Law N° 20.446, the National Budget for 2025–2029, was promulgated on 16 December 2025 and took effect on 1 January 2026. Most coverage has reduced it to a single number: the entry threshold for Uruguay’s tax holiday rose from UI 3,500,000 to UI 12,500,000.
That is accurate, and it is the smaller of the two changes.
The larger one is that the law redrew what counts as taxable foreign income for every Uruguayan tax resident, whether or not they ever hold a tax holiday. Galante & Martins describe it as the most significant change to the taxation of foreign passive income since the 2007 IRPF reform and the 2023 adjustments made in response to the EU Code of Conduct Group. An investor reading only about the threshold is reading about the part of the reform least likely to affect them.
What is now taxable
Until 31 December 2025, a Uruguayan resident outside the holiday paid 12% IRPF on foreign movable capital income — interest and dividends from non-resident entities. Rental income from property abroad and gains on the sale of foreign assets fell outside the net entirely.
| Income type | Until 2025 | From 2026 |
|---|---|---|
| Foreign interest and dividends | Taxed at 12% | Taxed at 12% |
| Income from real estate abroad | Not taxed | Taxed at 12% |
| Capital gains on foreign assets (shares, property) | Not taxed | Taxed at 12% |
| Income held through non-resident companies | Sheltered by the corporate layer | Attributed to the individual shareholder under a fiscal transparency regime |
| Scope of the deemed-Uruguayan-source rule | BONT entities with >50% of assets in Uruguay | Any non-resident entity where 50% of assets are Uruguayan-situated |
Three points deserve emphasis.
The transparency regime is the structural change. From 1 January 2026, income earned by non-resident companies is imputed directly to their Uruguayan-resident individual shareholders for IRPF purposes. The interposed-company structure that previously kept offshore holdings outside the domestic net no longer performs that function.
Losses became compensable. From 2026, negative results from capital gains — a loss on the sale of shares, for instance — can be offset against other capital gains or against movable capital income earned abroad. This is a genuine improvement and is usually left out of summaries.
A reduced withholding rate is available. The Executive was empowered to cut the rate from 12% to 8% where resident withholding agents intervene — banks, securities intermediaries, brokers — with the intention that such withholding be final, relieving the taxpayer of filing a return. Whether this is elected has real consequences for compliance burden as well as rate.
Certain categories remain outside: leases of movable property, image-rights assignments, and financial derivatives, the last of which was excluded under the previous regime too.
The tax holiday: who must invest, and who need not
Here the structure is commonly reported backwards. The investment requirements are not three parallel routes to be chosen between. They are a condition that attaches to everyone except those who become resident by physical presence.
Uruguay grants tax residency on several grounds — more than 183 days in the country, the centre of vital interests, or the base of economic activity. For those acquiring residency from 1 January 2026:
- Residency by the 183-day criterion: access to the holiday with no investment at all. The 183 days must be met in each year the holiday runs, not once on entry.
- Residency by any other criterion: the holiday requires a qualifying investment.
The qualifying investments are:
| Route | Amount | Nature |
|---|---|---|
| Real estate | UI 12,500,000 (≈ USD 2 million) | One-off acquisition |
| Investment fund | UI 625,000 per year (≈ USD 100,000) | Annual, for each year claimed; funds must finance productive projects or applied research and innovation |
Applicants must also not have been Uruguayan tax residents in the two immediately preceding fiscal years, nor have previously exercised a tax-holiday option.
Dollar equivalences are approximate and move with the Unidad Indexada. Comparisons between the old and new thresholds are meaningful only in UI: 3,500,000 against 12,500,000. Even in the same unit the comparison is imperfect, because the earlier route also carried a 60-day presence condition and the current regime admits a route requiring no investment at all.
What happens when the holiday ends
The holiday runs for the fiscal year in which residency is acquired plus the following ten — eleven fiscal years in total.
One point here is genuinely unsettled in the professional commentary. Galante & Martins describe the pre-2026 regime as covering the year of change plus five following years, with the eleven-year term being an extension granted from 2026 rather than a continuation. Other analyses describe the eleven-year term as pre-existing and preserved, noting that the original term was five years before being lengthened. Parallel options have existed since 2020, which is the likely source of the divergence. Anyone whose planning depends on the distinction should resolve it against the statutory text rather than on secondary description — including this one.
When the holiday expires, three positions are available.
The reduced rate. IRPF at 50% of the standard rate — 6% against 12% — for five fiscal years. This is conditional, and on either of two investments: real estate valued above UI 6,250,000 (≈ USD 1 million), or an investment of at least UI 625,000 per year in productive projects or applied research and innovation. Coverage that mentions only the real-estate condition is describing the option incompletely.
The comparison with the previous 7% rate is not a like-for-like improvement. The old rate was permanent; the new one is capped at five years, after which income moves to the standard rate. A lower number attached to a shorter term is not necessarily a better deal.
The fixed annual payment. The 6 May 2026 decree regulates an option to pay a fixed amount in place of assessing each income stream, covering all foreign income for a term of up to twenty years, at UI 1,875,000 per person with no reduction for spouses. Sources differ on whether this is a single payment covering the full period or an annual one: press coverage describes it as a single payment of roughly USD 306,700 covering up to twenty years, while at least one professional summary describes it as an annual charge with possible reductions according to days of residence or larger investments. The DGI is to establish the specific terms. The difference between the two readings is very large and the point should be confirmed before it is relied on.
Note that this option is directed at residents who have not used the tax holiday regime.
The standard rate. Absent an election, foreign capital income is taxed at 12%.
Acquired rights
Individuals who had already obtained tax residency and exercised the holiday option as at 31 December 2025 keep the previous regime for the term granted at the time of their election. The reform does not operate retroactively.
There is a detail here more favourable than usually reported. The protection extends to the new categories of foreign income that became taxable in 2026: for those already inside the holiday, movable and immovable capital income and capital gains are all covered by the existing option. The exception is income from financial derivatives, which was outside the previous regime as well.
The corollary matters just as much: those who were resident but never exercised the option have no protection. Their position falls to be assessed under the new framework in full.
Where the regulation stands
The law’s practical operation depended on implementing decrees, and their status has moved during 2026.
A decree of 6 May 2026, still unnumbered at the time of publication, regulates the application of IRPF to foreign capital income: determination of the taxable amount, fiscal transparency, withholding, payments on account, and an optional simplified regime. It also sets a fiscal cost rule for assets acquired before 1 January 2026 that are listed on recognised exchanges or appear in MEF or BCU information systems — the quoted value at 31 December 2025 — while providing that a loss on disposal cannot be offset against other income.
Decree N° 325/025 was issued under article 666 of the law, coordinating the Domestic Minimum Complementary Tax with pre-existing tax-stability rules.
Regulation remains partial. As of the reporting in mid-2026, the detailed rules governing the global income tax and the tax holiday itself were still awaited. Anyone structuring around the holiday specifically is working ahead of the definitive text.
A note on sources
The figures in this article — UI 12,500,000, UI 6,250,000, UI 625,000, UI 1,875,000 — are consistently reported across independent professional analyses including InGlobal, Galante & Martins, Guyer & Regules, Moore and Bachini Consultores, and are not in dispute among them. They correspond to provisions of Law 20.446 itself, a budget law running to several hundred articles; readers needing an article-level citation should consult the consolidated text at IMPO.
Two things genuinely are unresolved rather than merely unverified, and both are flagged above: the pre-2026 duration of the holiday, and whether the fixed payment is annual or once. Where DGI published guidance still describes the pre-2026 framework, it should not be read as confirming current thresholds.
What this means for the decision
For a prospective resident who intends to live in Uruguay more than half the year, the reform changes very little on entry: the 183-day route reaches the holiday with no investment requirement, as before, though the presence must now be sustained annually throughout the holiday rather than demonstrated once.
For a prospective resident who intends to hold residency at a distance, the threshold has risen roughly three and a half times in UI terms, and the alternative — UI 625,000 a year into innovation funding — is a recurring commitment rather than a one-off purchase.
For anyone already resident and not inside the holiday, the threshold is beside the point. The relevant change is that foreign rental income, capital gains and income held through non-resident companies now fall within IRPF, and that the corporate layer no longer shelters them.
For those already inside the holiday, the position is secure and slightly better than it was.
Verification checklist
| Item | Where to verify | Watch for |
|---|---|---|
| Entry thresholds | Law 20.446, consolidated text at IMPO | Figures are in UI; dollar equivalents move |
| Which route requires investment | Law 20.446; InGlobal and Guyer analyses | 183-day residency requires no investment; all other grounds do |
| Holiday duration | Law 20.446; compare pre-2026 regime | Sources differ on whether 11 years is new or preserved |
| 6% conditional rate | Law 20.446 | Two qualifying investments, not one; five-year cap |
| Fixed payment option | Decree of 6 May 2026; DGI terms pending | Annual or single payment — sources conflict |
| Expanded tax base | Law 20.446; decree of 6 May 2026 | Real-estate income, capital gains, fiscal transparency |
| Reduced withholding | Executive regulation | 12% to 8% where resident agents intervene; whether final |
| Acquired rights | Law 20.446 transitional provisions | Covers the new income categories; derivatives excluded |
Sources
Law N° 20.446, National Budget 2025–2029, promulgated 16 December 2025, in force 1 January 2026 (consolidated text: IMPO); implementing decree of 6 May 2026 (unnumbered at publication); Decree N° 325/025; Dirección General Impositiva; professional analyses by Guyer & Regules, Galante & Martins, InGlobal, Moore Latam and Bachini Consultores; press reporting by La Mañana and El Economista.
Figures were current at the time of writing and are drawn from professional analyses of the statute rather than from article-level citation. Two points identified above remain unresolved between sources. Confirm against the text of the law and its implementing regulation, and with a licensed Uruguayan tax adviser, before acting. This article is for general information only and is not a substitute for professional legal, tax or financial advice.
