Uruguay: Overview

RENTAL YIELDS

Montevideo yields can be as high as 11.4%

The very limited supply of rental units leads to high yields. A 400 sq. m. property in Montevideo, priced at US$470,000, can fetch a rent of US$4,473 a month; a yield of 11.4%.

Smaller sized properties can expect returns in between 7.5% and 10.5%. Properties close to the beach have lower yields of from 4.2% to 6.4%.

Uruguay's rental market is very small, only 4% of the housing stock. Owner occupancy is at 82%.

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TAXES AND COSTS

No income tax in Uruguay

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	10.3%	10.2%	10.2%
Click here to see a worked example
Source: Disclaimer

Rental Income: Uruguay is highly unusual in that there is no income tax for individuals. However, effective 01 July 2007, net rental income from leasing property is taxed at 12%.

Capital Gains: Capital gains on the sale of property are not taxable if the seller is an individual. However, effective 01 July 2007, capital gains earned by individuals are taxed at 12%.

Inheritance: There are also no inheritance or gifts taxes in Uruguay.

Residents: Resident individuals of Uruguay are not liable for income tax on other income, except for the net worth tax. However, effective 01 July 2007, earned income is taxed at progressive rates, from 0% up to 25% while capital income is taxed at 12%.

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BUYING GUIDE

Total transaction costs are moderate in Uruguay

The total roundtrip transaction cost, i.e. the cost of buying and selling a property, is 14% This includes the real estate agent's fee of 6%, which is paid equally by both buyer and seller.

Property registration takes about 66 days, and involves eight separate procedures.

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LANDLORD AND TENANT

Freedom to contract, limited rent control in Uruguay

Uruguay's landlord and tenant law is pro-landlord.

Rents: Rents can be freely agreed between landlord and tenant, except for properties constructed before June 2, 1968.

In the free sector rent increases may be freely mutually agreed between landlord and tenant.

For rent-controlled properties, rent increases are indexed to the Unidad reajustable de alquileres URA or (Re-adjustable Unit for rent), published by the government.

Tenant Security: The duration of a rental contract can be freely agreed. The court system works adequately to enforce evictions and lease agreements, but is quite slow.

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ECONOMIC GROWTH

One of Latin America's most fortunate

Despite the recent recession, Uruguay is a relatively prosperous country, with GDP per capita at US$3,000. It does not share its neighbors' problems of unemployment, inequality, poverty and slums.

With a population of 3.5 million, it is known for its progress in education, its advanced welfare system and its liberal laws on social issues such as divorce. It has an excellent climate, good communications, fine ports, high agricultural and cattle productivity, and an experienced service industry.

Uruguay was among the first Latin America countries to establish a welfare state system and has maintained this, together with one of the region's lowest poverty rates, through relatively high taxes on industry. Good access to health care contributes to a high average life expectancy.

Uruguay's colonial towns, sandy beaches and year-round mild climate have created an increasingly important tourist industry. However, Uruguay's dependence on livestock and related exports make it vulnerable to fluctuations in international commodity prices. Recessions in Brazil and Argentina - its main export markets and source of tourists - propelled Uruguay into economic crisis in 2002.

Disbursements from the International Monetary Fund (IMF) and a restructuring of foreign debt have helped to foster a fragile recovery. Uruguay is part of Mercosur (Mercado Comun del Sur), the commercial and political agreement with Argentina, Brazil, and Paraguay, which provides a potential market of 200 million people.