US Taxes for Americans Living in Uruguay
Uruguay has become one of the steadier landing spots in South America for Americans, with retirees drawn by the residency programs and remote workers and contractors drawn by the lifestyle and the territorial tax system. The move can be a good one, but it does not change the fact that as a US citizen you still file a US return every year, no matter where you live. I help Americans in Uruguay stay compliant on the US side and make sure the two systems fit together the way they should.
You still file a US return
The US taxes its citizens on worldwide income regardless of where they live, so your Uruguayan salary, contractor income, investment income, and gains all belong on your US return. Living in Uruguay does not remove the filing requirement, it just adds a layer. The good news is that between the Foreign Earned Income Exclusion, the Foreign Tax Credit, and careful planning, most of my Uruguay clients owe the IRS little or nothing. The goal is simply making sure nothing is missed.
How Uruguay taxes you
Uruguay generally runs a territorial system, and it is usually friendlier to new arrivals than most places, but the rules shifted with a reform that took effect January 1, 2026, so this is the part worth confirming with a local Uruguayan advisor. In broad terms, you are typically treated as a Uruguayan tax resident if you spend 183 days or more there in a calendar year, if your center of vital interests moves there, or through a qualifying investment. Employment income is generally taxed on a progressive scale up to about 36 percent, while foreign investment income has historically been taxed at a flat rate of around 12 percent. New residents have long been able to elect a tax holiday on foreign source income, and a version of that still exists after the 2026 reform, generally as a multi year exemption for those who meet the conditions. Exactly which version applies to you depends on when you established residency and how you qualify, so I coordinate with your Uruguayan advisor rather than guess at the local side. What I handle is making sure the US treatment lines up with whatever Uruguayan position you take.
No tax treaty, so planning matters more
Here is the piece that catches people off guard. The US and Uruguay do not have an income tax treaty. That means there is no treaty to lean on for reduced withholding, pension relief, or residency tie breakers, so the tools that usually smooth things out elsewhere are not available. Your protection against double taxation comes instead from the US's own mechanisms. The Foreign Earned Income Exclusion on Form 2555 lets you exclude up to $130,000 of earned income for 2025, rising to $132,900 for 2026, if you meet the Physical Presence or Bona Fide Residence test. The Foreign Tax Credit on Form 1116 credits the Uruguayan income tax you pay against your US tax, dollar for dollar. Because Uruguay often taxes new residents lightly, the Foreign Tax Credit alone may not wipe out your US bill the way it would in a high tax country, so the exclusion versus credit decision actually matters here, and it is worth running both ways. I also usually steer clients toward the Foreign Tax Credit rather than the exclusion when they still want to contribute to an IRA, since the exclusion can knock out that eligibility for the year.
Getting paid as a contractor or remote worker
A lot of Americans land in Uruguay doing remote work for US clients or running their own business, and that raises the self employment question. Normally US self employment income carries a 15.3 percent self employment tax on top of income tax, but the US and Uruguay have a Social Security Totalization Agreement in force since November 1, 2018. That agreement keeps you from paying into both countries' social security systems on the same income and determines which system you belong to, with a Certificate of Coverage as proof. For a self employed American living in Uruguay, that often means Uruguay's system rather than paying US self employment tax, which can be a meaningful saving, and it is something I check early. If you have set up or are considering a Uruguayan company, an SAS or SA, to invoice through, that brings its own US reporting, typically Form 5471 for a foreign corporation you own, or Form 8858 if it is structured as a disregarded entity. I would rather help you think that through before the entity exists than clean it up after.
Foreign accounts and investments
Once you are banking and investing in Uruguay, the US reporting follows. The FBAR, FinCEN Form 114, is required if your foreign financial accounts total more than $10,000 at any point in the year combined, and Uruguay reports US account holders to the IRS under its FATCA agreement, so this is one to get right. Form 8938 is an additional report if your foreign assets cross the thresholds, which for Americans living abroad generally start at $200,000 at year end or $300,000 at any point during the year if single, and double those amounts if married filing jointly. PFIC reporting on Form 8621 is the one that bites. Non US mutual funds and ETFs, including Uruguayan and other foreign funds, are usually treated as PFICs and taxed punitively on a separate form, so if you are investing locally, talk to me before you buy, not after.
Social Security and pensions
If you are retired in Uruguay on US Social Security or a US pension, that income is still reported on your US return as usual. On the Uruguayan side, foreign pension and Social Security income is generally expected to stay outside Uruguayan tax, but because that depends on local rules and the 2026 changes, I confirm it alongside your Uruguayan advisor rather than assume it. The totalization agreement also helps protect your US Social Security record if you are splitting a working career between the two countries.
How I work with Americans in Uruguay
I prepare the full US side, your 1040, the FEIE and Foreign Tax Credit, the FBAR, and Forms 8938, 8621, 5471 or 8858 as they apply, and I coordinate with your Uruguayan advisor so the two sides agree rather than contradict each other. Whether you have just arrived, you are filing your first year as a resident, or you have fallen a few years behind and need to catch up, the first conversation is free and there is no pressure. Book a call and we will figure out exactly what your situation needs.
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Frequently asked questions
Do I still have to file US taxes if I live in Uruguay?
Yes. As a US citizen you file a US return on your worldwide income every year regardless of where you live. Uruguay's tax rules do not remove that, but the Foreign Earned Income Exclusion, the Foreign Tax Credit, and proper planning usually bring your US bill to zero or close to it.
Is there a US and Uruguay tax treaty?
No. The US and Uruguay have no income tax treaty, only an information sharing agreement. That means no treaty based relief on withholding, pensions, or residency, so your double tax protection comes from the FEIE and the Foreign Tax Credit instead, which makes choosing between them more important in Uruguay than in treaty countries.
Will I get taxed twice on the same income?
Generally no, but it takes planning rather than a treaty. You use the Foreign Earned Income Exclusion, up to $130,000 for 2025, and the Foreign Tax Credit to offset US tax against what you pay in Uruguay. Because Uruguay often taxes new residents lightly, I run both methods to see which leaves you better off.
Do I pay US self employment tax on my remote or contractor income?
Not necessarily. The US and Uruguay totalization agreement, in force since November 2018, decides which country's social security system you belong to and prevents double coverage. For many self employed Americans resident in Uruguay that means Uruguay's system instead of the US 15.3 percent self employment tax, documented with a Certificate of Coverage.
What about the Uruguayan tax holiday for new residents?
Uruguay has long offered new residents a multi year exemption on foreign source income, and a version of it survives the reform that took effect January 1, 2026, with updated conditions. Which option applies depends on when and how you established residency, so I coordinate the Uruguayan side with your local advisor and make sure your US return lines up with the position you take.
Do I need to report my Uruguayan bank and investment accounts?
Yes. You file an FBAR if your foreign accounts total more than $10,000 at any point in the year, and possibly Form 8938 if your foreign assets exceed the FATCA thresholds. Uruguay reports US account holders to the IRS, so these need to match. And be careful with Uruguayan or other foreign funds, they are usually PFICs, which carry heavy US reporting, so check before you invest.
I am behind on my US filings since moving to Uruguay, what now?
That is fixable, and it is common. If you qualify, the streamlined filing procedures let you catch up on the last few years of returns and FBARs without the usual penalties. I handle these regularly, and the first step is a quick call to see where you stand.
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