Over the last ten years a growing number of Europeans and North Americans have been buying real estate in Uruguay. This is partly down global factors, increases in the value of farmland and the stability of Uruguay’s economy and laws. The latter is an open secret in South America with Uruguay regarded as a safe haven for Latin American investors particularly those from Argentina for decades.
Who can buy real estate in Uruguay?
Anyone. It makes no difference if the person–physical or legal–is Uruguayan or not, resident or not. All are treated the same.
Two minor restrictions exist in the case of rural properties. Firstly, rural properties must be bought in the name of a physical person (national or foreign, resident or not) or by a company with named partners or limited companies with named shareholders. Secondly, any rural property of over 500 hectares in size must first be offered to the Instituto Nacional de Colonización. The INC is a public body tasked with encouraging the growth of the rural population. It has the option of purchasing the land at the same price.
What are the legal requirements and fees involved?
There are no restrictions on who can purchase property–except for those affecting rural property—but you must use a public notary to prepare the legal documents. The notary will advise you on the nature of the transaction and ensure the title deeds are all in order. For example, that there are no outstanding debts on the property.
The standard fee for a notary is 3% plus VAT (plus taxes and expenses) if you are buying and 1% plus VAT if you are selling a property.
Property can be purchased directly or through a real estate agent known in Spanish as an inmobiliaria. The standard fee of a real estate agent is 3% plus VAT. VAT is currently twenty-two per cent.
You should calculate that between estate agents fees, all expenses and taxes, transaction costs on a purchase will be around 8% of the purchase price of your property in Uruguay.
How does the real estate purchase process work?
The process starts with the signing of a reservation contract – a boleto de reserva in Spanish. This is the formal acceptance of an offer to purchase and binds both parties to go ahead with the transaction. However unlike in other parts of the world the title investigation is only carried out after the signing of the contract. So if any defects in title are found then the contract can be rescinded without penalty.
A 10% deposit is normally paid on the signing of the contract and if one party defaults then it is usual to include a penalty clause equivalent to the deposit to be paid by the defaulting party. The deposit is held by the notary in an escrow account.
It is normal for the reservation contract to establish a period of between 30-60 days to proceed to closing.
Currency for transactions
Uruguay has a legal regime which provides for the free entry and exit of foreign currency and also permits it to be freely converted into the local currency.
All real estate transactions are carried out in US dollars. As will be seen below, for certain tax aspects the value is recalculated in Uruguayan pesos and taxes are paid in pesos, but the transaction itself will always be in US dollars.
What taxes are applicable on a transfer of property?
Mark Teuten is a British lawyer based in Montevideo since the 1990s. He has law degrees from both the UK and Uruguay. He can help you with your residency applications, setting up a registered company and other legal matters. Guru’Guay has recommended him to our readers who have praised his trustworthiness, clarity, prompt communication even over great distances and careful advice regarding courses of action.
Photos: Jimmy Baikovicius