April 27, 2021

Real Estate in Uruguay

What Foreigners must know to invest in the country.

1. Introduction.

With strong political and social stability, legal security and interesting rates of economic growth, Uruguay generates trust and a favorable business climate for foreign investors, especially in real estate.

Our country is a close and safe place for Argentinians, Brazilians and others citizens of the region, who seek to place their savings and / or conduct business, with competitive returns and certain flexibilities in terms of tax residence.

Likewise, Uruguay offers, for those who want to live in the country, excellent living conditions, with a calm rhythm, short distances, housing solutions of all kinds and access to first class health and education services.

Next, we will briefly detail what are the investment options and how is the procedure to acquire real estate in eastern lands, both for the obtaining of income as for those who seek to gain in quality of life.

2. Real estate investment opportunities.

The offers and opportunities to invest in the country are varied and can be adapted to the circumstances or needs of each client or interested party.

Regarding urban or suburban real estate, they can participate in the different enterprises that are developed in the country (mainly in Montevideo and Punta del Este), via the acquisition of apartments (condominium units in construction or in the well, for example), housing in urbanizations or private neighborhoods or other existing niches in the field, or carry out own projects with important and attractive tax benefits (promoted homes or construction trusts to the cost, p. ex.).

Foreign clients can also acquire and / or exploit rural real estate, which are recognized for their high productive quality and natural landscapes. The Field destinations range from housing and recreation to farming - livestock, either for the enjoyment, own production or leasing by third parties.

3. Investment promotion. Tax benefits.

In our country there is an attractive investment promotion regime, protected by Law N ° 16.906 - amending and complementary regulations -, which declares of national interest the promotion and protection of investments made in Uruguay, allowing to obtain important tax benefits.

The application of the said law, through the Commission for the Application of the Law of Investments (COMAP, dependent on the Ministry of Economy and Finance), imports the promotion of construction activities for the sale or lease of real estate destined for offices or housing, and private initiative developments, corresponding to projects of great economic dimension.

Projects of great economic dimension are considered those constructions that have a value of civil works and personal property destined to areas of common use from twenty million Indexed Units (20,000,000 IU) -approximately US $ 2,300,000-.

The benefits to which companies whose investments are promoted by the Executive Power, include important exemptions from the Income Tax Income from Economic Activities (IRAE), exemption from Wealth Tax (IP) for the properties included in the activity, recovery of the Value Added Tax (VAT) payment on purchases of materials and services, and exemption from taxes on the importation of movable property of fixed assets not competitive with the national industry.

4. Vehicles for making investments.

Foreign investors can act as natural persons directly or through participations in commercial companies (public limited companies, companies limited liability company or simplified joint stock companies, p. eg) or real estate trusts.

According to each business structure, the treatment must be analyzed, taking into account  the regulations applicable to the concrete case (in tax matters, compliance / money laundering, possession and exploitation of rural properties, among others).

5. Acquisition procedure.

For the purposes of illustrating a procedure for acquiring a property, we will take a standard or classic operation (such as the sale of a house or apartment), which can be summarized in the following steps or stages:

a. Reservation ticket (preliminary contract).

Once the intentions and preferences of the client are determined, with the proper advice of the professionals involved, the terms and conditions will be negotiated and agreed for the real estate transaction.

For the purposes of laying the foundations of the business (object, price, term of deed and others), a reservation ticket will be granted, the text of which will be issued by the acting clerk, which will always be designated by the acquiring party.

At the time of its granting, it is style that the future buyer deliver to the designated notary public ten percent (10%) of the price agreed in escrow concept.

b. Deed (definitive contract). Within the term agreed in the reservation ticket (usually between 30 and 60 days from its subscription), the deed of transfer of ownership of the property before a notary public, after a rigorous study of all the documentation related to the property and its antecedents by it (called "title study").

The first copy of the deed must be registered in the respective public registry (Property Registry, Real Estate Section of the place where the property is located), which will grant real right in the property. This procedure will also be carried out by the Acting notary, as part of the professional service provided for such purposes. Notwithstanding the foregoing, in the event that the object of the operation is a future condominium unit (building under construction) or there is another circumstance that warrants it (payment of the price in a deferred way, for example), the deed of sale may be preceded by a promise of alienation between the parties, which It is also a preliminary contract but it has registration aptitude - registration gives rise to the aforementioned real right, which is an advantage for the promisor buyer in relation to other legal systems.

6. Costs associated with buying real estate.

As in any operation, there are a series of associated costs, which will depend on the amount and complexity of the matter, the vehicle or legal structure chosen to carry it out and other aspects of the transaction.

Between five and nine percent (5% - 9%) of the price or value of the good object of the operation should be used to cover this cost by the acquirer.

Next, we indicate some of the items to be considered by buyers of real estate - without prejudice to the applicable tax exemptions and the particularities that correspond to each case-:

a. Intermediation commission. In case of participation of a real estate agent, you have the right to receive three percent (3%) -more VAT- of the amount or price of the transaction for brokerage commission.

b. Notary fees. The clerk, in his capacity as intervening professional (in charge of advising, study of titles, deed and registration and agent of withholding and collection of taxes), must be chosen by the person who acquires the asset. In accordance with the official tariff in force, the notarial fees for participation in this type of contracts amount to three percent (3%) -more VAT- of the price of the operation.

c. Taxes. Except for exceptions (purchase of homes promoted by the Agency Nacional de Vivienda -social interest housing-, p. eg), the acquiring party of a property must pay the Tax on Patrimonial Transmissions (ITP), to a rate of two percent (2%) of the real value of the property (cadastral value, generally significantly lower than market value).

d. Expenses. The expenses that make the study of the documentation related to the property and the
registration of contracts in the respective public registry must also be assumed by the buyer. The charge in this matter will depend on the background property of the good; without prejudice, for these purposes, we can estimate the costs between three hundred and five hundred US dollars (US $ 250 - US $ 500).

For your part, keep in mind that, despite of the tax exemptions that are applicable, the owner will be responsible for the payment of a series of taxes and expenses associated with the ownership of the real estate or the economic performance of its exploitation, according to Corresponding (Real Estate, Primary, Equity and Income Contribution, by way of example).