How to Pay Fewer Taxes, Earn 18 Times More Interest, and

Bob Bauman’s
May 2011
How to Pay Fewer Taxes, Earn
18 Times More Interest, and
Secure Your Family’s Physical
and Financial Safety…
With Just One Step
Knocking out three of your biggest frustrations – tax, income and
security — in one step is a rare opportunity. Today, you can do just
that.
Together with Erika Nolan, Executive Director of the Sovereign
Society, and Jeff Opdyke, Director of Investments and Research at the
Sovereign Society, we have found the ideal way for you to enjoy…
• A zero tax rate on your foreign income
• Interest rates of around 4.5% on basic savings accounts
• The freedom to easily open a foreign
bank account to gain access to
interest rates up to 18 times more
than what’s on offer at U.S. banks
• And a safe and stable social and
economic environment where your money
is safe, your property investments
are liquid and profitable, and your
family can walk the streets in
complete safety.
Inside This Issue
Pay No Taxes...... Pg 3
Protect Your Financial
Privacy........... Pg 6
The Special Deal for
Retirees.......... Pg 9
1st World Living Without
Big Brother...... Pg 12
Published by The Sovereign Society®
You can have it all if you take one simple step: move to Uruguay.
Uruguay Residency Offers it All
Uruguay is one of only a few remaining countries that still offers
a sound banking system that welcomes Americans and their money, has
greater financial privacy than what you get in the United States, and
has attractive real estate possibilities.
It also has a pleasant climate and friendly citizens, and
certainly qualifies as a place you might want to live.
Before you begin to plan your move though, there are several
details you should know…
The Jewel of Latin America
The official name of the country is the Oriental Republic of Uruguay.
“Oriental” in this case means “eastern” because Uruguay is on the
eastern side of the Uruguay River that separates it from Argentina.
It is one of the most economically developed countries in South
America, with a high GDP per capita.
It had the 52nd highest quality of life index in the world in 2010,
and ranked first in quality of life/human development in Latin America.
The Economist ranked it 21 out of 167 countries on the 2010
Democracy Index.
And according to Transparency International, Uruguay is the 2nd
least corrupt country in Latin America, behind Chile.
By most estimates, political and labor conditions in Uruguay are
the freest on the continent.
It was the highest rated country in Latin America on Legatum’s
2010 Prosperity Index, which produces its rankings based on factors
that help drive economic growth and create happy citizens.
Reader’s Digest, earlier this year, ranked Uruguay as the 9th “most
liveable and greenest” country in the world. It ranked Uruguay as 1st
in all the Americas.
Besides all of these accolades, Uruguay has even more to make it
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the best offshore residence for you.
For one, it is still a tax haven…
Pay No Taxes
on Income You
Generate Outside
of Uruguay
If you want a tax, financial, or
even a residential haven, Uruguay is
much more than a pretty face.
In 2010, Uruguay adopted changes
in its tax laws that imposed taxes
on certain types of offshore
payments to Uruguayans: interest on
deposits and dividends.
After much confusion and
complaints, especially from
foreigners considering residence
in Uruguay, in April 2011 the
government took an important step
to assure that it would not tax
foreigners who choose to relocate to
Uruguay.
A new rule was announced that
applies to both foreigners who move
to Uruguay, and those who already
live there. That is, both groups
will be exempt from taxes on any
type of income generated outside of
the country – at least for the first
five years of their residence.
Under the new rules now being
drafted, the five-year offshore income tax exemption for foreigners
will apply to all new arrivals and
foreigners who have established
residence in the last two years.
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Uruguay in a Nutshell
Government: Constitutional
republic
Capital: Montevideo
Population: 3,308,535 (July 2011
est.)
Total Area: 68,039 sq. miles
Languages: Spanish, Portuñol
(Portuguese-Spanish mix on the
Brazilian frontier)
Ethnic groups: 88% White, 8%
Mestizo, 4% black, Amerindian
Life expectancy: 76.33 years
Currency: Uruguayan peso (UYU)
GDP: US$48.43 billion (2010 est.)
GDP per capita: US$14,300 (2010
est.)
Time: One hour ahead of U.S.
eastern standard or daylight time
(3:00pm in New York is 4:00pm in
Uruguay)
After the five year period, offshore dividends and interests will
be taxed at a rate of 12%.
However, if you already pay tax on that income elsewhere — which,
as an American, you do — Uruguay will not impose double taxation on
you. They will credit the taxes you already paid the IRS.
Our man in Montevideo, attorney Juan Fischer, offers the opinion
that it is likely the tax law will be amended to extend beyond five
years…
“…to a more permanent non-taxed status for foreigners who
move to Uruguay.”
One point to remember: if you stay in Uruguay for more than 183
days in one year, the law presumes Uruguay is your tax domicile
and you could become liable for all taxes a local citizen would be
required to pay.
(Taxes on offshore income will not apply if you qualify for the
five year exemption described above.)
This raises the question: what tax rates would you pay in Uruguay
should you become liable?
The answer is: far lower rates than you pay to the IRS.
The 3 Types of Income Uruguay Taxes
Effective from 2011, Uruguay levies the following taxes…
On assets: citizens face a small tax on offshore deposits,
securities and loans. The rate is 0.07% to 0.5%. This tax, known as
“IP,” is being phased out in annual steps and will end in 2017.
It will not affect anyone who gets citizenship after 2017.
On income: Uruguay will tax three types of income generated
outside of the country…
1.Interest on deposits
2.Interest from loans to a foreign company
3.And dividends
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The tax rates range between 0% and 25%.
If you bring in less than $400,000 a year, you’ll pay only a 12%
flat tax rate. Should you bring in more than $400,000 per year, you can
negotiate your tax rate with the Uruguayan government.
However, if you already pay income tax abroad on any of these three
types of income, you will not have to pay additional taxes in Uruguay.
This means you avoid double taxation.
Any other type of income generated abroad, like a salary, capital
gains on the sale of shares or property, pensions, lease income, or
any other type of offshore income are all untaxed.
The reality is Uruguayan taxes are very favorable to foreigners.
How Beneficial are Uruguayan Taxes
to You?
Here’s an example of just how good Uruguayan taxes can be for you.
Say you earn $1 million a year and you bring $100,000 a year into
Uruguay…
Uruguay will look at 70% of that $100,000. That means only $70,000
is taxable.
There is also no tax on the first $800 of income you “earn” each
month… so this further reduces the amount of income Uruguay will
impose taxes on.
Of that $100,000 you bring into the country each year, you’ll only
face taxes on $60,400. At a flat rate of 12%, you’ll pay just $7,248 in
taxes.
Compare this to what the IRS would take from you for that same
$100,000 annual income – $25,000 – and it’s clear that Uruguay is a
low-tax jurisdiction.
Besides paying less tax (if you pay any in Uruguay at all) there
is another reason you should consider establishing a second residency
in this Latin American gem…
5
The Bank Secrecy Statute That
Protects Your Financial Privacy
Unlike the United States, where financial privacy is dead and
buried, Uruguay protects your financial privacy to some degree with a
bank secrecy statute (Law #15,322, 1982).
Under this law, banks cannot share your information with anyone.
Not the government of Uruguay, not any foreign entities, nor
foreign governments.
The only exceptions are in cases involving issues of alimony,
child support, or alleged crimes, including foreign tax evasion and
then they can only share the information upon court order.
Still, Uruguay does comply with Article 26 of the Organization for
Economic and Community Development’s (OECD) model standards for tax
information exchange requests. That is, banks may exchange information
upon proof of foreign tax evasion or tax fraud.
Uruguay limits such exchanges to countries with which it has
signed tax information exchange agreements (TIEAs), specifically
excluding both neighboring Brazil and Argentina.
The Uruguayan government already has, or soon will have, TIEAs
with Germany, Mexico, Portugal, Spain, France, Korea, Finland, Malta,
Switzerland, Liechtenstein, India, Belgium, Hungary, Malaysia, Chile
and Luxembourg.
It does not yet have a TIEA with the United States.
In most other countries, these information exchange agreements are
a curse: they have made banks more reluctant to assist Americans in
opening local bank accounts. In some countries, banks refuse to deal
with Americans all together.
The cost and administration involved in complying with, and
accommodating, the TIEAs make foreign accounts unattractive.
This is not the case in Uruguay.
In fact, banks in Uruguay are quite hospitable to Americans who
want to open accounts there.
6
Earn 18 Times More Interest
on Your Money
There are 12 local banks and 15 international banks in Uruguay. In
the resource section at the end of this issue, we’ve included a list
of banks and contacts we recommend.
While investment accounts are available, retail or personal
accounts are also welcome.
In particular, Banco Itau and Lloyds TSB in Montevideo will accept
non-resident American clients in their retail banking branches.
When opening a bank account in Uruguay, you must be present and
you must sign an IRS Form W-9.
You will also need the following paperwork:
• Your passport
• Proof of residency, like a utility bill
• A reference letter from your home bank in the U.S.
• A statement of your profession and the source of funds you will
deposit
• And a letter explaining why you want the account
You must also have a clean, non-criminal record.
Once you have completed the application and given the bank all the
supporting documents they need, it will take about two weeks for the
bank to open and activate your account.
Many banks will assign an English-speaking account manager to you.
However, the government only guarantees bank insurance on deposits up
to $2,500.
Another bonus is the country’s interest rates, which are around
the 7.5% mark. Banks offer up to 4.5% on various types of accounts.
That means your money can earn 18 times more than it does sitting idle
in an U.S. bank account (where you could get the minimum of 0.25%).
So, Uruguay stands out as the stable country of the Latin
Americas, it is a great low tax jurisdiction, and its banks welcome
Americans and their money. These three elements alone make it an ideal
place to establish a second residency.
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The fact that you can acquire this residency with ease seals the
deal.
You Need Just 3 Key Proof Elements
to Apply for Uruguayan Residency
Acquiring Uruguayan citizenship is a relatively straight forward
process. It starts by filing a residency application.
Immediate residency is easy to get with three key proof
requirements:
1.A birth certificate (authenticated and stamped by the Uruguayan
Consulate in your country of birth)
2.A home-country, clean police record, and
3.Proof that you can support yourself financially during the year
of the residency process (known as the “income requirement”)
As proof that you have a clean police record, you must present a
police certificate from your country of origin and from those countries
where you actually resided within the past five years.
As an American, the U.S. record you need is a statement from your
local police or the Interpol office.
You fulfill the income requirement by proving that you have a
yearly income of at least US$6,000. That can be a pension, a mutual
fund, real estate or lease income from assets in or outside Uruguay,
dividends of any nature, or certified salary sources.
How to Begin the Application
Process
It is important to note that to become a Uruguayan resident, you
don’t need to own property or have investments in the country. In
fact, simply owning property does not eliminate the income requirement
as described above.
To become a resident, you must enter Uruguay as a tourist and
then file a formal request at the Immigration Authority (“DNM”). The
application takes eight to 12 months.
8
Once you apply for residency, you can stay in Uruguay indefinitely. You
also can request a national identification card, which allows you to travel
without a passport to neighboring Argentina, Brazil, Chile and Paraguay.
Five years after filing for residency (three years in the case of
couples or families), you can apply for citizenship.
At this point you must have established Uruguayan residency, have
had a permanent connection with the country and not have been absent
for more than six straight months during the five year period.
You can show proof of Uruguayan residence by evidence of salaries
to household staff (maids), doctor or dentist bills, ATM receipts, and
local bank information.
Uruguay does allow dual or multiple citizenships, as does the
United States.
Special Deal for Retirees
A special law (#16,340) expedites citizenship for foreign retirees
with an annual official government pension of $18,000 or more.
In addition to the pension, you must also buy or own real property
in Uruguay valued at $100,000 or more.
The “passport” granted under this law appears the same as the
one issued to any citizen, but in fact is only a “travel document”
that states that “this passport was granted to a Uruguayan Permanent
Resident with (name of country) nationality.”
Eventual citizenship comes with a Uruguayan passport that allows
visa-free travel to all of Latin America and several European
countries as well.
United States citizens entering Uruguay for business or pleasure
must have a valid passport. However, you do not need a visa for a
visit of less than three months.
What Truly Makes You a
Resident in Uruguay?
Simply: your presence.
9
The immigration law states that residency is granted to those “who
show intent to reside in Uruguay.”
This means you must have an established address in Uruguay (rented
or owned), which the Immigration Department may randomly verify.
This does not stop you from coming and going, or spending several
months outside of Uruguay during your application process.
However, if you don’t meet the minimum “presence requirement” then
your application may be delayed.
After Uruguay grants you permanent resident status, there is no
longer any requirement to stay in the country. You keep your residence
status so long as you do not live out of the country for more than
three years.
With the need to be in Uruguay for a few months every year, and
the beauty and stability of the place making this requirement easy to
meet, you should consider investing in local property.
Erika and Jeff spent some time in country recently, exploring the
real estate, banking and investment opportunities there first hand.
This is what Erika had to say about property in Punta del Este…
Rising Values and High Liquidity
Make Property in Punta del Este a
Worry-Free Investment
Punta del Este is Uruguay’s answer to Newport, Rhode Island.
Bridge nights and cocktail parties are part of the routine. Many
people of wealth make their home there and international cruise ships
regularly visit the harbor.
As an Atlantic Ocean-side town, Punta del Este has a great deal of
“old money,” which makes it a more established re-sell market.
Prices are not cheap because of international demand, but your
investment is safer because you’ll be able to find a buyer when you
want to cash out.
There are currently 70 new developments in Punta del Este, all of
them without mortgages. It’s a cash business that is owner/developer
financed.
10
The lowest entry-point price on the peninsula is $300,000. The
lowest you’ll pay for a studio apartment in the area is $160,000.
Historically property in Punta del Este has increased in price and
holds value well.
The rental market is strong during peak summer season — January to
March – with a return of 3–4%.
Adjacent to Punta del Este is the small town of La Barra. It is
highly sought after so you’ll pay between $600,000 and $800,000 for
property there. But with art galleries, shops, narrow, Europeanstyle streets, and youth oriented activities, from daytime sports
on the fine sandy beach to all night discos, it is well worth the
investment.
According to Erika, another great place to invest in Uruguayan
property is in the country’s capital…
Montevideo:
One of the World’s Safest Cities
Montevideo is an attractive, modern city — among the safest in the
world.
Located on the southern Atlantic coast of the country, the city
contains many impressive high-rise buildings. Those most suitable for
the expat community conveniently face the city golf course.
The average price for a 2,500 square foot apartment in this area
is about $550,000.
New construction prices are higher, closer to $750,000.
A smaller apartment of about 1,800 square feet, in an equally good
section of the city, would cost you around $350,000 plus.
Most apartment buildings have association fees of a few hundred
dollars a month. These allow you to use common areas and enjoy a
parking spot.
Overall, the Uruguayan property market has a dependable security
that makes investments safe and stable. For example, farmland prices
have increased in value ten times over since 2002 to a present average
price of $2,100 per hectare.
11
What Else Makes Uruguay a
Great Offshore Haven
Uruguay is an open, free market economy,
with no exchange controls or foreign currency
limitations.
80% of bank deposits in Uruguay in U.S. dollars
or euros. Accordingly, the prices for most
big-ticket items like real estate and cars are
denominated in U.S. dollars.
An export-oriented agricultural sector
characterizes Uruguay’s economy.
It has a well-educated work force, and high levels of social spending.
The country’s main industries are tourism and farming.
Political stability has boosted the economy.
Uruguay is not a country where you should look for a cheap
retirement. Its first world living standards comes with first world
prices.
But, as proof of how attractive this market is, Sotheby’s
International Realty Affiliates announced they will develop the
Sotheby’s International Realty brand throughout the country. They’re
calling it Uruguay Propiedades Sotheby’s International Realty.
For First World Living Without Big
Brother… Go to Uruguay
Uruguay offers you financial and physical security – you feel safe
walking the streets in Monte Video or Punta del Este… or anywhere else
in the country.
It has one of the lowest tax rates for foreigners anywhere in the
world.
Its banks welcome Americans and they offer interest rates 18 times
higher than what you get in the U.S.
12
It has a strong property market with high liquidity and consistent
growth.
And acquiring residency is relatively easy.
If you want to learn more about what the country can offer you,
contact Juan Federico Fischer of Fischer & Schickendantz. His web
site, www.fs.com.uy, offers an informative free report on property
purchases, immigration and taxes.
Then schedule a trip to see the country first hand.
If you like what you see, return and rent a place for at least six
months so you can see if you’d really like living there full-time.
As an offshore haven, Uruguay is definitely a place to consider
seriously.
Until next month,
Bob Bauman
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Resources
U.S. Taxes & Reporting Compliance
JOSH N. BENNETT, JD
Address: 440 North Andrews Avenue, Ft Lauderdale, Florida 33301
Telephone: (954) 779-1661
Email: josh@joshbennett.com
Website: www.joshbennett.com
Josh Bennett deals with aspects of international tax, estate, and gift
tax planning for U.S. citizens, resident aliens, and non-resident
aliens.
MICHAEL CHATZKY, JD (Chatzky & Associates)
Address: 6540 Lusk Boulevard, Suite C121, San Diego, CA 92121
Telephone: (858) 457-1000
Email: mgchatzky@aol.com
Michael Chatzky specializes in federal and international taxation
and wealth protection with an emphasis on business, estate and asset
protection planning.
Recommended Banks
BANCO ITAU
Contact: Macarena Olmedo
Address: Pedro Berro 1039, 11300 Montevideo, Uruguay
Telephone: +(598) 2 709-9990, Ext. 523
Email: molmedo@itau.com.uy
Website: http://www.bancoitau.com.uy/
Banco Itau offers retail banking services only.
You need a $2,500 minimum balance and you’ll pay a monthly fee of $30.
The bank offers safety deposit boxes, ranging in price from $250 to
$600.
LLOYDS TSB
Contact: Ignacio d”Avila
Address: Zabala 1500, CP 15000, Montevideo, Uruguay
Telephone: +(598) 2 916-1370, Ext. 334
Email: idavila@lloydstsb.com.uy / Website: www.lloydstsb.com.uy
Lloyds TSB offers retail and private banking. You need a minimum
14
deposit of $10,000 but will pay no fees.
Safety boxes are available for you at the bank’s discretion.
You can designate which currency you want your account to be in: the
dollar, pound sterling, euro or peso uruguayo
BBVA PRIVATE BANKING
Contact: Pablo Troccoli Fischer, Account Executive
Address: 25 de Mayo, 11000 Montevideo, Uruguay
Telephone: (598) 2 916-1444, Ext. 393
Email: ptroccoli@grupobbva.com.uy
Website: http://www.bbva.com.uy/Inicio/Personas/ (Spanish)
You need a minimum deposit of $100,000 to open an account at BBVA.
Real Estate
Contact: Carla Parodi Ramos, Parodi Real Estate
Address: Solano Antuna 2848, Montevideo
Telephone: +(598) 2 711-5045.
Email: carlaparodi@parodi.com.uy
Contact: Sancho Pardo Santayana, Managing Partner
360 International Realty
Email: sancho@360terra.com / Website: http://en.360terra.com/about
Punta del Este Office Address: Ruta 10, KM. 166, Punta Piedras
Telephone: +(598) 4 277-5066
Montevideo Office Address: General. Paz 1428, Local 14, Punta Gorda
Telephone: +(598) 2 601-2567
Miami Office Address: 1942 NE 148th St., MVD6245, Miami FL 33181
Telephone: (305) 407-1705
Recommended Attorney
JUAN FEDERICO FISCHER Esq., Fischer & Schickendantz
Address: Rincón 487, Piso 4, Montevideo 11000, Uruguay,
Telephone: +(598) 2 915-7468, ext. 130
Email: jfischer@fs.com.uy
Website: www.fs.com.uy
Fischer & Schickendantz is a full service law firm with a specialized
unit in immigration, real estate and corporate law.
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Embassy Contacts
Embassy of Uruguay
Address: 1913 I (Eye) Street, NW, Washington, D.C. 20006
Telephone: (202) 331-1313 / Fax: (202) 331-8142
Email: uruwashi@uruwashi.org / Website: http://www.uruwashi.org/
There are Uruguay Consulates in Chicago, Miami, Los Angeles, New York
and San Juan, Puerto Rico.
U.S. Embassy
Address: Lauro Muller 1776, Montevideo 11200
Uruguay Mailing Address: UNIT 4500, APO AA 3403
Telephone: + (598) 2-418-7777
Fax: + (598) 2-410-0022
Website: http://montevideo.usembassy.gov/
Publisher...................................... Erika Nolan
Editor..................................... Bob Bauman JD
Managing Editor..... Teresa van den Barselaar
Graphic Designer....................... Bruce Borich
Bob Bauman’s Offshore Confidential is published 12 times per year for $495 by The Sovereign Society
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The information and recommendations contained in this brochure have been compiled from sources considered reliable. Employees,
officers and directors of The Sovereign Society do not receive fees or commissions for any recommendations of services or products
in this brochure. Investment and other recommendations carry inherent risks. As no investment recommendation can be guaranteed,
the Society takes no responsibility for any loss or inconvenience if one chooses to accept them.
The Sovereign Society advocates full compliance with applicable tax and financial reporting laws. U.S. law requires income taxes to
be paid on all worldwide income wherever a U.S. person (citizen or resident alien) may live or have a residence. Each U.S. person
who has a financial interest in, or signature authority over bank, securities, or other financial accounts in a foreign country that exceeds
$10,000 in aggregate value, must report that fact on his or her federal income tax return. An additional report must be filed by June
30th of each year on an information return (Form TDF 90 22.1) with the U.S. Treasury. Willful non compliance may result in criminal
prosecution. You should consult a qualified attorney or accountant to insure that you know, understand and comply with these and any
other reporting requirements.
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