Punta del Este - My Second Home

PROPeRtY GuIde

Punta del este
MY second hoMe

best Quality of life, Naturally

Punta del este | my second home 1

Jose Ignacio’s lighthouse

2

CONTeNTs INTRODUCTION

3 INTRODUCTION the purpose of this work is to provide foreigners who
are interested in making real estate investments in
4 INfORmaTION uruguay with a general introduction to the main fea-
4 Geography and weather conditions tures of the country’s legislation which may be of in-
4 Population and language terest to someone considering it for a real estate in-
5 Political system and Goverment vestment or for a second residence, as well as with a
5 living in uruguay guideline to the main legal aspects involved in select-
6 excellent Background ing, purchasing and utilizing real estate in uruguay.
7 combined with modern infrastructure for
quality of living It is important to point out from the start that no limi-
tations are imposed on foreigners for the purchase of
8 PROPeRTy RIghTs IN URUgUay real estate in uruguay and no requirements exist for
8 ownership of Real estate such foreigners to have any kind of domicile in the
8 leases country. any person or legal entity, regardless of its
8 apartment buildings nationality or place of domicile, may own real estate
9 country clubs in uruguay, whether in tourism or agricultural areas
9 land and Planning with no limitations of any kind and at any time when
9 trusts selling their property may repatriate the result of its
investment as well as rents derived form their invest-
10 Real esTaTe TRaNsaCTIONs ment without the need for any kind if authorization or
10 Registration of real estate rights intervention by uruguayan authorities.
10 structure of the real estate operations
12 Financial real estate transactions In the last few years foreign investment in real estate
13 taxes applicable to real estate transactions has increased most significantly in the following main
areas: a) Punta del este and its adjoining locations of la
14 fOReIgNeRs RIghTs TO ResIDeNCe aND Barra, manantiales and José Ignacio, the department
CITIzeNshIP IN URUgUay of Rocha with its still underdeveloped oceanic beach-
es, colonia del sacramento and the costal areas of the
15 legalIzaTION Of DOCUmeNTs COmINg Río uruguay, which have experienced the construction
fROm abROaD of important tourism projects together with a constant
flow of individuals in search of holiday retreats; and b)
15 INheRITaNCe laws agricultural lands spread out far and side across the
country for all kinds of projects such as agriculture,
16 Taxes cattle grazing, forestry, viticulture and dairy projects.
also the purchase of large rural estates to set up hunt-
18 INvesTmeNT PROmOTION ing reserves has become quite common.
18 General Regime
21 tourism sector www.destino-puntadeleste.com
23 General regime/tourism sector www.uruguayxxi.gub.uy

24 PUNTa fOR sale


INfORmaTION

abOUT URUgUay

aN OUTlINe Of URUgUay

geography and weather conditions the most densely populated city is montevideo, the
capital city, which has the most important port, fol-
uruguay is located in south america, on the atlantic lowed by Paysandú and salto (on the shore of the River
coast, between Brazil on the north and argentina on uruguay) and las Piedras (near montevideo).
the West.
Punta del este, on the atlantic coast and 130 kilome-
It has an area of approximately 176,000 km2 (68,000 ters from montevideo, is one of the most popular bath-
square miles) excluding territorial waters. ing resorts in south america, highly active during the
summer season (January and February).
there are no remarkable topographical features. most of
the surface consists on rolling hills crossed by long rivers. Population and language

Weather conditions are enjoyable and healthy throughout uruguay’s population, according to the census car-
the year. summer temperatures average between 21 ºc ried out in 2004, is 3.3 million, of which near 1.3 mil-
and 27º c (70º F and 80º F), Winter temperatures vary be- lion live in montevideo and its surroundings. For the
tween 10º c and 16º c (50º F and 60º F) and there are some whole country, approximately 89% of the population
cold days occasionally. Rainfall may occur on any season, is urban.
but it is usually heavier during the months of autumn.

4

there are no indigenous people; a high percentage of deo may be crossed from one end to another by car in
uruguayans are descendants of european immigrants, a little more than an hour, at any time of day.
mainly spanish and Italian.
cities have large green spaces and thanks to the con-
the rate of population growth is one of the lowest in tinuity of the winds and the absence of polluting indus-
latin america: 3 per thousand per year, similar to that tries, there is no environmental pollution. this positive
of most developed countries. statement is also valid for rivers and coastal sea, also
facing montevideo.
spanish is the official language and the one normally
used. teaching english and French has been a tradition the benefits of the climate and the absence of environ-
in the country, and english is mostly used by the busi- mental pollution, the range of the sanitary and drinking
ness community. currently, the study of Portuguese is water networks and the scope of medical care, provide
also consolidating as a consequence of the integration a high level of healthfulness to the people. epidemics
process in meRcosuR. of any type are practically inexistent.

Political system and government due to its territorial extension, the distances to travel in
order to access to recreational areas (for example the
uruguay is politically organized as a democratic republic countryside, beaches and river shores) are reduced.
with a presidential system. the state is organized in three the most popular beaches extend over a distance of
independent Powers: executive, legislative and Judicial. almost 300 km between montevideo and the border
with Brazil. the national sport par excellence is foot-
living in Uruguay ball, which attracts the vast majority of the population
of all social levels. there are several private clubs with
In uruguay life can be safe, placid, healthy and pleas- sports fields, particularly excellent golf courses, as well
ant. the country offers the highest security level in as state sports facilities, which can be acceded at very
south america in a broad sense. crime rate is very low low costs or also for free. there also is an important
in comparison with the other countries of the region. cultural activity which is translated into a wide range of
there are no racial, religious or other types of con- theatrical, musical and cinematographic shows.
flicts, and political meetings are held peacefully.
the uruguayan market offers vehicles, electrical ap-
the movement of vehicles is smooth, even in city cen- pliances, beverages, food and other consumer goods
ters. time spent on commuting is reduced; montevi- of any origin and quality.

maldonado

josé ignacio

manantiales
punta ballena
la barra

punta del este
maldonado
montevideo


INfORmaTION

excellent background
RaNkINg URUgUay IN URUgUay IN
sOUTh ameRICa The wORlD
uRuGuay has a stRonG democRatIc tRadItIon,
chaRacteRIzed By PolItIcal and socIal staBIlIty.
low Corruption 2 24
(transparency International
oPen, staBle and RaPIdly develoPInG econo- 2010)
my WIth RelIaBle and hIGh level InstItutIons.

Democracy Index 1 21
one oF latIn ameRIca’s hIGhest GdP GRoWth
(the economist Intelligence
Rates. unit 2010)

modeRn and attRactIve Investment ReGIme. economic freedom Index 2 33
(heritage Foundation 2011)
theRe aRe no RacIal oR RelIGIous conFlIcts.
uRuGuay Is FRee FRom ePIdemIcs and natuRal
Quality of living 1 70
dIsasteRs.
(mercer eco-city Ranking 2010)

nIce WeatheR and aBsence oF natuRal
low cost of living 4 13
dIsasteRs Plus aBundance oF WateR.
(mercer cost of living city
Ranking 2010)

Combined with modern Infrastructure
for quality of living

WoRld-class PoRt FacIlItIes In montevIdeo, health caRe and hIGhly sPecIalIzed medIcIne
a ReGIonal huB PaR excellence FoR south InstItutes, WIdely coveRed By aFFoRdaBle
ameRIca’s southeRn cone ReGIon. PRIvate local and InteRnatIonal health In-
suRance comPanIes.
latIn ameRIca’s most dense hIGhWay netWoRk.
hIGh qualIty GolF couRses WIth modeRn ame-
2009: neW teRmInal at montevIdeo aIRPoRt, nItIes stRateGIcally located thRouGhout the
neW colonIa FeRRy PoRt and neW montevIdeo countRy WIthIn shoRt dIstance FRom maJoR
RInG Road. cItIes.

hIGhest InteRnet, BRoadBand, Pc and tele- Polo FIelds hostInG InteRnatIonal touR-
Phone PenetRatIon In latIn ameRIca (e.G. 123 naments WIthIn shoRt dIstance FRom maIn
moBIle lInes PeR 100 ResIdents In 2009). InteRnatIonal aIRPoRts.

98% oF teRRItoRy WIth access to loW-cost
electRIcIty (mostly FRom ReneWaBle souRc-
es) and dRInkInG WateR.

6

QUalITy Of eleCTRICITy sUPPly bROaDbaND PeNeTRaTION glObal PeaCe INDex
(RaNkINg) (RaNkINg) (RaNkINg)

Us 23 Uruguay 46 New zealand 1

Ireland 25 Chile 47 Ireland 6

Chile 30 argentina 48 Uruguay 24

spain 36 brazil 54 spain 25

Uruguay 37 Panama 57 Chile 28

hungary 46 Colombia 61 Italy 40

Italy 47 Costa Rica 63 argentina 71

New zealand 56 brazil 83

brazil 63 Us 85

argentina 93

World economic Forum’s Global World economic Forum’s Global economist Intelligence unit 2010
competitiveness Report 2010-2011 competitiveness Report 2009-2010

Punta del este’s shore


PROPeRTy RIghTs IN URUgUay

Terramar Christie’s

the following, is a summary of the general principals ment. at the expiration of the term of the lease agree-
governing real estate property rights in uruguay. ment, possession returns to the lessor and lessee
loses all rights to the property.
Ownership of real estate
the legislation in force limits the term of lease agree-
Real estate property may be owned by one or more in- ments to a maximum of 15 years.
dividuals, partnerships and corporations, or a combi-
nation of the same. apartment buildings

the nationality or legal residence of such individuals, the legal existence and property rights over each
partnerships or corporations is not relevant as far as apartment of a condominium, the administration of the
acquiring the property is concerned. the transfer of building and the rights and obligations of the owners
real estate from owner to purchaser and its require- of such units are governed by law 10,751. such law
ments is addressed below. establishes the requirements for each apartment to
become independent real estate properties separate
the only current restriction in force refers strictly to from the building, the rights of the individual owners of
agricultural land: law 18,092 of January 7, 2007 (as each apartment as well as their rights to use the com-
amended by law 18,172) imposes certain restrictions mon areas and amenities of the building.
on the ownership and exploitation of rural or agrarian
land in uruguay. Basically it establishes that agrarian as a general principle, each apartment is recognized by
land may be owned or exploited solely by individuals law as an independent real estate property only upon
or by certain types of companies, corporations or as- the completion of the building, the inspection and ap-
sociations. proval of construction by the municipal authorities, the
registration of the construction plans and the mandato-
leases ry execution of a deed (the Reglamento de copropiedad)
which regulates the rights and obligations of the own-
under a lease agreement (contrato de arrendamiento), ers of the units and establishes a mortgage over each of
the owner of the property (lessor) grants to another the apartments of the building in favor of the owners of
person (lessee) the right to use and benefit from the all other apartments as security for the payment of said
property for an agreed period of time, subject to the common expenses. a special regime is created by law
limitations and conditions set forth in the lease agree- 16,760 for buildings which are financed by banks.

8

during the construction phase however, the execution Pursuant to lot, the municipal Governments are em-
and registration of promises of sale with respect of powered to issue land use instruments to regulate all
the future apartments is admitted by law, granting the aspects relating the construction and future develop-
purchaser the rights described below. ments of urban communities such as -among others-
the categorization of lands as belonging to urban, sub-
Country Clubs urban or rural areas, the determination of the type of
construction and activities admissible in each area, the
housing in the form of private country clubs has be- minimum size of plots and the consecration of certain
come increasingly common in uruguay. law 17,292 areas as of special environmental protection.
regulates property rights of plots in country clubs as
well as the contribution of each plot to the common ex- Trusts
penses, the administration and use of the common ar-
eas, the size of the plots and other matters pertaining under law 17,703 of 27 october 2003, trusts, so com-
to the premises to be built by the owner of each plot. mon in other legislations, were introduced in the uru-
under this law the independent legal existence of each guayan legal regime. a trust is a legal vehicle to hold
plot will be the result of the granting of the municipal fiduciary property, as a separate patrimony from that of
approval of the infrastructure works carried out in the other persons. the fiduciary property consists of certain
country club, the registration of the respective map assets or rights transferred by one or more persons,
identifying plots and common areas and the execution (the trustor) to the trust in order for another person (the
and registration of the Reglamento de copropiedad trustee) to dispose of or administrate, or exercise the
with similar characteristics to the those mentioned in rights in question, as the case may be, in accordance
the previous paragraph. with the instructions imparted in the trust agreement
and for certain pre-established purposes, for the ben-
land Use Planning efit of a third party or parties (the Beneficiaries).

under law 18,308 dated 18 June 2008 (ley de orde- trusts may be constituted by an agreement enter into by
namiento territorial, or “lot”) a new legal frame- the parties or by means of a will or testament. all trusts
work has been created regarding land use planning, must be executed by a written instrumented irrespective
which purpose is to organize the use of land, improve of their purpose, and must be executed as a public deed
the quality of life of citizens and environmental use of when such formality is required by law (for example, if
natural resources. the fiduciary property consists of real property).


Real esTaTe TRaNsaCTIONs

Registration of real estate rights structure of the real estate operations

uruguay has an excellent real estate regime in place a) the PRelImInaRy aGReement
under which title to real estate and all rights pertain- It is customary that the parties, upon reaching an
ing to real estate, in order to be valid before third par- agreement on the commercial terms for the pur-
ties, must be registered before the pertinent public chase of any kind of real property (whether a house,
registry. the chronological order in which such rights an apartment or a ranch or agricultural land), exe-
are registered grants precedence to the various rights cute a preliminary agreement (a Boleto de Reserva).
registered with respect of a property. the system is so With the execution of such preliminary agreement,
safe that title insurance is unheard of in the country. a percentage of the purchase price -usually 10%- is
deposited by the buyer with the acting escribano, to
Further, all real estate transactions and most contracts be kept in escrow as security for the compliance of
which create rights over real estate property (includ- the obligations of the buyer under the agreement
ing security on real estate) must be executed before and released in the moment in which the agreed
a lawyer specialized in such matters (an escribano) in trasnacation is executed.
the form of a public deed and registered with the Real
estate Public Registry. It is common practice that preliminary agreements
will establish a 30-day term for urban properties
In the case of the purchase and sale of real estate, it or 60 day term for agricultural land to conduct due
is the buyer who has the right to appoint the escribano diligence work and title search to confirm good and
who is to act in the transaction and authorize the pur- clean title in the name of the seller. such terms are
chase agreement. said escribano shall conduct a due not mandatory and other may be agreed upon. It
diligence on the title deeds of the property, obtain in- is also common that the agreement provides that
formation from the public registries and further check upon the existence of substantiated observations
that all the taxes and fiscal obligations have been paid to the title deeds with respect of which the parties
and all other legal requirements complied with. do not reach an agreement the matter be deferred


10

to the opinion of the asociación de escribanos del registration, shall grant full protection and preemp-
uruguay (the uruguayan association of escribanos). tion to the rights of the buyer over the real estate
some preliminary agreements establish that the property over any other right subsequently created
buyer may unilaterally desist of the operation if said regarding such property: attachments or encum-
buyer’s escribano formulates duly grounded obser- brances, purchase and sale or lease agreements
vations. affecting the property or any other circumstance
which could affect the property right of the seller or
since this preliminary agreement will contain all the its right to dispose of its property. additionally, the
main negotiated aspects of the deal, it is advisable buyer is entitled to assign to third parties his o her
that the buyer –upon reaching a commercial agree- rights acquired in virtue of this promise of sale.
ment with the seller and/or the real estate agent-
immediately contact his escribano to make sure this this law further stipulates that, if the seller were
agreement and all other contractual documentation to default in its obligation to execute the purchase
is correctly negotiated and prepared. agreement or were unable to do so for any reason
(including death), the pertinent court, upon verifica-
B) the ReGIsteRed PRomIse oF sale tion that the purchase price has been either paid in
uruguayan law contemplates, in case of real estate full or deposited with such court, shall execute the
transactions where the purchase price is to be paid in purchase agreement in the name and on behalf of
installments or where there are deferred obligations the seller and in favor of the buyer (or the succes-
to be complied with by the parties, the execution of sors or assigns of the same).
a promise of sale (compromiso de compraventa),
which principles are regulated by law 8,733. this structure is commonly used to purchase apart-
ments in buildings under construction, allowing the
this promise of sale shall be executed before the es- buyer to obtain secure title to the property being
cribano appointed by the buyer - substantially in the built and the seller to receive payment in install-
form of a definitive purchase agreement - and, upon ments during the construction period.


Real esTaTe TRaNsaCTIONs

c) the PuRchase aGReement escribano who will be responsible for their subse-
Real estate purchase agreements must be executed quent payment to the tax authorities.
before an escribano in the form of a public deed which
is entered into said escribano´s book. Registration of the purchase agreement with the per-
tinent registry will cause it to be valid and enforceable
as stated above, the role of the escribano is not only against third parties as of the date of registration. If
limited to the drawing up of the agreement and its not registered, the agreement will only be valid be-
authorization under his signature and seal; the said tween the parties thereto.
professional further acts on behalf of the state as a
controlling agent that confirms that the seller is up to financing real estate transactions
date with the payment of certain taxes, that all pen-
sion funds contributions related to the construction of Financing for the purchase of real properties in uru-
the premises which are part of the property have been guay is available through banks and financial institu-
paid as per certain certifications issued by the pen- tions, even though such practice is far from as com-
sion funds institution, that all necessary permits and mon as it is in europe and the united states, and many
authorizations have been obtained, etc. Reference to real estate transactions are carried out without such
such controls as well as the inclusion of other clauses financing on a cash on hand basis or with financing
in the purchase agreement is mandatory for the due provided by the seller.
registration of purchase agreement in the Real estate
Public Registry. additionally certain taxes to be paid customarily, the lender will participate in the deal
at the execution of the agreement are collected by the through its own legal advisors and escribano who will

Jose Ignacio’s lighthouse

12

be in charge of carrying out the due diligence described tice the fiscal value of properties is considerably low-
above and drafting a mortgage agreement over the er than their market value, and may be estimated at
property in question (in the event of a purchase agree- about 50% of the market price or less even though of
ment) or a pledge over the buyer’s rights (in the event course, this is only an estimation and in certain cases
of a promise of sale). not applicable.

mortgages must also be executed as a deed before an the ltt is deposited with the escribano upon the ex-
escribano, who, in this case, is customarily appointed ecution either of the promise of sale or the purchase
by the creditor and registered with the Real estate agreement, who shall be in charge of making the cor-
Public Registry. the security rights created by the responding payment before the fiscal authorities pri-
mortgage shall only rise and become enforceable as or to registration of the purchase deed together with
of the date of registration. other taxes.

Taxes applicable to real estate transactions 2. stamP dutIes
stamp duties, or montepíos notariales, are appli-
1. land tRansFeR tax cable to all transactions in which an escribano par-
all real estate purchases are subject to a land trans- ticipates.
fer tax, or Impuesto a las trasmisiones Patrimoniales,
(the “ltt”) which amounts to four per cent (4%) of the In case of a real estate purchase agreement and mort-
fiscal value of the property and is paid in equal parts gage agreements, stamp duties amount to approxi-
by both the buyer and by seller (i.e, 2% each). In prac- mately 0,55% plus vat (22%) of the purchase price.

Punta del este’s Port


fOReIgNeRs RIghTs
TO ResIDeNCe aND
CITIzeNshIP IN URUgUay

obtaining a resident permit in uruguay does not pose 2. the granting of a common passport to the person
great difficulties. Foreigners are admitted to reside in question, his or her spouse and children under
permanently in the country if they comply with the fol- 18 years of age who have also obtained permanent
lowing three general conditions: a) to be of good health, legal residence.
b) to prove to be of good conduct and, c) to have enough
means to support themselves and their family. 3. maintenance within the uruguayan territory of
life insurance policies and those related with the
legal citizenship may be obtained by non nationals if pension funds coverage which may have been con-
they have resided in the country for a term of at least tracted abroad.
three years (if they have resided with their families) or
of five years (in case they have resided on thier own) these persons, in order to benefit from this regime,
and - in both cases - have been of good conduct. must either: (a) Purchase real estate to be destined
to their habitation within the uruguayan territory for
Furthermore, foreigners who have retired or obtained a value of not less than 100,000 us dollars, which
a pension abroad and who wish to obtain permanent they will not be able to sell for a period of 10 years;
residence in uruguay shall have the right to the fol- or (B) acquire bonds issued by the uruguayan gov-
lowing benefits, as prescribed by law 16,340 and de- ernment for a minimal nominal value of 100,000 us
cree number 119/2004: dollars, which will remain in deposit with the Banco
de la República oriental del uruguay for a period
1. the introduction into uruguay, with the first 6 of not less than 10 years. Further, upon other re-
months of the obtaining of the permanent legal resi- quired documentation, these persons will need to
dence, free of any and all customs duties and taxes of submit to the dirección nacional de migraciones
the following goods: (a) the furniture and household (the national Immigration agency) certifications is-
appliances of their residence, in reasonable quanti- sued by the entity or pension fund serving the re-
ties as the customs authorities may estimate; and (b) tirement pension attesting to the existence of the
a motor vehicle which they will not be authorized to same, which must exceed a minimum of 1,500 us
transfer for a period of 4 years as from the moment of dollars a month and be of a permanent and periodi-
its introduction into the country. cal nature.

fOReIgNeRs aRe aDmITTeD TO ResIDe PeRmaNeNTly IN The COUNTRy
If They COmPly wITh The fOllOwINg ThRee geNeRal CONDITIONs:

a) to Be oF Good health,
B) to PRove to Be oF Good conduct,
c) to have enouGh means to suPPoRt themselves and theIR FamIly.

14

legalIzaTION Of
DOCUmeNTs COmINg
fROm abROaD INheRITaNCe laws

uruguay is not a signatory to the hague convention under uruguay law, upon the demise of a person, the di-
abolishing the Requirement for legalization for For- rect descendants of the deceased, whether legitimate or
eign Public documents and therefore does not accept natural, and in their absence, his or her ascendants to-
legalization of documentation by means of the “apos- gether with the surviving spouse are considered as “force-
tille”. all documents coming from abroad must be le- ful heirs” of the estate of the deceased. In the absence
galized before the uruguayan consulate of the place of both parents and spouse, the siblings of the deceased
in which the document was issued or before the uru- whether legitimate or natural shall be the heirs. the law
guayan consulate with jurisdiction over such place. reserves for such forceful heirs a mandatory portion of the
estate. even by means of a will, a person who at the time of
In the event that there effectively is no uruguayan con- his death has forceful heirs may not dispose of more than
sulate with jurisdiction over such place, indirect legal- a certain percentage of his or her estate in the benefit of
ization is accepted. In this case, the document is legal- third parties or may not alter the percentage of the estate
ized before the consulate of any country in which there that corresponds to any one of such forceful heirs.
exists a uruguayan consulate and then legalization is
completed before such uruguayan consulate. the percentage of the estate assigned to such heirs
depends upon their number. In the case of one single
It is advisable to consult with uruguayan counsel be- child, the percentage of the estate that can be freely
fore embarking in legalization of documents since le- bequeathed to other individuals is 50%; if there are two
galization requirements are observed quite strictly. children a person may dispose by means of a will of up to
1/3 of his estate to others, other than his or her forceful
heirs, and in the case of three or more, this percentages
is reduced to 25% of the estate. If there are no children
and the forceful heir or heirs are one or both parents, the
testator may dispose freely of fifty per cent of his estate.

the uruguayan civil code regulates the legal actions
forceful heirs have at hand in order to be compensated
for the breach of their rights in the estate.

Punta del este’s Bay


Taxes

aside from spectacular landscapes, uruguay offers threshold below which the tax is not applied. For the
very interesting investment opportunities in the real year 2010, this threshold was of approximately usd
estate market. 111,000 for single individuals and usd 222,000 for
married couples who elect to be taxed as such.
Investing in real estate in uruguay is becoming more
and more attractive, not only because the economic en- state PRoPeRty tax (“contRIBucIón InmoBIlIaRIa”):
vironment is very favorable, but also because taxes do Real estate properties in urban and suburban areas
not substantially affect investor’s returns. taxes over are subject to a property tax, imposed by state Govern-
real estate transactions and holding of real estate are ments. the tax base is the local cadastral value of the
lower in uruguay than in most countries in the region. property. the tax rates vary depending on the state. In
maldonado (state where Punta del este is located) the
buying Real estate: applicable taxes tax rate is 6.8%.

land conveyance tax (“ItP”): Real estate properties in rural areas are subject to a
transfer of real estate is subject to ItP, payable both similar tax, imposed by the national Government and
by the seller and the buyer. the tax rate is 2%, appli- collected by the state Governments.
cable over the fiscal value of the property duly adjusted
for inflation. PRImaRy school PRoPeRty tax (“ImPuesto
de PRImaRIa”):
value added tax (“Iva”): a national tax is also levied on real estate properties in
If the house is bought to the construction company, the uruguay, destined to the financing of the public prima-
sale will be subject to Iva at a 10% rate. ry school system. the tax base is the cadastral value of
the property. the tax rates vary from 0.15% to 0.30%.
Owning Real estate: applicable taxes
selling Real estate: applicable taxes
net WoRth tax (“IP”):
If you own real estate in uruguay you will have to pay land conveyance tax (“ItP”):
net Worth tax every year. the tax will depend on the transfer of real estate is subject to ItP, payable both
vehicle that you use as holder of the real estate. by the seller and the buyer. the tax rate is 2%, appli-
cable over the fiscal value of the property duly adjusted
If you decide to hold the real estate through a legal en- for inflation.
tity (be it a local or foreign company), net Worth tax
will apply at a 1.5% rate on the revalued purchase price Income tax (“IRae”, “IRPF” oR “IRnR”, dePendInG
of the property. on the holdeR oF the PRoPeRty):
the applicable income tax varies according to who the
If you own the real estate in a personal capacity, net holder of the real estate is.
Worth tax is applied at progressive rates ranging be-
tween 0.7% and 2%, applicable over the property’s fis- In the case of sale of property held by an individual or
cal value. a foreign company, same will pay income tax (IRPF /
IRnR) at a 12% rate over the difference between the
different deduction rules apply to companies and indi- sales price and the purchase price. once the property
viduals. In the case of individuals, there is a net worth is sold the shareholder can repatriate the money with-

16


out paying any other tax. this favorable tax treatment erty held by an individual or a foreign company, same will
is not applicable if three or more real estate properties pay income tax (IRPF / IRnR) at a 12% rate over the lease
are sold within one year. price. dividends remitted abroad by the foreign company
will not be subject to tax withholding in uruguay.
If the real estate is held through a uruguayan company,
income deriving from the sale of the property will be If the real estate is held through a uruguayan com-
subject to corporate income tax (IRae) at a 25% rate. pany, income deriving from the lease of the property
Profit on sale of the property is determined by the differ- will be subject to corporate income tax (IRae) at a 25%
ence between the sales price and the cost of acquisition, rate. also, dividends distributed by uruguayan compa-
updated for inflation and amortized. also, dividends dis- nies are subject to withholding tax of 7%. Preferential
tributed by uruguayan companies are subject to with- tax treatments may be available for certain type of
holding tax of 7%. Preferential tax treatments may be uruguayan companies.
available for certain type of uruguayan companies.
If you are the tenant:
Renting Real estate: applicable taxes a recent law allows individual tenants who are uru-
guayan tax residents to deduct from their Income Per-
Income tax (“IRae”, “IRPF” oR “IRnR”, dePendInG sonal tax (“IRPF”), a 6% of the rental payments, if they
on the holdeR oF the PRoPeRty): report the identity of their landlord to the tax authority.
this may be extended in the future to holiday rentals.
If you are the landlord:
the applicable income tax varies according to who the value added tax (“Iva”):
holder of the real estate is. In the case of lease of prop- Iva does not apply to the lease of real estate.


INvesTmeNT PROmOTION

general Regime (Decree 455/007) benefits

scoPe a. Income tax
commercial and service companies are eligible to ap- under the former regime companies could access an
ply for tax benefits for their projects. exemption on taxable income equivalent to 50% of the
investment financed with own funds, or with or with
the highlights of the investment promotion regime are: funds generated by the project itself for three years, as
1. direct exemption from business income tax (IRae). of submission of the benefit application.

2. does not require investments to be financed with In turn, they could defer the remaining nonexempt 50%
own funds in order to access IRae exemption. by self-channeling until the fifth year following that of
the investment.
3. Investments considered to be in the national
interest include the acquisition of movable assets companies with qualified projects can access IRae ex-
to be used directly in company activities, fixed emption of up to 100% of the eligible investment (re-
improvements and intangibles (to be determined gardless of source of financing), depending on the in-
by the executive). vestment amount, which determines project category,
and position within the category.
4. Investments made as of six months prior to the
application date can be included. a.1 Project rating
to determine the amount of the benefit and the period
5. Rules classify projects, depending on the for IRae exemption, projects are rated based on the
investment amount measured in indexed units (uI), matrix of objectives and indicators appearing in the
as small, medium (tranches 1 and 2), large following table
(tranches 1 to 3), and high economic impact.
For small projects, companies must select one of the
following objectives:
• Job creation
PROjeCT amOUNT IN amOUNT IN
• Increase in research and development
CaTegORy mIllIONs Of UI mIllIONs Of UsD and innovation (R&d+i)
• Increase in exports
small less than 3.5 less than 0.3
• Use of cleaner technologies
medium – T.1 3.5 – 14 0.3 - 1.3

medium – T.2 14 – 70 1.3 – 6.6

large – T.1 70 – 140 6.6 - 13.2

large – T.2 140 – 500 13.2 – 47.1

large – T.3 500 – 7,000 47.1 – 660

high economic impact over 7,000 over 660

18

ObjeCTIve INDICaTOR POINTs (0 TO 10 POINTs)

job creation Number of net jobs (annual average) One point for every 3 jobs

Decentralization human Development Index (hDI) for [(hDI max. –hDI Dept. / (hDI max.
Department where project is located – hDI min.)] x 10

Increase in exports variation in exported amount One point for every UsD 200 thousand in exports
(with project – w/o project)

Increase in national value added Ratio of wages and local purchases {[(wages + local sales) / sales]w/p /
to total sales with and w/o project [(wages + local sales) / sales]w-o/p} -1) x 10

Use of clean technologies Investment in cleaner production (CP) One point for every 10% of investment
with respect to total investment in project in CP as share in total investment

Increase in research and (Investment in R&D+i / total investment), or One point for every 10% of investment
development and innovation (number of employees in R&D+i / total employees) in R&D+i for chosen indicator

Project’s impact on economy Increase in gDP generated by project One point for every 0.003% of increase
in country’s annual gDP

depending on the points scored, projects will have ac- other projects will be rated based on their scores on
cess to an IRae exemption ranging from 51% to 60% of the objectives and indicators matrix, weighted accord-
the investment during a period of from 3 to 5 years, per ing to the investment amount. depending on scores,
the following table. they may access the following exemption percentages:

IRae exemPTION amOUNTs aND TeRms fOR small PROjeCTs, PROjeCT IRae exemPTION
PeR POINTs sCOReD CaTegORy

amOUNT TeRm

POINTs IRae exemPTION

medium 70% of amount invested 25 years x matrix
% Of amOUNT INvesTeD TeRm (yeaRs) Tranche 1 x matrix score / 6 score / 10

0 0% 3
medium 80% of amount invested 25 years x matrix
1 51% 3 Tranche 2 x matrix score / 8 score / 10
2 52% 3

3 53% 3 large 90% of amount invested 25 years x matrix
Tranches x matrix score / 10 score / 10
4 54% 3 1 and 2

5 55% 4

6 56% 4 large 100% of amount invested 25 years x matrix
Tranche 3 x matrix score / 10 score / 10
7 57% 4

8 58% 5
high 100% of amount invested 25 years
9 59% 5 economic
impact
10 60% 5



Projects having high economic impact must score over c. ImPoRt dutIes and taxes
60% on the matrix to access the exemption established. Regulations establish an exemption from import du-
ties and taxes on fixed assets certified as not competi-
a.2 matrix selection tive with uruguayan industry by the national office of
medium and large projects may opt for application of Industries (dnI) of the ministry of Industry, energy and
the matrix for their category or the matrix applicable mining (mIem).
to small projects.
d. ReImBuRsement oF value added tax on con-
In this last case, requirements for generating points stRuctIon WoRk
in the employment generation indicator depend on the eligible projects can benefit from reimbursement of vat
type of project and the amount of staff at the company, on local purchases of materials for construction and
being more demanding the larger the project or the services hired in connection with construction work.
larger the company.
e. Fees and WaGes FoR technoloGIcal devel-
a.3 exemption ceilings oPment oF PRIoRIty aReas
exemptions cannot exceed the following percentages For income tax purposes, the regulation permit com-
of income tax payable: puting one and a half times the amount of fees and
wages for project work in scientific and technological
a) 90% - years included in the first 50% development in priority areas (per articles 49, 52 and
of the maximum term granted. 55 of decree 150/007).
b) 80% - subsequent years corresponding
to 10% of the maximum term. FolloW-uP and contRol
c) 60% - subsequent years corresponding Beneficiaries must file their Financial statements with
to 10% of maximum term. comaP within four months following the close of each
d) 40% - subsequent years corresponding business year, accompanied by a public accountant’s
to 10% of maximum term. report (audit in the case of large taxpayers, limited
e) 20% - subsequent years corresponding Review for companies categorized for tax purposes as
to 10% of maximum term. cede sector firms, and compilation in other cases) con-
f) 10% - subsequent years corresponding taining information permitting calculation of indicators.
to 10% of maximum term.
the regulation set tolerance margins for achieving the
In all cases, exemption period is computed as of the year projected points. additionally, for exceptional reasons
in which taxable income is obtained, provided four years alien to the company, unforeseeable at the time of
have not elapsed since qualification of the project. project submission, there is a possibility of obtaining
suspension of the time schedule for meeting project
B. net WoRth tax targets, and to recompute the terms and benefits.
companies can access net worth tax exemption for the
full useful life of movable assets applied to the project. neW Investments and ReclassIFIcatIon
In the case of investments in construction works, the If a company complies with the requirements set for
term is 8 years if located in montevideo, and 10 years if a higher category than the original one, it can request
located in the interior. the benefits of such category.

20

In turn, if new investments are made during the period struction, improvement or expansion of the tourism
in which benefits are available, they will be considered Project, pursuant to the terms set forth in the promo-
in addition to the original investment, and the company tion declaration and to the conditions set forth in the
may obtain reclassification and extension of terms. decree, may be amortized over fifteen years, and in-
vestments in equipment in five years.
Tourism sector
b. Net worth Tax (IP)
Decree 175/003 For purposes of computing IP, investments in infra-
scoPe structure and building work for construction, improve-
tourism companies are eligible to apply for tax ben- ment or expansion of the tourism Project, pursuant to
efits for their tourism projects. the procedures and the terms set forth in the promotion declaration and to
benefits under this system are applicable to: the conditions set forth in the decree, will be computed
as exempt assets at the close of the year in which the
a) tourism activities providing lodging, cultural, com- works commenced and the ten following years. Invest-
mercial, congress, sports, recreational, entertain- ments in fixed assets will be considered exempt at the
ment and health services, which constitute a complex close of the year in which the asset was acquired and
unit for the purpose of attracting tourists (hereinafter the four following years.
called tourism Projects) approved pursuant to law
16,906 as regulated in the decree. c. value added Tax (Iva)
credit for Iva included on local purchases of goods
b) hotels, aparthotels, Inns, motels and vacation and services for use in construction, improvement or
Ranches constructed or to be constructed. expansion (infrastructure and construction works) of
the tourism Project. exemption from Iva on imports of
aPPlIcaBIlIty goods for the same purposes.
a tourist activity will be declared to be promoted when
it contributes: For investments in fixed assets a credit for Iva will be
• To the geographic and touristic development of granted for assets acquired locally and an exemption
infrastructure in the area in which the project from tax on imports.
will be located.
• To the total or partial coverage of specific needs d. Import taxes
in the area’s tourist offering. exemption from 50% on all taxes on imports of materi-
• To the generation and attraction of tourism. als and goods for construction, improvement or expan-
• To the creation of innovative tourist services. sion of fixed assets for furnishing the tourist Project.
Investments made under paragraph b above can only
tax BeneFIts make use of benefits for net Worth tax, value added
tax benefits will be applicable to tourism Projects pro- tax and Import taxes when they are made in furnish-
moted under law 16.906, on a step basis, according ings and equipment.
to progress on implementation of the works and the
schedule approved. they are as follows: oPtIon FoR InvestoRs:
GeneRal oR sPecIal ReGIme
a. business Income Tax (IRae) Investors in hotels and tourism complexes have the
For purposes of computing IRae, investments in con- possibility to choose between the general benefits



under decree no. 455/007 and the specific benefits Operator:
established by decree no. 175/003 for tourism promo- the furniture for the tourism Project’s furnishing,
tion (investors can choose benefits for certain taxes which are incorporated by the operator, throughout
under one regime and benefits for other taxes under life. use and/or usufruct of the units given by the own-
the other). ers to the operator, for 11 years.

Decree 404/010 c. value added Tax (Iva)
scoPe Developer:
Promotion of tourism ventures operating under the Iva exoneration on goods imported for construction
condominium hotels or “condohotels” regime. the works. Iva credit for purchase in the uruguayan market
promotion affords benefits similar to those granted to of goods and services for use in the construction works.
hotels operating under a traditional scheme. Below is
a summary of the benefits which could be obtained by Operator:
each of the parties involved in a “condohotel.” Iva exoneration on imports of fixed assets, for use as
furnishing. Iva credit for purchase in the uruguayan
tax BeneFIts market of fixed assets to be used for furnishing
tax benefits will be applicable to condohotels accord-
ing to the following description: d. Import taxes
developer:
a. business Income Tax (IRae) exoneration on construction materials and goods im-
Developer: ported as necessary for construction works. the de-
the IRae generated on the sale of units by the devel- veloper must choose one of the following options:
oper is excluded from the exoneration. • 100% of the taxes levied on goods which are
declared non-competitive with national industry.
operator: • 50% of the taxes levied on all imported goods.
• Small Projects: up to 60% investment,
for up to 5 years Operator:
• Medium Projects: up to 80% investment, exoneration on imports of fixed assets for furnishing.
for up to 20 years the operator must choose one of the following options:
• Big Projects: up to 100% investment, • 100% of the taxes levied on goods which are
for up to 25 years(3) declared non-competitive with national industry.
• 50% of the taxes levied on all imported goods.
b. Net worth Tax (IP)
Developer:
IP exoneration on goods incorporated in construction
works, for the period they remain in the developer’s
estate, for a term up to 11 years as of incorporation.

this exoneration includes the property where the con-
struction works take place.

22

general regime/Tourism sector (including Condohotels)

RegIme beNefICIaRy IRae exONeRaTION NeT-wORTh Tax (IP) valUe aDDeD Tax (Iva) ImPORT Taxes
exONeRaTION exONeRaTION exONeRaTION

General regime all enterprises • Small Projects: up • Moveable goods Iva exoneration on Import taxes exonera-
decree nº 455/007 to 60% investment, for • Construction Works acquisition of construction on imports of non-
(*) (act. nº 16.906) up to 5 years tion materials and competitive moveable
services to be used in goods
• Medium Projects: up
construction works
to 80% investment, for
up to 20 years
• Big Projects: up to
100%, for up to 25 years

tourist sector touristic complexes depreciation of invest- • Construction, im- credit for purchases 50% exoneration from
decree no. 175/003 ments made in: provement or expansion made in the uruguayan all taxes levied on
(infrastructure or con- market and import imports of:
• Construction, im-
struction works), for a taxes exoneration on:
provements or expan- • Construction materi-
10 year period (includes
sions (to be amortized • Goods for final use in als and goods for con-
properties where the
over 15 years) construction, improve- struction, improvement
works are located)
ment or expansion or expansion
• Equipment (to be am-
• Fixed assets, for a 4 of (infrastructure or
ortized over 5 years) • Fixed assets for use
year period construction works)
in furnishing
• Fixed assets for fur-
nishing or renovation

hotels, apart-hotels, • Only for equipment • Only for equipment • Only for equipment
lodging facilities, motels
and tourist ranches

condohotels devolper the IRae generated on • The furniture for • IVA exoneration on exoneration on con-
decree nº 404/010 the sale of units by the the tourism Project’s imports of fixed assets, struction materials and
developer is excluded furnishing, which are for use as furnishing goods imported as nec-
from the exoneration. incorporated by the op- essary for construction
• IVA credit for purchase
erator, throughout life. works. the developer
in the uruguayan mar-
must choose one of the
• Use and/or usufruct ket of fixed assets to be
following options:
of the units given by the used for furnishing
owners to the operator, • 100% of the taxes lev-
for 11 years ied on goods which are
declared non-com-
petitive with national
industry.
• 50% of the taxes levied
on all imported goods.

operator • Small Projects: up to • The furniture for • IVA exoneration on exoneration on imports
60% investment, for up the tourism Project’s imports of fixed assets, of fixed assets for fur-
to 5 years furnishing, which are for use as furnishing nishing. the operator
incorporated by the op- must choose one of the
• Medium Projects: up • IVA credit for purchase
erator, throughout life. following options:
to 80% investment, for in the uruguayan mar-
up to 20 years • Use and/or usufruct ket of fixed assets to be
used for furnishing • 100% of the taxes lev-
• Big Projects: up to of the units given by the
ied on goods which are
100% investment, for owners to the operator,
declared non-com-
up to 25 years(3) for 11 years
petitive with national
For the investments ex- industry.
ecuted by the developer • 50% of the taxes levied
and the operator. on all imported goods.


PeRmaNeNT OR sUmmeR ResIDeNCe
Punta del este offers multiple options to enjoy in sum- include various houses and chalets of excellent con-
mer, with a complete and improving infrastructure that struction, that generally have 2 or 4 bedrooms (1 or 2
brings an increasing number of persons to choose it as en suite), living room, fireplace, kitchen, service room,
the option for residence or second residence. For sum- bathroom, garden, barbecue and swimming pool.
mer vacations or for year round living, available options starting Price Us$ 250.000

PRIvaTe NeIghbORhOODs
Private neighborhoods or “countries” are an interest- such as the club house with pool, barbecue, play-
ing home option: a closed residential area in which you grounds, sports fields and gymnasium are shared.
can acquire a parcel of land from 500 to 2,000 m2 to
build your desired house according to your personal starting Price of Parcels Us$ 80,000
preferences or buy built ones. security and services houses from Us$ 200,000

24

maRITIme faRms
maritime Farms are land properties with areas com- Private neighborhood modality is available, shar-
prising approximately 4,000m2 up to 5 hectares with ing security and services such as swimming pools,
coast in the ocean or very near the beach that can sports fields and mini golf courses, spa, reception,
be found in different zones of Punta del este, from housekeeping, etc.
laguna del sauce up to Jose Ignacio and Garzon. Parcels starting price Us$ 150,000

faRms
It is possible to find along uruguay fertile lands with have old houses and others have modern edifications,
stunning landscapes suitable for cattle breeding and with complete working facilities functioning with good
agricultural activity. Particularly in maldonado, the return rates.
farms are picturesque, undulated and have good ac-
cess, rivers, lakes and subterraneous waters. many starting price Us$ 3,500 per hectare


TOweRs
along Punta del este´s coastline, at the zone of “Para- beautiful view. Five star hotel amenities are available:
das” in the “mansa” beach, in the Peninsula and up to concierge, security, housekeeping, beach service, out-
the first segment of the “Brava” beach, spectacular 20 door swimming pool, indoor heated swimming pool,
stories towers of buildings were erected with plenty of spa, gymnasium, sports fields, barbecues, event rooms,
services and infrastructure. they are located mainly at business center, internet rooms, playrooms for adults
the first row in front of the ocean or within a short dis- and kids, hairdressing, valet parking among others.
tance from the beach, with surrounding woods and a starting Price U$s 300,000

bUIlDINgs
characterized for being constructions of approximately or premium, but generally all of them have reception,
5 stories, they can be found in the woods zone as well security, housekeeping, beach service, swimming pool,
as in front of the sea. they can be only one building or barbecue, gymnasium, business center, internet rooms,
they can be built as condos in many blocks or in ter- and playrooms for adults and kids among others.
races. the amount of services depends if they are basic starting price Us$ 200,000

26

PRemIUm ResIDeNCes
the sophistication of Punta del este can be appreci- ocean front, lake front or inside a large parcel, they all
ated in its entire splendor from one of the luxury resi- have a dreamed comfort and satisfy the most exqui-
dences that can be found in exclusive zones like “Bar- site clients. this unique type of properties, in front of
rio del Golf”, “Beverly hills”, “laguna del sauce”, “la the sea, with privacy, large spaces and incomparable
Barra” or “José Ignacio”. at the glamorous level of the views, can be found for relatively lower values than in
most important sea side resorts, these spectacular other parts of the world.
houses can be classic or have a vanguard style, with starting price: Us$ 1,500,000


this guide to investing in uruguay has been prepared by not only to its prowess in the football field (it came in fourth
Guyer & Regules (Property Rights in uruguay), Ferrere in the south africa 2010 World cup) but also to the impres-
abogados and cPa / Ferrere (taxes) and uruguay xxI sive growth rates it is evidencing, the beauty and sophisti-
(statistics and country information) with the aim of giving cation of its summer resorts, amongst the best and most
the lay reader a general picture of a country which until glamorous in the world, and the top quality of the output of
recently was rarely mentioned in the world outside south its fertile land ideal for agriculture. uruguay after all, with
america, and who’s mail claim to fame until recently was its small size, is the seventh exporter in the world of bovine
the culture of its people and its achievements in the field of beef, the seventh of rice and the sixth of soy beans.
world soccer, having won the olympic tournaments of 1924
of course this slim volume far from comprises all the
and 1928 and the World cups of 1930 and 1950 aside from a
subjects which it only very lightly touches. It can aim at
host of south american tournaments.
nothing more than providing a bird’s eye view of a country
In recent times however uruguay has suddenly come into we are proud to live in. Were you to require more informa-
the spotlight, and its name is becoming familiar allover, due tion or assistance do not doubt to contact us at:

smanso@ferrere.com ejadra@cpa.com.uy invest@uruguayxxi.gub.uy jsleaman@guyer.com.uy
sfontana@ferrere.com fsusena@guyer.com.uy
Punta del este | my second home
bmspiess@guyer.com.uy 47
logo destino

PaRTNeRshIPs

www.agroland.com www.alejandroperazzo.com www.antoniomieres.com.uy www.atijas.com.uy

www.awahotel.com www.chichotelelesresorts.com www.grupobbva.com.uy www.carbonellpropiedades.com www.chichotelelesresorts.com

www.destino-puntadeleste.com www.elpuertitoboating.com.uy www.ferrere.com www.cpa.com.uy www.foti.com.uy

www.garciasantos.com www.chichotelelesresorts.com www.guyer.com.uy www.chichotelelesresorts.com www.unibon.com.ar

lomas 3
www.lavalleja.gub.uy www.maldonado.gub.uy www.rocha.gub.uy www.lagunadeloscisnes.com.uy

www.mintur.gub.uy www.nanalavagna.com www.ppv.com.uy www.puntaforsale.com

www.sanabriabarrios.com www.selenzavillage.com.uy www.stiler.com.uy www.terramar.com.uy www.chichotelelesresorts.com

www.setaijoseignacio.com www.uruguayxxi.gub.uy www.unwto.org www.wsw.com.uy www.estudiozulamian.com
48

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