Employment in Uruguay

• Exports are the main focus of Uruguay’s economy. The export of agricultural goods such as cattle, soybeans, or wood pulp is an important contributor to the nation’s economy.
• Uruguay’s economy continued to grow even during the harsh times of crisis. Positive growth over the last few years has led to a significant reduction in poverty.
• Even though Uruguay generally doesn’t have double taxation treaties with other countries, the non-double taxation rule of 2012 is similar. Expats now have a five-year window in which their foreign income is not taxed.
• Uruguay maintains social security agreements with some countries to avoid double payment. Expats working in a free trade zone may also opt out of contributing to social security altogether.

Uruguay displays many of the traits that the seasoned expat will have come to expect from developed nations, including a strong services sector and fiscally healthy economy. However, while in many places around the globe agriculture only adds a rather negligible contribution to the gross domestic product, it is of quite vital importance to the Uruguayan economy.

Uruguay’s Strong Agriculture Sector

Uruguay has long made exports one of the main focus points of its economy: 2014 saw a new record with a total of 9.2 billion USD. Even though exports have decreased in 2015, the sector is still a large contributor to the economy. Most of the top exports are in the primary sector, and both unprocessed and processed agricultural goods are important pillars of the national economy.

Soybeans and cattle are two of the agricultural staples Uruguay is most well-known for, and which rake in the biggest share of export profits. Apart from those, the primary sector also produces rice, wheat, wool, milk and dairy products, and lumber. The latter is particularly important as one of the country’s most popular export goods is wood pulp (cellulose). It is estimated that more than 80% of Uruguay’s land area is used for cattle and sheep farming and related industries.

More than Just Sheep

The industrial sector is largely active in food and beverage processing. Other important industries include chemicals, textiles, and machinery. Automotive and, increasingly, aeronautical industries have been on the rise in the past years. Recently, the country has also shown interest in exploring offshore drilling, with some of the world’s largest oil companies bidding for drilling rights.

Services in Uruguay are characterized by a well-educated workforce and a strong public sector, with the government monopolizing a number of important utilities such as water and landline telecommunications. The country’s wonderful beaches, such as Punta del Este, are also great economic assets with tourists, especially from the big neighbor Argentina, contributing to the national income. Furthermore, banking and consulting, IT, life sciences as well as logistics employ many of the people working in Uruguay.

Surviving and Growing in a Recession

Since the nation’s most recent economic crisis at the turn of the century and the reforms and structural improvements that followed, people working in Uruguay have been able to reap the benefits of vigorous economic expansion.

The country has been able to maintain positive economic growth throughout the global recession, and managed to remain relatively unscathed by the problems of its neighboring countries Brazil and Argentina. On average, the Uruguayan economy grew by 5.2% annually between 2006 and 2014, and was even able to grow in the year the crisis hit hardest, 2009.

Even though unemployment increased over the last years after hitting a historical low in 2012 (around 6%), Uruguay’s unemployment rates are still a far cry from the ones that plague many other nations in the region. And the growth of Uruguay’s economy led to a significant reduction of poverty, and extreme poverty even has practically disappeared.

A Magnet for Foreign Investment

With its strategically beneficial location in the Southern Cone, close proximity to a number of huge markets, reliable infrastructure and macroeconomic stability, highly educated workforce, and attractive tax incentives, Uruguay has become one of the more popular options for foreign direct investments.

The country offers not only a free seaport and airport, but also a large number of free trade zones in which multinational companies working in Uruguay can set up shop and operate without having to worry about income or import taxes, as long as they meet a number of criteria. It therefore doesn’t come as a surprise that many of the world’s leading multinationals have established operations in the country.

Taxation and Social Security in Uruguay

The Non-Double Taxation Rule

Expats are considered tax residents if they spend more than 183 days in one calendar year (which doubles as the tax year) in Uruguay. Tax rates are progressive and range from 0-30%. Usually, taxes are withheld from your paycheck, and you rarely need to file a tax return.

Uruguay is generally not party to double taxation treaties. However, in an effort to keep the country interesting for expats and immigrants, the Uruguayan government introduced a new tax incentive in 2012: expats who are residents under tax legislation now have an optional five-year window in which their income derived from foreign sources is not taxed. After five years, the usual 12% rate on foreign interest and dividend income applies, as long as this income is not taxed at a rate of 12% or more anywhere else in the world. This is called the non-double taxation rule. Note that all other possible foreign income sources, such as pensions or rents, are not taxed in Uruguay.

KPMG offers a fairly detailed overview of the Uruguayan tax regime and its application to expatriates on their website.

Benefits and Pensions: Social Security in Uruguay

Overseen by the Instituto de Seguridad Social, social security in Uruguay operates on a mixed system of social insurance, individual accounts, and assistance programs. The benefits provided by the system include pensions (old age, disability, and survivors’), sickness and maternity, unemployment, and family allowances. Individual accounts are mandatory and managed by AFAPs (pension fund managers) — which one you choose is up to you.

Contributions are calculated on the basis of gross monthly earnings of up to 74,128 UYU, some 2,332 EUR in September 2016. Of the first 24,709 UYU, 15% goes towards social insurance, and 15% of earnings above this threshold go towards the individual account.

Uruguay has social security agreements with Argentina, Austria, Belgium, Bolivia, Brazil, Canada (also including Q as a special case), Chile, Colombia, Ecuador, El Salvador, France, Greece, Israel, Italy, Luxemburg, the Netherlands, Paraguay, Peru, Portugal, Spain, Switzerland, and Venezuela.

As one of the special incentives granted to companies operating in the many free trade zones in Uruguay, foreign employees working in a FTZ may opt out of contributing to the social security system altogether, which may be preferable for expats from countries which do not have social security agreements with Uruguay.

Working Legally in Uruguay 

Being legally able to take up employment in Uruguay is a very easy affair for expats, no matter where in the world they might come from. We have taken a closer look at the topic in our article on moving to Uruguay.

However, as always with these matters, you might feel more at ease if you hire a professional to help you, no matter how hassle-free the process might seem on paper.