Uruguay: From Legalized Marijuana to Crypto - Why Is Everyone Going There?

Intro

Exciting news for those eyeing Latin America: On October 3, 2024, Uruguay, finally embraced cryptocurrency regulation. After years without any legal framework for cryptocurrencies, Uruguay has followed in the footsteps of its neighbors, Brazil and Argentina, by enacting Law No. 20.345.

This new legislation fully legalizes cryptocurrency exchanges, requiring them and other crypto platforms to obtain licenses. The Central Bank of Uruguay will oversee and regulate the process.

While Bitcoin is not yet recognized here as a legal tender, unlike in El Salvador, the adopted law makes Uruguay one of the few countries in Latin America with a legislative framework for cryptocurrency transactions. However, what truly sets Uruguay apart are the unique opportunities it offers to digital nomads and crypto enthusiasts alike.

The Switzerland of Latin America

Uruguay is a relatively small country, comparable in size to Tunisia. It is about twice as large as Austria, Georgia, or Ireland. However, it is significantly smaller than its main neighbors—Argentina or Brazil.

The country takes pride in its strong and well-developed social sector, and salaries are relatively high by Latin American standards. This country is often referred to as the Switzerland of Latin America and is considered one of the region’s best countries for achieving a balanced and fulfilling lifestyle. Many who have already moved there, describe this country as very similar to Spain – both in terms of population composition and overall living conditions.

Uruguay is ranked as the most democratic and least corrupt country in Latin America, placing 22nd globally in Transparency International’s Index for 2023. Despite global crises, the country has maintained an average GDP growth of around 4% per year over the past decade. Additionally, the inflation rate in 2023 was about 8%, which is relatively low for the region.

So Why Is Everyone Coming Here?

Uruguay attracts many immigrants from other Latin American countries, primarily Brazil and Argentina. People move here to escape high taxes, seeking a higher standard of living and greater security. They are drawn by the promise of a better quality of life.

Another thing that makes Uruguay stand out is its progressive approach to legislation. Not only are cryptocurrency transactions fully legal, but cannabis is as well. Local residents can legally purchase indica and sativa strains directly from pharmacies.

Taxation

Uruguay operates under a territorial tax system, offering benefits for income earned abroad. This system applies to both individuals and legal entities, with taxes levied only on income generated within Uruguay or from Uruguayan sources. Foreign income, however, is either taxed at a lower rate or completely exempt. This attractive tax structure is one of the key factors drawing businesses to Uruguay.

The corporate tax rate in Uruguay is 25%, lower than in most neighboring countries where rates are 30%. For local residents, the income tax is progressive, reaching up to 36% for higher earnings. This applies primarily to wages. Compared to countries like Spain and many Western European nations, Uruguay’s tax rates are notably lower.

An immigrant in Uruguay can officially receive a tax exemption on all foreign income for up to 10 years, or choose to pay a flat 7% tax for life. There are also special tax regimes, such as a 0% tax for IT companies and a 0.75% tax rate for the import and export of goods.

Furthermore, Uruguay (like its neighbor Paraguay, with a similar system) is not listed on any FATF blacklists or gray lists, enhancing its reputation as a reliable and transparent financial hub. This contributes to its comparison with Switzerland, as Uruguay cooperates with tax authorities worldwide while offering an attractive tax system for businesses and digital nomads.

When comparing Uruguay’s costs and potential benefits to European alternatives, it proves to be far more affordable and appealing than places like Cyprus, Malta, or Switzerland.

Weather and Climate

In terms of comfort, Uruguay has two obvious advantages: a mild climate and a long coastline that stretches along the Atlantic Ocean. The weather is often referred to as “suit weather”- it’s not too hot in the summer or too cold in the winter. The average annual temperature ranges from 17-20°C, with summer temperatures around 25°C and winter temperatures between 5-10°C. While this climate may not appeal to those who prefer hot, tropical weather, Uruguay still boasts plenty of resorts and beaches to enjoy.

Where to Go?

The main coastal cities favored by tourists and relocators are Montevideo, Punta del Este, Colonia del Sacramento, and Piriápolis.

Montevideo is the capital and largest city of the country and has a population of about 1.5 million (out of Uruguay’s total population of 3.4 million). As the business hub of Uruguay, it is home to a significant number of visitors and features several free economic zones.

Punta del Este located 140 kilometers east of Montevideo, is a small but luxurious resort town known for its expensive lifestyle. It offers beaches for families, surfing spots, vibrant nightlife, and plenty of shopping options.

Another city worth mentioning is Colonia del Sacramento, located 180 kilometers from Montevideo. Its historical center, a UNESCO World Heritage Site, attracts tourists, and the city also has a free economic zone. A ferry runs across the strait between Sacramento and Buenos Aires. Just over an hour – and you’ll find yourself in Argentina!

Safety

Safety in Uruguay is a somewhat controversial topic, so it’s worth exploring in more detail.

On the one hand, Uruguay is one of the most prosperous countries in Latin America in terms of crime. On the Numbeo safety index map, Uruguay stands out as almost the only country glowing in a prosperous yellow, while the rest of the region is marked with alarming orange.

However, in the capital, Montevideo, clashes between criminal groups occasionally occur.

Given that the carrying of weapons is legally permitted, these confrontations can sometimes be dangerous. Additionally, the presence of homeless individuals and other vulnerable groups can contribute to street theft and home burglaries.

Locals advise that as long as you avoid certain areas, the risk is relatively low. For those seeking a completely peaceful environment, the neighboring cities of Montevideo, such as Punta del Este and Piriápolis, are considered safer alternatives.

Prices

The standard of living in Uruguay is higher than it is in most Latin American countries. This refers to prices on dairy and even meet, despite Uruguay, like Argentina, being one of the largest beef suppliers globally and utilities. Renting an apartment in Montevideo will cost at least $500, with a three-room apartment cost starting from $900.

On the other hand, buying property is relatively affordable. For example, an apartment in Montevideo costs between $2,000 -  $2,500 per square meter, while in resort areas like Punta del Este, the price is about $3,000 to $5,000 per square meter. The real estate market is growing rapidly: Uruguay actively attracts real estate investors by offering incentives, including certain tax exemptions.

Another positive aspect is that salaries in Uruguay are relatively high by Latin American standards. The average salary after taxes is about $1000 and salary growth is reportedly outpacing inflation. Overall, I would say that life in Uruguay is comparable to Spain, based on my experience from a year ago. While the cost of living may be high compared to other Latin American, Asian, and CIS countries, for Europeans (such as Spaniards), the price level here is quite familiar. In fact, for Germans and Americans, it would be considered inexpensive.

More About IT Benefits

Uruguay, known for its high standard of living, actively works to attract talent, programmers, and entrepreneurs. The country offers support for digital professions and startups through various government programs, such as the ANII startup support system.

Additionally, Uruguay boasts one of the best internet networks in the region, with an average internet speed of 50-70 Mbps.

Residence Permit and Permanent Residence

Uruguay provides simplified procedures for obtaining residency. In many cases, it’s possible to secure a residence permit within 6–12 months. The main requirement is to demonstrate a regular income of approximately $1,500–2,000 per month for a family.

You can also obtain a residence permit in Uruguay by opening a company, applying for a rentier visa, or becoming a tax resident of the country. Uruguay also offers a special program for foreign retirees. To qualify, you need to prove a monthly income of $1,500 and purchase local real estate worth $100,000 or more—then, voilà, a residence permit is yours!

As for obtaining a passport, you need to live in Uruguay for 3 years if married or 5 years if unmarried. At the same time: it is not necessary for the marriage partner to be a citizen of Uruguay! I don’t know about you, but this is the first time I have encountered such an interesting opportunity. Now, attention! The burning question: what's up with crypto in Uruguay?

Crypto Regulation

The Central Bank of Uruguay oversees cryptocurrency operations by regulating virtual asset service providers (VASPs), including crypto exchanges, wallets, and even miners. VASPs must obtain licenses to operate, which are granted after a thorough evaluation of the legality, compliance, and appropriateness of their activities.

Cryptocurrency is now officially “legal” in Uruguay, allowing individuals and businesses to work with it transparently and within the law. To operate with cryptocurrencies, a company must obtain a business license, register with the Central Bank of Uruguay, and regularly submit financial intelligence reports.

Uruguay’s approach to regulating cryptocurrencies is in line with international standards, following practices similar to those in Brazil, Peru, and the European Union, which was one of the first regions to adopt such regulations.

As for taxes, Uruguay applies a capital gains tax of only 12% on cryptocurrency profits, just like the tax on the sale of shares, securities, and other capital gains.

Conclusion

There are some disadvantages to living in Uruguay. First, the main language is Spanish, so adapting may require either learning the language or finding a local community of expats. Additionally, a naturalized Uruguayan passport does not provide visa-free entry to the Schengen Area. Like in any other Latin American country, moving to Uruguay also means being far from your family.

Uruguay offers political stability, a simple immigration process, a mild climate, a good ecology (with approximately 95% of its electricity produced from renewable energy sources), a relatively low crime rate, and a high standard of living. These factors make Uruguay an attractive destination for both living and doing business.

That said, Uruguay stands out as one of the most interesting countries in the world for doing business, gaining citizenship quickly, and escaping global “hot spots.” I would particularly recommend Uruguay to those with a stable income or capital as an alternative to European countries or Dubai. Though far from Europe, Uruguay is well-connected to major economic hubs in the Americas, such as Buenos Aires (just 1 hour by ferry) and São Paulo (2.5 hours by plane).

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