The approval of Law 20.446 on December 16th, 2025, included several changes in the individuals’ taxation, in particular broadening the spatial scope of the personal income tax as well as modifying the “tax holiday” benefit. We refer to our previous alert on this matter, on this LINK.
On May 6th, Decree 95, 2026 was approved, regulating the amended legislation on the spatial scope of the personal income tax. We must remark that the “tax holiday” was not regulated on this Decree and has not yet been regulated by a Decree. Later, on June 30th, Resolution 1.517/2026 was approved by the Tax Authority, implementing changes on personal individual taxation, clarifying due dates and introducing the mechanism to comply with the new income taxes due.
As detailed below, from January 2026 onwards certain foreign sourced income started being taxable in Uruguay, such as the lease of a house located abroad, the sale of foreign shares and the sale of a real estate property located abroad. Generally, a 12% income tax will apply, foreign tax credit will be available, and the payment needs to be made by the Uruguayan residents in every 6-month period (every July and every January), unless there is a withholding agent, in which case a monthly withholding will apply.
The Tax Authority has approved a transition period in this Resolution, providing that the income tax due related to the first semester of 2026 will be due in October 2026.
Prior to the Budget Law 20.446 approved in December 2025, Personal Income Tax (IRPF) applied to returns on movable capital from foreign investments — such as interest or dividends from non-resident entities. The referred law expanded the scope of this source, specifying that all capital income is now included — covering not only movable but also immovable capital — as well as capital gains such as those from the sale of shares, bonds, or credit rights derived from foreign assets (note that leasing of movable and intangible assets and the transfer of image rights remain non-taxable income).
The Decree clarifies that the transfers due to death and allocations of assets by non-resident entities in certain circumstances are not considered capital gains subject to IPRF.
In practice, the new legislation provides that certain types of income obtained by Uruguayan tax residents start being taxable as of January 1st, 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.
Also, prior to Law 20.446, if an individual derived income from abroad through a local or foreign entity, tax liability arose only when that entity distributed dividends. The only transparency regime in place applied to BONT entities (entities located in a place of low or nil taxation). Law 20.446 changed this situation; however, the change does not affect the tax payment itself but rather its timing, aiming to prevent the use of interposed companies to defer tax payments.
Consequently, passive income derived through entities, whether local or foreign, is now attributed directly to resident individuals liable to IRPF, based on their status as ultimate beneficial owners. For these purposes, an ultimate beneficial owner is defined as the individual who, directly or indirectly, holds at least 5% of the capital (or its equivalent) or voting rights, or who exercises ultimate control over an entity by other means. The practical consequence is that the income may be taxable in the hands of the individual even if it has not been effectively distributed.
Regulations also establish specific rules for determining the income derived from the sale or promise of sale of real estate located abroad, and the sale of other assets (shares, equity interests, bonds, securities, or other financial assets) from abroad.
The Decree and the Resolution now regulate the mechanisms for collecting the income tax, designating different parties responsible depending on the type of income involved. Among others, regulations designated as withholding agents to resident entities that, acting on behalf of and under the instructions of the taxpayer, professionally and habitually carry out intermediation operations between offerors and purchasers of securities issued by non-resident entities, and provide custody services for said assets. In this case, the withholding monthly tax rate is 8%, and the taxpayer may treat it as a final tax.
In the absence of designated tax withholding agents, the general tax rate of 12% applies, and taxpayers must make semiannual installment payments in July, corresponding to the January–June semester and in January of the following year, corresponding to the July–December semester of the previous year.
Notwithstanding the general regimes established for withholdings and payments on account, the Resolution sets forth a transitional regime applicable to the year 2026, as follows:
The specific due date within the month will depend on whether the payment is performed directly by the individual taxpayer, in which case the general due date of October 26th, 2026, would apply, or whether the withholding agent remits the taxes due, in which case the due date is determined by the type of contributor.
Finally, it must be noted that if the individual is still enjoying the “tax holiday” benefit, he/she will not be impacted by this new income tax until the “tax holiday” period ends.
As the new tax law heavy 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 assist on the compliance procedures related to the new liabilities.
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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