7%;
• property worth from USD120,300– 240,600 is 1.1%;
• property worth from USD240,600–481,200 is 1.4%; and
• property worth over USD481,200 is 1.5%.

The tax rate for nuclear families that applies to:

• property worth up to USD240,600 is 0.7%;
• property worth from USD240,600–481,200 is 1.1%;
• property worth from USD481,200–924,000 is 1.4%; and
• property worth over USD924,000 is 1.5%.If the property is owned by a corporation, foreign or Uruguayan, the tax rate is 1.5%.

ITP Tax

Transfers of real estate properties are subject to ITP tax as follows:

• both transferor and transferee will be subject to taxation at a rate of 2% each; and 
• where the transfer is caused by death, the applicable rate will be 3% for direct ascendants or descendant heirs.

The tax rate will be calculated with consideration for the cadastral value of each real property, which is in general lower than the market value of the assets.

IRNR

Upon the sale of the property, the difference between the sale value of the property plus ITP and the purchase value, adjusted for improvements based on tax criteria, is calculated. If the difference is positive, the IRNR rate of 12% is applied. Also, income from real estate property is also taxed at a 12% rate and, in the case of rental income, there is a withholding tax or advance payment of 10.5% which can be the definitive rate. It is important to mention that if real estate is owned through a company which is considered a tax haven (BONT), then the rates are 30.25%.

Other Property-Related Taxes

Other property-related taxes include the following.

• Real estate tax (contribución inmobiliaria): between 1.2% and 1.8% of the cadastral value. This is a municipal tax.
• Primary school tax: approximately 0.3% of the cadastral value.

Uruguay stands out as one of the leading countries in terms of reliability in Latin America, boasting strong political stability, social cohesion and legal security.

Uruguay benefits from highly competitive human resources, due to its well positioned university education, as well as the adaptability of Uruguayan workers to new processes and technologies.

As a regional hub with a strategic location for logistics and commercial activities, Uruguay offers advantageous geographical positioning and a favourable legal and tax framework.

Uruguay maintains an extensive network of tax treaties, which can often mitigate withholding taxes on services, particularly technical services, provided to foreign entities. These agreements typically reduce the withholding tax rate, except where expressly specified otherwise.

However, in response to international pressures, Uruguay committed to the minimum standards of the Base Erosion and Profit Shifting (BEPS) project, including both Pillars, in 2021. This commitment reflects the government’s response to pressure from the OECD and the EU. Notably, in 2023, Uruguay enacted significant tax reforms aimed at ensuring removal from the EU’s “grey list” and avoiding placement on the more severe “black list”. Being listed can lead to various repercussions, such as restrictions on EU funding, economic sanctions, increased withholding taxes, damage to reputation, and challenges in accessing European banking services.

Despite its international standing, Uruguay has faced significant pressure to transition from a territorial tax system to a worldwide one, particularly from the EU. To address these concerns, Uruguay has introduced economic substance rules similar to those in offshore jurisdictions and special regulations for foreign-source passive income. For example, holding companies may now be subject to taxation, aligning with European participation exemption regimes.

In summary, while Uruguay offers a stable and favourable tax environment, recent regulatory changes driven by international pressures have demanded significant adjustments.

Regarding the Common Reporting Standard (CRS), at the end of 2016, the Uruguayan parliament approved Fiscal Transparency Law No 19,484 which, among other important modifications, implemented the automatic exchange of financial account information in tax matters based on the OECD CRS.

Furthermore, the Uruguayan Parliament enacted Act No 19.428 which ratified the Convention on Mutual Administrative Assistance in Tax Matters (hereinafter “the Convention”), signed by Uruguay in Paris on 1 June 2016. The Convention is one of the most complete and comprehensive legal instruments at international level for mutual assistance between tax authorities, considering its forms of assistance and also its multilateral scope. Such characters turn the Convention into the underlying legal instrument that, in general terms, allows the automatic exchange of information on income from financial source. The Convention has a multilateral scope, binding Uruguay, in principle and simultaneously, with more than 100 jurisdictions which are its participating parties.

In the spirit of the regulations mentioned above, Uruguay has approved bilateral exchange relationships for the automatic exchange of country-by-country reports between tax authorities: Andorra, Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chile, Colombia, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Guernsey, Hong Kong, Hungary, India, Indonesia, Ireland, Isle of Man, Italy, Japan, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malaysia, Malta, Mauritius, Mexico, Monaco, Netherlands, New Zealand, Norway, Pakistan, Poland, Portugal, Russia, San Marino, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland and the United Kingdom.

The Fiscal Transparency Law was later regulated by Executive Decree No 77/017, establishing that financial institutions (including, but not limited to, banks, securities intermediaries and insurance companies in certain cases) must report the identity and residence of account holders, and may require certain information from individuals for this report.

However, as from 2019, when the balance of the preexisting accounts of non-residents and resident individuals and companies is less than approximately USD20,000, these accounts are exempt from being reported to the tax authority.

Furthermore, in November 2016, Uruguay adhered to the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information. The agreement authorises the automatic exchange of information with all signing countries.

The adherence to this agreement is essential for the implementation of the automatic exchange of the country-by-country report, developed under BEPS Action 13, which contributes to international co-operation on information exchange.

Moreover, as previously mentioned, Uruguay has an extensive network of international tax treaties for purpose of preventing double taxation and fulfilling the country’s commitments on fiscal transparency and exchange of information as well as controlled foreign corporation (CFC) rules.

All these tax provisions and multinational transparency initiatives that have been implemented by Uruguay to comply with OECD directives affect planning for clients in the following way: resident individuals can no longer get tax deferral on their foreign-sourced holding income by using offshore low-taxed entities.

Many high net worth individuals, who are looking for confidentiality regarding their financial assets and who mistrust governments and tax authorities, are migrating their bank accounts to the USA, since the USA does not adhere to the OECD CRS, and applies only Foreign Account Tax Compliance Act (FATCA) policies to US nationals.

Finally, in accordance with Laws 18,930 and 19,484, certain entities must identify and report to the Central Bank of Uruguay (BCU) the ownership of participations, as well as the ownership chain until reaching their ultimate beneficiaries. In this context, the law considers “ultimate beneficiaries” to be natural persons who directly or indirectly own at least 15% of the subscribed capital (or its equivalent), or the right to vote, or who in some way exercise the final control of the company. This registry is non-public and confidential. 

In Uruguay, cultural factors significantly shape succession planning practices. The prevailing cultural attitude towards estate planning leans towards procrastination and a lack of proactive foresight. Unlike jurisdictions where families prioritise succession planning to secure wealth and ensure smooth generational transitions, Uruguayans often address these matters only when faced with immediate necessity or crisis.

This societal tendency towards procrastination and a relaxed approach extends to succession planning, where individuals frequently delay or overlook creating comprehensive strategies for transferring wealth and control to younger generations. This cultural mindset contrasts with the efficiency and forward-thinking typical of succession planning in other jurisdictions.

Despite these cultural challenges, Uruguay offers legal instruments such as testaments, which are widely used to help individuals organise their affairs and facilitate the smoother transfer of assets. Intestate succession rules under the Civil Code come into play when no will exists; they govern inheritance within family relationships and ensure responsibilities, including those related to the probate process, and are appropriately managed.

In Uruguay, the growing complexity of international planning significantly impacts succession planning due to the intricate interplay of tax laws, rules of inheritance and treaties across multiple jurisdictions.

Under Uruguayan law, succession involves elements of alienation when an individual passes away with assets spread across different countries. Uruguay adheres to the Germanic principle of plurality of succession, meaning that multiple successions can occur in each state where the deceased held assets (lex rei sitae).

Uruguayan judges have jurisdiction over successions involving assets within Uruguay, applying Uruguayan law regardless of the deceased’s nationality or residence. However, when assets are located outside Uruguay, the applicable law depends on international treaties. Uruguay’s criterion of plurality of succession necessitates initiating succession processes in each jurisdiction where assets are held. This can lead to conflicts of laws, particularly in jurisdictions with unitary succession criteria or in the absence of international treaties.

In terms of succession planning tools, the will plays a central role. In Uruguay, a will allows individuals to decide how to distribute their inheritance, thereby potentially preventing conflicts among heirs. The Civil Code of Uruguay establishes the legal framework for wills, defining them as revocable acts by which individuals dispose of their property after death. Wills must be signed by the testator, a notary and applicable witnesses.

Uruguayan forced heirship laws, in general terms, determine that:

• if the testator has only one child, they can freely dispose of 50% of the estate;
• if the testator has two children, they can freely dispose of 33% of their estate; and
• if the testator has three or more children, they can freely dispose of up to 25% of their estate.

The will must be signed as public deed before a Uruguayan notary public and witnessed.

The surviving spouse may have the right to receive a portion of the assets of the deceased. If the deceased had no direct descendants, the surviving spouse’s portion shall be 25% of the estate assets. If the deceased had descendants, the surviving spouse’s portion shall be equal to the forced heirship portion of one direct descendant.

If there are no heirs (direct or indirect) and the deceased has not drawn up a will, the ultimate heir will be the government (specifically, the National Administration of Public Education).

In Uruguay, the default marital regime is the “conjugal partnership”, which means that the assets acquired during the marriage become the property of the conjugal partnership. Nevertheless, the assets received during the marriage by one of the spouses via donation or inheritance are property owned only by such spouse.

The alternative type of marital regime is “the separation of property”. If this is established after the couple is married, they separate their assets by a judicial proceeding. If the division of assets is established before the marriage, they must execute a prenuptial agreement. This prenuptial agreement must be executed prior to the celebration of the civil marriage, by public deed issued by a notary and registered at the National Registry of Commerce in the Personal Acts section.

Uruguayan law prohibits donations and purchases among spouses. As a rule, one spouse cannot transfer marital property without the consent of the other spouse, except in certain situations, such as non-registrable assets (this excludes real estate and vehicles, among others).

The only tax currently applied over estates in Uruguay is  ITP, which levies tax on transfers of real estate property. The value of the property is that set by the municipal government (Dirección General del Catastro Nacional) and the tax rate is 4%. The ITP also applies to transfers at death, but at a tax rate of 3% paid by the heirs. Heirs shall pay the ITP within a year of the passing, and the donors within 15 calendar days, of the taxable event (gift).

In Uruguay, transferring assets to younger generations tax-free involves navigating specific rules and mechanisms. Donations, which are treated as sales for tax purposes, incur taxation based on the fair market value of the donated asset minus its acquisition cost. This measure aims to prevent tax abuse.

When it comes to real estate donations, they are subject to ITP, set at a 4% rate based on the property’s municipal valuation. This tax also applies to property transfers at death, although at a reduced 3% rate paid by heirs.

However, as per General Tax Directorate (DGI) Consultation No 5.815, monetary donations are exempt from IRPF. The tax administration interprets that monetary donations do not constitute a taxable event.

Thus, while Uruguay imposes taxes on property transfers and donations to prevent abuse, it offers an exemption for monetary donations.

From a tax perspective, no specific regulation has been issued to date regarding the tax treatment of digital assets and cryptocurrency. 

However, the tax treatment applicable to the transfer of these assets could be the same applicable to assets under the general rules, as they can be regarded as assets from a legal perspective.

As per the DGI Consultation No 6.419, regarding an exchange of real estate property for cryptocurrency, the DGI understood cryptocurrencies to be intangible assets. Therefore, if Uruguay is considered to be the location of the assets (another point still not determined), its tax treatment would be as follows.

• For an asset holding, according to the “subsequent valuation rule“, a local intangible asset does not generate IRAE and a foreign asset would generate foreign-source income (and possibly “pure capital” in addition).
• In the case of a sale or exchange, if the asset is considered to be of Uruguayan-source income, it is taxed as a “capital gain” at 2.4%. Income from “capital gains” is subject to IRAE provided that it qualifies as “business income from Uruguayan sources”.

In Uruguay, trusts and foundations serve as significant tools for tax and estate planning purposes. Trusts, governed by Uruguayan Law No 17,703, adopt a structure that combines elements from both Anglo-Saxon and Latin American trust traditions. They involve three main parties:

• the settlor (or trustor), who transfers assets;
• the trustee, appointed to manage these assets according to the settlor’s instructions; and

• the beneficiary, who ultimately benefits from the trust’s assets and economic gains.

Trustees can be individuals or specialised companies mandated to act in a fiduciary capacity and manage assets without acquiring ownership rights.

Certain developments impacting the benefits of trusts and foundations in Uruguay include regulatory frameworks aimed at ensuring transparency and compliance. Professional trustees are subject to rigorous registration requirements, enhancing accountability and safeguarding the interests of beneficiaries. Moreover, foundations, governed by Law No 17,163, are established through the contribution of assets by natural or legal persons for objectives of general interest, following specific legal procedures for recognition by the Ministry of Education and Culture.

While trusts remain more commonly used for estate planning due to their flexibility and fiduciary oversight, foundations in Uruguay play a more limited role in this regard, primarily serving broader philanthropic or charitable purposes. Both mechanisms continue to evolve under regulatory frameworks that emphasise transparency and legality, ensuring their effectiveness in facilitating tax-efficient estate planning strategies.

Trusts are recognised and respected in Uruguay under Law No 17,703, which establishes a legal framework that combines elements from Anglo-Saxon and Latin American trust traditions.

By way of example, in Uruguay, a testamentary trust can be established through a will, where the testator (settlor) designates a trustee to manage specified assets for the benefit of a beneficiary or beneficiaries. The trustee, who can be a natural person with legal capacity or a specialised legal entity, holds legal ownership of the trust assets but administers them according to the instructions laid out in the will.

The role of the trustee includes obligations such as administering the trust assets prudently, providing annual accounts to the beneficiaries, and transferring the assets to the designated beneficiaries or heirs upon the fulfilment of conditions or terms specified by the testator. Trustees are prohibited from benefiting personally from the trust assets or engaging in transactions that conflict with the interests of the beneficiaries, ensuring their fiduciary responsibilities are upheld.

Furthermore, the legal system in Uruguay supports the recognition of trusts as effective tools for estate planning, allowing flexibility in asset management and distribution while ensuring adherence to legal standards and the protection of beneficiaries’ interests. This framework provides clarity and security for settlors, trustees and beneficiaries alike, contributing to the trust’s recognition and respect within the jurisdiction. 

It is important to highlight that the trust (fideicomiso) is a taxable person according to corporate income tax (IRAE) and wealth tax (impuesto al patrimonio), so income from Uruguayan sources and assets located in Uruguay is taxed.

If the settlor is an IRAE or IRPF taxpayer, the contribution of assets to the trust is also taxable. The taxable income would be determined by the difference between the value of the assets transferred to the trust and its cost of acquisition. Also, the transaction may be subject to VAT (unless the sale of such assets is exempt).

Trust income, which is paid to the beneficiaries, is also taxable under IRPF at the rate of:

• 12%, when paid out of regular income from foreign capital investment; and
• 7% in the remaining cases.

Furthermore, distributions arising from income not taxed by IRAE (foreign source or otherwise exempted income) will be exempt from IRPF (unless they are foreign dividends or interests) and also IRNR. There are certain exceptions to this rule, but they would not apply for a non-tax resident beneficiary.

Regarding directors, if they are residents, they will be subject to IRPF if they are declared as remunerated directors. In that case, they will tax IRPF for the salary received as any employee does. The tax rate goes from 0% to 36%.

In summary, trusts, though contractual and not legal entities, are recognised contributors for tax purposes. However, guarantee trusts exhibit fiscal transparency. Funds, operating similarly to trust structures without legal entity status, differ in their tax treatment: closed-ended funds are contributors under IRAE, while open-ended funds are fiscally transparent.

In Uruguay, the categorisation of trusts can be delineated based on their characteristics, including whether they are revocable or irrevocable, and discretionary or non-discretionary.

• Revocability: a trust is considered revocable if the settlor retains control or the ability to dispose of the assets contributed to the trust after their establishment. On the contrary, an irrevocable trust is one where the settlor relinquishes control over the assets, with distributions to beneficiaries contingent upon the fulfilment of conditions specified in the trust agreement.
• Discretionary v non-discretionary: a discretionary trust grants the trustee discretion to determine when and how distributions to beneficiaries are made, as well as how the trust assets are managed, in accordance with the terms of the trust agreement. In contrast, a non-discretionary trust mandates distributions to beneficiaries according to contractual obligations, or allows beneficiaries to decide on distributions without trustee intervention.

Regarding the question of whether Uruguay has taken steps to accommodate structures that allow changes to be made in the future or permit settlors to retain extensive powers over such entities, the jurisdiction’s legal framework generally supports both revocable and irrevocable trusts, as well as discretionary and non-discretionary trusts. Settlors can structure trusts in a manner that aligns with their preferences, whether seeking flexibility for future modifications or retaining significant control over trust assets and distributions.

In Uruguay, one of the most popular methods for asset protection planning involves the utilisation of corporate types such as corporations (sociedades anónimas) and limited liability companies (sociedades de responsabilidad limitada), under Uruguay’s Business Corporations Act No 16,060. 

Corporations allow for the representation of corporate capital through registered shares. Simultaneously, limited liability companies operate with a similar mechanism. These business entities present a robust legal framework adept at effectively addressing the multifaceted challenges associated with wealth preservation and risk management.

The hallmark of these structures lies in the segregation of personal assets from business liabilities.

Consequently, the personal assets of the company’s members, or owners, are typically shielded from the company’s debts or legal obligations. This intrinsic feature of limited liability structures introduces an additional layer of protection, fostering a secure environment conducive to wealth preservation. Both corporations and limited liability companies offer settlors and business owners invaluable tools for safeguarding assets and executing strategic risk management.

Additionally, trusts and foundations, although limited in their use, are used to protect assets and manage wealth, under the above-mentioned Uruguayan Law No 17,703. 

Regarding trusts and private foundations (mentioned in 3.1 Types of Trusts, Foundations or Similar Entities), their use in estate planning in Uruguay is limited. Assets can be transferred into a trust by the settlor to safeguard them against potential family business risks, benefiting their children, spouse or any third party. To fulfil this objective, the trust structure must be appropriately established, meeting specific criteria, such as being irrevocable and discretionary. 

It is crucial to note that while these structures can provide asset protection benefits, they should not be used for fraudulent or improper purposes. Courts may scrutinise asset transfers and structures that appear to be set up with the primary intent of avoiding legitimate creditor claims. Additionally, international legal considerations and the laws of other jurisdictions where creditors may be based can impact the effectiveness of asset protection measures.

As mentioned in 2.1 Cultural Considerations in Succession Planning, Uruguay is not known for planning succession, regardless of the several legal options available. Amongst them, the will is the most popular way to organise successions from one generation to the next, but with various limitations, including that it cannot have transgenerational effects like trusts in other jurisdictions do.

Some businesses’ successions do go through the asset planning methods addressed in 4.1 Asset Protection, but they tend not to be comprehensive of the deceased’s estate, unlike trusts in other regions.

Regarding trusts or foundations, as mentioned in 3. Trusts, Foundations and Similar Entities and 4.1 Asset Protection, their use is limited. Amongst them, trusts remain more commonly used for estate planning due to their flexibility and fiduciary oversight. Foundations in Uruguay play a more limited role in this regard, primarily serving broader philanthropic or charitable purposes, as detailed in 10. Charitable Planning. 

When it comes to valuating the interest in a company for transfer purposes, local law establishes the same criteria independently of the percentage that will get transferred; there are no special regulations for partial/minor interest exchanges.

In the event the transfer of interest is caused by death of the holder, valuation rules will apply following the general criteria, but such transfer will not be taxed for the heirs, as Uruguay does not impose a tax on inheritance.

Wealth disputes in Uruguay often arise from inadequate or inexistent estate planning by the deceased (as mentioned in 2.1 Cultural Considerations in Succession Planning) and subsequent disagreements over the management and distribution of family business assets. Common issues include challenges to the validity of wills and trusts, claims of undue influence or lack of capacity, and conflicts among heirs regarding asset division in the will or by them. The latter can include questioning the value of the assets distributed under the will as under or overvalued in or to violate the forced heirship percentage indicated in 2.3 Forced Heirship Laws. 

The lack of proper succession planning can exacerbate these disputes, leading to prolonged legal battles in court to determine the soundness of mind of the deceased, revaluing the assets and eventually redistributing them. Occasionally, assets might be frozen for the duration of the legal dispute, this being one of the most undesired consequences. 

In Uruguay, the judicial system offers mechanisms for compensating aggrieved parties in wealth disputes, especially with regards to the violation of the forced heirship rights in 2.3 Forced Heirship Laws. Courts can impose various forms of damages based on the nature of the dispute, including restitution of misappropriated assets, compensation for breaches of fiduciary duty, and other financial remedies. The legal framework allows for equitable distribution of assets and may involve appointing independent fiduciaries to manage contested estates or trusts. 

Depending on the nature of the trust, corporate fiduciaries may be prevalent. The Uruguayan Trust Law provides four types of trusts according to their function. 

The following would likely have corporate fiduciaries. 

• Investment trust: usually used for construction purposes or real estate developments. Under this type of trust, assets transferred to the trust must be invested by the trustee in risky, speculative operations, with the main objective of obtaining profits.
• Financial trust: usually used for project financing. The beneficiaries are holders of certificates of participation of the trust property, debt securities issued guaranteed with the trust assets or mixed nature rights. This vehicle is very helpful for securitising accounts receivable and shielding future cash flow. Only financial institutions or investment fund administrators are allowed to be trustees of financial trusts.

The following are less likely to involve corporate fiduciaries and are usually more trust-based appointments. 

• Management trust: usually used for estate and tax planning, the testamentary trust falls under this category. Assets are transferred to the trustee to manage them and deliver the earnings to the designated beneficiary. All types of personal or real property, whether tangible or intangible, may be transferred as trust property.
• Guarantee/collateral trust: usually used for financing purposes, making recovery less expensive and much faster, and avoiding judicial proceedings. Assets are transferred so that the trustee holds them for a certain period, until a contractual obligation, guaranteed by the trust, becomes enforceable.

As mentioned in 4.1 Asset Protection, trust and foundations should not be used for fraudulent or improper purposes. Courts may scrutinise asset transfers and structures that appear to be set up with the primary intent of avoiding legitimate creditor claims, and eventually pierce them. 

As for the fiduciaries, they can be held personally liable if they act improperly, including cases of fraud, gross negligence or breach of fiduciary duty. The legal concept of “piercing the veil” allows courts to disregard the separate legal entity of a trust or corporation and hold fiduciaries personally accountable. To protect fiduciaries from such liabilities, various mechanisms can be employed, such as exoneration or exculpatory clauses in trust documents, which limit the fiduciary’s liability for certain actions. Additionally, fiduciaries may delegate specific administrative duties to third-party professionals, further reducing their exposure to liability.

In Uruguay, the regulation of fiduciaries, particularly trustees, involves specific laws that ensure assets are managed prudently. Key provisions include the following.

• Obligations of the trustee: trustees must administer trust assets with the diligence and prudence of a good businessperson. They are required to render accounts of their administration to the beneficiaries at least once a year, and this obligation cannot be waived by the testator. Additionally, trustees cannot acquire the assets included in the trust for themselves, ensuring that they act in the best interests of the beneficiaries.
• Prohibitions for trustees: Law No 17,703 imposes several prohibitions to prevent conflicts of interest and ensure fiduciaries act prudently. Trustees cannot guarantee or endorse the results of the trust or the operations conducted with the trust assets for the settlor or beneficiary. They are also prohibited from engaging in transactions with the trust assets for their own benefit, except with express authorisation from the settlor’s heirs and the beneficiary. 
• Types of trusts and purpose: as mentioned in 6.1 Prevalence of Corporate Fiduciaries, there are different types of trusts and each one has specific regulations to ensure prudent management. For example, investment trusts require trustees to invest the assets in speculative operations with the main objective of obtaining profits, while management trusts involve the trustee managing assets and delivering earnings to the designated beneficiary. 
• Registration and supervision: trusts must be registered with the General Tax Directorate and the Social Welfare Bank (BPS), and the General Directorate of Registries (DGR). This registration process includes detailed information about the trust, such as the settlor’s and trustee’s identities and the assets involved. Such registration ensures transparency and supervision, promoting prudent management of the assets. 

The investment theory applied to fiduciary investments in Uruguay emphasises a prudent approach, requiring diversification and risk management. Fiduciaries must balance the need for growth with the preservation of capital, ensuring that investments align with the beneficiaries’ best interests. Trusts are permitted to hold active businesses under certain conditions, which include maintaining proper governance structures and adhering to legal requirements to protect the trust’s value and integrity.

Domicile

In Uruguay, Article 24 of the Civil Code provides that the domicile consists of the residence, accompanied, real or presumed, by the intention to remain there. The civil domicile is relative to a determined section of the territory of the State. 

Domicile is generally determined by the place where an individual habitually resides and has their principal centre of interests.

Decree 148/007, which regulates personal income tax, establishes that if the individual’s main personal and economic interests are located in Uruguay, they are considered a tax resident. The above is determined by evaluating where the individual’s family and substantial economic activities are based. 

• Personal interests: includes the habitual residence of the individual’s spouse and dependent children.

• Economic interests: encompasses significant business or economic activities in Uruguay, such as running a business, holding investments or earning most of the income from Uruguayan sources.

Residency

To establish legal residency in Uruguay, an individual must meet specific criteria set forth by the Uruguayan immigration authorities. It is important to note that legal residency is distinct from tax residency.

The process begins by filing a residency application with the National Directorate of Migration. Applicants must provide several documents, as set out below.

Identity documentation

• Passport: original passport used to enter Uruguay. If a visa was required for entry, it must be valid according to Decree 356/18.
• Criminal record certificate: a certificate, duly legalised or apostilled and translated (except for documents from Brazil), from the country of origin and any other countries where the applicant has resided for more than six months in the last five years. This applies to individuals over 18 years old. For US nationals, fingerprints can be taken at Interpol in Montevideo for an FBI criminal record. Only national-level certificates are accepted, not state or provincial ones. A certificate from the Consulate of the country in question, accredited by the Uruguayan government, is also valid.
• Marriage certificate: if applicable, to prove the relationship, issued within the last year or a judicial recognition of a civil union, properly legalised or apostilled and translated as necessary.

Health documentation

• Health card: issued by public or private health service providers authorised by the Ministry of Public Health.
• Vaccination certificate: issued by authorised health service providers as per Decree 136/2018.

Work documentation

• Proof of means of living: applicants must demonstrate sufficient monthly income for maintenance (proof varying depending on whether they are employees, self-employed, business owners, foreign employees, pensioners, etc). 

Furthermore, the applicant’s intention to permanently reside in Uruguay will be evaluated by the relevant authority. After fulfiling these requirements, applicants are granted temporary residency, which can eventually lead to permanent residency after demonstrating continuous residence and economic activity in Uruguay for a certain period, typically around two years.

Citizenship

Uruguay offers a relatively straightforward path to citizenship for permanent residents. The general requirements for naturalisation include the following.

• Legal residency: continuous legal residency in Uruguay for a minimum of five years (or three years if married to a Uruguayan citizen or with Uruguayan children).
• Integration: demonstrated integration into the Uruguayan society, including knowledge of Spanish and participation in social and cultural activities.
• Application: submission of a naturalisation application to the National Directorate of Civil Identification (Dirección Nacional de Identificación Civil), along with supporting documents such as proof of residence, a clean criminal record and proof of income or employment.
• Interview: attendance of an interview to assess the applicant’s integration into Uruguayan society and adherence to its laws and customs.

There are certain ways in Uruguay to obtain citizenship faster. 

• Marriage to a Uruguayan citizen: foreign nationals married to a Uruguayan citizen may apply for citizenship after three years of residency in Uruguay.
• Uruguayan children: parents of Uruguayan-born children can apply for citizenship after three years of residency.
• Substantial investment: while not explicitly detailed as a separate fast-track option, substantial economic investment in Uruguay may demonstrate significant ties to the country, potentially influencing the authorities’ discretion in processing residency and citizenship applications more favourably. Investors should show that their economic activities contribute to Uruguay’s development, thus establishing their centre of interest in the country.

In Uruguay, the legal framework primarily relies on the institutions of tutelage (tutela) and guardianship (curatela) to protect the interests of minors and adults with disabilities.

• Tutelage (tutela): according to Articles 3274 and following of the Civil Code, under tutelage, parents or designated tutors manage the assets and personal affairs of minors until they reach legal age. The tutelage ensures that minors’ assets are administered responsibly, with the tutor required to prepare judicial inventories and submit periodic accounts of their administration.
• Guardianship (curatela): for adults with disabilities, guardianship is regulated under Articles 3277 and following of the Civil Code. It appoints a curator to manage their affairs when they are unable to do so themselves. This process requires a court proceeding initiated by relatives, spouses or the attorney general. The curator is responsible for ensuring the well-being and proper management of the adult's assets, including preparation of inventories and accountability to the court.

Unlike some jurisdictions, Uruguay does not have specific legislation for special needs trusts aimed at managing assets for individuals with disabilities. However, administrative trusts or testamentary trusts can be established to provide for the care and needs of disabled individuals, with the curator appointed as the trustee to manage assets according to the wishes and directives of the settlor.

Appointment of a guardian or curator in Uruguay involves a judicial process to ensure the protection of individuals who are unable to manage their own affairs.

• Court proceeding: the appointment of a guardian (tutor for minors or curator for adults) necessitates a court proceeding as outlined in the Civil Code. This process is initiated by relatives, spouses or the attorney general. The court evaluates the capacity of the individual and appoints a suitable guardian based on the best interests of the ward.
• Ongoing court supervision: once appointed, the guardian or curator is subject to ongoing supervision by the court, in accordance with the Civil Code. They are required to fulfil legal responsibilities, such as preparing inventories of assets, providing guarantees and submitting periodic reports on the administration of assets. This supervision ensures transparency and accountability in the management of the ward’s affairs.

In Uruguay, the impact of demographic aging on social security systems has prompted proactive regulatory measures to ensure financial preparedness for longer lives, both for individuals and their elderly family members.

The country has acknowledged the challenges posed by an aging population on pension systems, particularly those based on a pay-as-you-go model. With increasing life expectancy leading to more retirees and longer benefit payment periods, Uruguay has implemented reforms to adapt its pension system accordingly. One significant development is the introduction of a new pension scheme that allows individuals to retire and continue working if they choose to do so after the age of 60. This reform aims to provide flexibility and sustainability by aligning retirement age policies with changing demographics and workforce dynamics.

Moreover, the reform strives to equalise conditions between genders regarding pension access in cases of family member deaths and streamlines contributions to the social security system. These adjustments are designed to support approximately 600,000 individuals who may benefit from the enhanced flexibility and provisions under the new system.

Nevertheless, the new pension system will be potentially challenged in a plebiscite that may take place with the presidential elections in October 2024. Were it to be successful, the reform under Law No 20,130 of 2023 may be repealed. 

In Uruguay children born out of wedlock, adopted children and those born through surrogacy (either abroad or by the limited local options) have the same rights that children born in wedlock. The legal framework ensures that non-traditional children must inherit under forced heirship rights and can be included as beneficiaries in estate plans, providing equal protection under the law.

Uruguay prohibits surrogacy but does provide an alternative. In 2013, the Law on Assisted Reproduction was enacted, which included the possibility of surrogacy up to the second degree of consanguinity. It enables the mother, mother-in-law, sister or sister-in-law of an infertile woman to gestate an embryo in their place.

Since the approval of the Same-Sex Marriage Act in 2013, Uruguay has recognised same-sex marriage and provided a legal framework for same-sex couples to plan their estates and manage assets, in the same way traditional marriages did. This recognition includes rights related to inheritance, property ownership and other aspects of family law, ensuring that same-sex couples have the same legal protections and opportunities as opposite-sex couples.

In addition to recognising same-sex marriage, Uruguay provides a framework for domestic partnerships under the Concubinary Union Act of 2007. This Law extends rights and obligations to couples who have cohabited in a domestic partnership for at least five years without interruption.

To access legal benefits such as inheritance or pensions, couples must prove the existence of their concubinary union. This can be done by obtaining a judicial declaration of recognition. The domestic partners, or any interested party in the event of a partner’s death, can initiate this process. The judicial declaration confirms the start date of the union and identifies any assets acquired jointly during the partnership.

Once the concubinary union is judicially recognised, domestic partners gain similar rights to those enjoyed by married couples regarding inheritance and pension benefits. Surviving domestic partners are entitled to a share of the deceased partner’s estate equivalent to that of a spouse. For pensions, the surviving partner must prove the five-year minimum duration of the partnership (unless there are common children, in which case this requirement is waived) and demonstrate economic dependency on the deceased. If these conditions are met, the surviving domestic partner can receive a pension similar to that of a surviving spouse.

Although the philanthropic culture in Uruguay is not as widespread and developed as it is in other Latin American countries, Europe or the USA, Uruguay does encourage charitable giving through various tax incentives and the establishment of charitable foundations. 

Article 69 of the Uruguayan Constitution provides that institutions that provide private education and cultural services are exempt from all national and municipal tax. Therefore, foundations and civil associations (see 10.2 Common Charitable Structures) that provide such services are exempt from all taxes. The Uruguayan Tax Law provides several benefits that encourage charitable giving, for example, granting donors the possibility to deduct the amount donated against their income tax calculation, or granting tax credits that can be used against taxes to be paid, but this applies only to corporate taxpayers.

In the Uruguayan Corporate Tax Law, there is a special donation regime, with specific benefits, when the following requirements are met:

• the donation must be destined for a purpose specifically included in Article 79 of the Uruguayan Corporate Tax Law (mostly education and health related purposes);
• the entity beneficiary of the donation must file an investment project stating how the funds will be used; and
• donations must be deposited in cash, in the Banco de la República Oriental del Uruguay, in a unique and special account created for this purpose, on behalf of the Ministry of Economy and Finance.

The taxpayer will be granted the following benefits when making this type of donation:

• a tax credit for 75% of the amount donated to be used against income or wealth tax; and
• the remaining 25% can be deducted as an expense for tax purposes.

Foundations and civil associations are the most used vehicles for charitable purposes. The main feature of these types of legal entities is that they must be non-profit organisations. A foundation can be incorporated by a unilateral act of its founding member by will (mortis causa) or by gift (inter vivos). A civil association, on the other hand, must be incorporated by a multilateral act between its members that joins the different corporate bodies. Both entities are subject to the control of the Ministry of Education and Culture (MEC).

Foundations and civil associations, as non-profit organisations, offer distinct advantages for charitable planning in Uruguay. 

Foundations can be established by a single benefactor through a will or gift, providing a streamlined process for those looking to dedicate resources to a specific cause. They often enjoy greater permanence and stability, allowing for long-term planning and significant tax benefits, including total exemption from national and municipal taxes. However, they require an initial endowment (substantial enough to demonstrate financial viability and capacity to fulfil the foundation’s purposes) and face stringent oversight from the MEC, which can be a complex and bureaucratic process. 

Civil associations, on the other hand, are formed by a collective agreement among members, fostering community involvement and shared decision-making. They are particularly effective for ongoing, collaborative projects and can benefit from similar tax exemptions. However, they may face challenges in governance due to the need for consensus among members, and their activities must align closely with their defined purpose to maintain legal and tax benefits. 

Both structures are subject to rigorous compliance and reporting requirements, ensuring transparency but potentially adding administrative burdens.