Uruguay

National Budget Law 2025–2029 – Tax Updates

Tax Holidays

A new tax holidays regime is introduced for individuals who become tax residents in Uruguay as of 1 January 2026.
Eligible individuals may opt (on a one-time basis) to be subject to IRNR (which results in effective no taxation on income) exclusively on capital-yields (passive income) and on capital-gains from foreign sources during:

• The fiscal year in which tax residency is obtained, and
• The following ten fiscal years.

To qualify for this optional regime, individuals must make:
a) investments in real estate in amounts exceeding UI 12,500,000 (approx. USD 2 million), or
b) capital contributions on investment funds to finance productive projects, research, or innovation in amounts exceeding UI 625,000 (approx. USD 100,000) on an annual basis.

Those individuals that are tax resident in Uruguay each year based on the physical presence criterion (i.e., presence exceeding 183 days in each fiscal year), can benefit from this tax holiday without the need to comply with the referred real-estate investment condition.

It is required that the individual has not been tax resident in Uruguay during the two immediately preceding fiscal years, and that it has not previously applied a tax holidays regime, with certain exceptions.

In addition, after the ten-year period referred to above, for the mentioned foreign-source passive income, the Budget Law includes the possibility to opt (on a one-time basis) between being subject to:

a) A fixed annual Income Tax on Resident Individuals (IRPF) amount for the following twenty years, of approximately UI 1.875.000 (approximately USD 300,000) per year. This amount is reduced to UI 1,250,000 (approximately USD 200,000) per year, if the individual meets the physical presence criterion for tax residency purposes in such period (>183 days in a calendar year); or

b) IRPF for the following five fiscal years, applying a reduced rate equivalent to 50% of the standard applicable rate (currently 12% in most cases), provided that the individual makes (i) capital contributions on investment funds to finance productive projects, research, or innovation in amounts exceeding UI 625,000 (approx. USD 100,000) on an annual basis for each fiscal year in which this option applies, or (ii) investments in real estate for an amount exceeding UI 6,250,000 (approx. USD 1 million).

Tax transparency regime

An amendment to the income attribution rules under IRPF was approved, whereby capital-yields and capital-gains from foreign sources of non-resident entities, or of resident entities subject to CIT due to its legal type, will be directly attributed (regardless of its effective distribution) to the IRPF taxpayers that are the beneficial owners of the referred entities (i.e., hold at least 5% of the capital of such entities).

New items of foreign- source taxable income

In absence of a tax holidays regime, income from immovable capital originating from non-resident entities and capital-gains related to assets generating yields from movable capital located outside Uruguay, are subject to IRPF as from January 1, 2026.

Yields from movable capital from foreign source are subject to this tax since 2011.

Highly Qualified Scientific and Technological Professionals

Highly Qualified Scientific and Technological Professionals (APTC) residing abroad may benefit from tax reliefs if they move to work within Uruguay and are hired - on a regular and permanent basis - by companies or institutions linked to innovation or technological development, or by companies that provide global services.

Remote working: Free zone employees

The National Direction of Free Zones (NDFZ) approved the regulations of the home office regime in free zones, in accordance with the provisions of Law Nbr. 19,996 and Decree Nbr. 319/022. Subsequent modifications on these provisions were introduced.

Current regulations provide, among others, that:

• Employees included in the home office regime are also the free zone user's dependent workers, except for those who carry out production, distribution, or logistic activities who will not be able to work remotely.
• The employee and the free zone user must convene, at the beginning or during their work relation, the home office regime in the work contract.
• Home office work should be carried out exclusively from the worker´s particular address located in the national territory.
• 90% of the workers enabled to do home office work must work, at a minimum, 60% of the monthly workload on-site. The remaining 10% can choose to work remotely 100% of their time.
• Free zone developers must keep a record where it clearly validates the completion of the conditions and limits required for workers being able to do home office work.

Law Nbr. 20,124: Modifications to income tax on resident individuals (IRPF)

The Uruguayan Parliament approved Law Nbr. 20,124, which introduces amendments on IRPF, with the purpose of granting tax relief to taxpayers by means of the extension of certain deductions applicable to the taxation of employment income, as follows:

• Increase in the annual amount of the deduction for dependent children, from approximately 2,160 to 3,325 United States dollars (USD).
• Increase in the percentage of the tax credit for real estate leasing, from 6% to 8%.
• Increase in the maximum limit of the cost of exclusive and permanent property to make use of the mortgage credit deduction, from approximately USD 120,000 to USD 160,000.