On Tuesday, December 9, 2025, the Congress approved the National Budget Bill for the 2025–2029 five-year period, which contains several legislative changes to the tax law of Uruguay. Regarding individuals’ taxation, the spatial scope of the personal income tax is modified as well as the “tax holiday” benefit.
Also, the Law contains multiple changes to corporate income taxation, creating the Qualified Domestic Minimum Top-up Tax (QDMTT), amending some administrative processes between the tax office and the taxpayers, among others.
The Law will take effect as of January 1, 2026, except for those provisions for which a different effective date is expressly established.
Specifically for individuals’ taxation, until now, the hypothesis of extending the source rule provided for in the Uruguayan legislation only included certain capital gains derived from movable capital from non-resident entities (such as dividends paid by foreign entities or interests paid by accounts located in foreign banks). With the approval of the Budget Law, the spatial scope of the income tax for resident individuals is expanded.
Starting on January 1, 2026, Personal Income Tax (hereinafter “IRPF”) will also be levied on wealth increases of assets located abroad and capital gains derived from immovable property, except for income from the leasing of movable and intangible assets, the transfer of image rights, and income from derivative financial instruments.
In practice, this means that certain types of income obtained by Uruguayan tax residents will start being taxable as of January 1, 2026. Examples of this include rental income derived from properties located outside Uruguay, sale of foreign shares (i.e., equity plans) or sale of real estate property located abroad. A general tax rate of 12% will be applicable, and a tax credit might be available for taxes paid abroad upon the same income, if certain rules are met.
Moreover, the Budget Law approved a new “tax holiday” regime and finishes the existing current regime. Until December 31, 2025, the “tax holiday” refers to the possibility for individuals who acquire tax residency status in Uruguay (and can prove one year before of non-resident status) to choose, with respect to income from movable capital from abroad, to:
It should be noted that income from movable capital originating from foreign entities is not subject to IRNR, therefore, choosing the first option would effectively mean that this type of income would not be taxed for the tax year where the residency is acquired and the following 10 years. The new law finishes this current tax waiver rule establishing that this “tax holiday” regime can only be opted for until December 31, 2025.
Starting on January 1, 2026, the new “tax holiday” regime will apply for those who become residents in Uruguay from 2026 onwards and are eligible to pay IRNR from the year in which the change of residence and for the following 10 fiscal years. Therefore, to opt for the new regime, the tax resident must comply with one of the following conditions:
In all cases, for the new regime to be applicable, it will be necessary to comply with not having been a tax resident during the two tax years immediately prior to having acquired tax residence and not having opted for the previous “tax holiday” regime.
After the period stipulated by this “tax holiday” regime, that is, from year 12 onwards, the taxpayer will pay IRPF on their capital gains under the general regime, or they may pay IRPF for the following five tax years at a reduced rate of 50% if they make an annual investment of UI 625,000 (approximately USD 100,000) in innovation funds or UI 6,250,000 (around 1 million dollars) in real estate.
There is another alternative available from year 12 onwards for those who intend to keep the Uruguayan tax residence at that time, either covered by the old or new Tax Holiday regimes, that is a lump sum payment to the government, under certain requirements.
The approved law also allows for those who opted for IRNR before January 1, 2026, or who are within the deadline as of December 31, 2025, to access the IRPF options of the new regime once the original period ends. The two aforementioned alternatives available from year 12 onwards will be annual and may be exercised for up to 20 tax years following the year in which the first option was chosen.
At the end of these periods, the income will be subject to IRPF at the applicable rate under the regular regime, which is currently 12%. Those who, under the previous system, had opted to pay IRPF at 7% without time limits will continue to apply this rate, but will also include the new taxable foreign income.
Finally, it must be remarked that the individuals who have acquired tax residency in Uruguay until 2025 will only be able to opt to the current “tax holiday” regime until December 31, 2025, and they are likely not eligible to the new regime. Thus, if they do not apply for the current “tax holiday” until the end of the calendar year 2025, they will be subject to IRPF upon their personal passive income at the applicable tax rate.
As the new tax law heavily impacts the mobility processes of those with any Uruguayan ties, the Vialto Partners team can assist in preparing studies and calculations to determine the additional cost the tax increase and tax offsetting changes may bring.
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Flávia Fernandes
Partner
Antonieta Rodríguez Mosquera
Senior Manager
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