Uruguay's 2025–2029 National Budget Law No. 20,446 was recently passed. Below we comment on its main tax changes regarding the taxation of foreign capital income. These changes may be of particular interest to individuals who are Uruguayan tax residents or are planning to become tax resident in the country.
Extension of “worldwide income” under IRPF to other foreign-source capital income
Until 31/12/2025, personal income tax (IRPF) is levied at 12% on income from movable capital arising from deposits, loans and, in general, any placement of capital or credit of any kind, provided that income comes from non-resident entities (e.g. interest, dividends). This Law broadens that definition to include:
- Income from real estate abroad (e.g. rent).
- Capital gains from the sale of investments or real estate abroad.
Losses on the sale of foreign investments may be deducted and offset against gains from foreign movable capital income, provided they can be reliably proven.
To determine the income from the sale of real estate abroad, the tax cost and related improvements will be taken in the original currency and converted at the exchange rate on the day before the sale.
Deemed income option: 15% of the sale price -> IRPF = 12% of 15% of the sale price = 1.8% of the sale price.
Income from other transfers of assets:
For assets located abroad, the tax cost will be determined using the value in the currency in which the investment was made, converted at the exchange rate on the day before the sale.
For listed financial assets acquired before 1/1/2026, the tax cost will be their market price at 31/12/2025.
Deemed income option: 20% of the sale price -> IRPF = 12% of 20% of the sale price = 2.4% of the sale price.
The deemed income option is annual, which means that at the end of each year taxpayers should assess whether it is better to apply the deemed regime to all income or to calculate the actual income.
Resident withholding agents:
The Executive Branch is empowered, where resident withholding agents are involved (banks, securities intermediaries, stockbrokers), to reduce the withholding rate from 12% to 8%, for both capital income and capital gains. The intention is also that this withholding may be final, releasing the taxpayer from the obligation to calculate the tax and file the corresponding return.
No deferral of IRPF on foreign capital income
Foreign capital income obtained by resident or non-resident entities will be attributed directly to IRPF taxpayers, provided they are the beneficial owners of the entities that obtain that income (unless their interest is below 5%).
The income to be included by the taxpayer will be considered accrued when it is received by the first entity in respect of which the attribution obligation applies.
Tax credit for taxes paid abroad
Tax withheld abroad on the same income may be credited, up to the amount of tax generated in Uruguay on that income.
Under the regime in force until 31/12/25, where a company is interposed, tax withheld abroad from the company cannot be credited against IRPF. Although the Law does not yet say so expressly, since it provides for the attribution of income received by companies, the regulations are expected to allow a credit against IRPF for tax withheld from the company.
Changes to the “tax holiday” regime
The current tax holiday regime is maintained for tax residents who opted in up to the 2025 tax year, and is extended to cover the newly taxed foreign capital income.
For new Uruguayan tax residents from 2026, only those who become resident under the physical presence test (183 days) may access the tax holiday without making an investment. The 183 days must be met in each year of the tax holiday.
Those who become tax resident under the other criteria must make certain investments to access the tax holiday for the year of the change of residence and the following 10 years:
- Investments in real estate worth more than UI 12,500,000 (approx. USD 2,000,000), or
- Contributions to investment funds that finance productive projects or research or innovation activities applied to production, of at least UI 625,000 per year (approx. USD 100,000).
After the 10 + 1 year period, individuals may choose to:
- Pay IRPF at 50% of the applicable rate for the following 5 tax years. To do so, they must invest UI 6,250,000 (approx. USD 1,000,000) in real estate, or contribute at least UI 625,000 per year (approx. USD 100,000) to investment funds that finance productive projects or research or innovation activities applied to production.
- Pay IRPF as a fixed annual amount of UI 1,875,000 (approx. USD 300,000). In years in which they are resident under the physical presence test, the fixed amount will be UI 1,250,000 (approx. USD 200,000). Those who make a direct investment of more than UI 45,000,000 (approx. USD 7,200,000) in a company to increase its productive capacity, under the conditions set by the regulations, may also pay UI 1,250,000 per year.
The spouses of resident individuals who have chosen the fixed amount may also opt for it, paying 15% of the applicable fixed amount as tax.
The fixed amount option is annual and may be exercised for up to twenty tax years following the year of the first election.
Options (a) and (b) are available both to new tax residents and to existing tax residents whose tax holiday has ended or is still running.
Extended source rule for the sale of shares in foreign companies: IRAE and IRNR
Income from the transfer of shares or interests in non-resident companies is treated as Uruguayan-source income (for Corporate Income Tax and Non-Resident Income Tax purposes) if any of the following conditions is met (at any time within the 365 days before the transfer):
- More than 50% of the company's assets consist, directly or indirectly, of property located in Uruguay.
- The value of the property located in Uruguay exceeds 31,500,000 UI (approximately USD 5,000,000) and the transfer represents the direct or indirect transfer of more than 50% of the property located in the country. If the transfer is made by more than one related entity, this percentage is calculated by adding up the transfers made by each entity.
The Uruguayan-source income is calculated by applying the ratio of the entity's assets in Uruguay to its total assets.
If the assets are equity interests in resident entities, their value will be solely the value of the underlying assets located in the country.
Changes to the taxation of dividends paid to non-resident shareholders
Dividends paid by local companies to foreign shareholders that do not correspond to income taxed under IRAE in the hands of the local company (that income was already taxed) will be subject to non-resident income tax (IRNR) if:
- The beneficiary's jurisdiction of residence taxes those dividends.
- A tax credit is granted for the tax withheld in Uruguay and the non-resident is able to use it.
Entry into force
Unless expressly stated otherwise, the measures in this Law come into force on 1 January 2026. For further information, please do not hesitate to contact our team or write to us at info@inglobal.com.
Our team is available to advise you.
