Uruguay's tax holiday lets a person who becomes tax resident in Uruguay choose to pay non-resident income tax (IRNR) on foreign capital income, instead of the resident income tax (IRPF). Because IRNR only reaches Uruguayan-source income, the practical effect is that dividends, interest and similar income from abroad are not taxed in Uruguay for the year of arrival and the following ten years.
The regime changed on January 1, 2026. Uruguay's 2025-2029 budget law, Law 20,446, added a new article to the IRPF rules for people who become resident from 2026. The holiday still lasts eleven tax years, but it now comes with qualifying conditions, a longer look-back period, a wider scope that includes foreign capital gains, and a menu of options for when it ends. The old 7% alternative is closed to new arrivals.
This guide explains how the regime works as of October 2026, who can use it, and what it does not cover.
Key takeaways
- New residents from January 1, 2026 can opt out of Uruguayan tax on foreign capital income for the year they become resident plus the next ten years.
- To qualify, they must spend more than 183 days a year in Uruguay, buy real estate worth more than 12.5 million indexed units (about US$2 million), or put at least 625,000 indexed units (about US$100,000) a year into qualifying investment funds.
- The permanent 7% IRPF option was available only for elections made by December 31, 2025.
- After the holiday, people can choose a five-year period at half the normal rate or a fixed annual tax, subject to conditions.
- The holiday covers foreign capital income only. Salary, business income and Uruguayan-source income stay taxable.
How Uruguay taxes residents
Uruguay's personal income tax, the IRPF, is built on the source principle. Income from activities carried out, assets located or rights used in Uruguay is taxable. Employment and professional income is taxed at progressive rates that reach 36%, and most capital income is taxed at a flat 12%, according to PwC's Uruguay tax summary.
Since 2011, the IRPF has also reached certain income from abroad. Residents pay tax on interest and dividends paid by non-resident entities. Law 20,446 widened that reach from January 1, 2026: capital gains on those foreign assets and income from foreign real estate held through non-resident entities now fall inside the IRPF as well. A new transparency rule also attributes some income of foreign companies to Uruguayan resident owners with at least 5%.
That is the background to the tax holiday. For a person with a large investment portfolio abroad, the difference between 12% on foreign capital income and no Uruguayan tax on it can be significant.
Who counts as a tax resident in Uruguay
Article 2 of the IRPF title sets the residence tests. A person is resident if they spend more than 183 days in Uruguay in a calendar year, or if the main base of their activities or their economic or vital interests is in Uruguay. Uruguay presumes vital interests are there when the person's spouse and dependent minor children live there habitually.
Regulations add investment-based ways to meet the economic interests test. According to PwC, these include real estate worth more than 15 million indexed units (UI), a company investment of more than UI 45 million in a promoted project, real estate of more than UI 3.5 million bought from July 2020 combined with at least 60 days of presence, or a company investment of more than UI 15 million that creates at least 15 jobs.
One point often gets missed. Becoming tax resident and qualifying for the 2026 tax holiday are two separate questions. A person can be resident under one of the investment tests and still not meet the holiday's own conditions.
The UI (unidad indexada) is an inflation-linked unit, so the dollar figures in this article are approximate and move over time.
The old regime and the new one side by side
The table below compares the rules for people who became resident from 2020 to 2025 with the rules for people who become resident from January 1, 2026.
| Feature | Residents from 2020 to 2025 | Residents from January 1, 2026 |
|---|---|---|
| Length | Year of arrival plus 10 years | Year of arrival plus 10 years |
| Income covered | Interest and dividends from non-resident entities | Foreign capital income, including capital gains on those assets |
| Alternative | IRPF at 7% with no time limit | None |
| Conditions | Become resident; not resident in the prior year | 183+ days each year, or real estate above UI 12.5 million, or UI 625,000 a year into qualifying funds |
| Look-back | No residence in the immediately preceding year | No residence in the two preceding tax years and no prior use of the regime |
| After expiry | Standard 12% IRPF | Choice of a reduced rate or a fixed annual tax |
The legal text for the new regime is Article 24 BIS of Title 7 of the 2023 consolidated tax code, published by IMPO, Uruguay's official gazette.
The three ways to qualify from 2026
Physical presence
A new resident who spends more than 183 days in Uruguay in each tax year can make the election without any investment. The condition applies every year, so a year spent mostly abroad can break it. People in this group often keep detailed travel records; our guide on how to track days for tax residency covers the methods.
Real estate
The second route is an investment in Uruguayan real estate worth more than UI 12.5 million, roughly US$2 million. Before 2026, people who became resident through the cheaper UI 3.5 million property route with 60 days of presence could also elect the holiday. For new arrivals, that combination no longer reaches the holiday unless one of the 2026 conditions is met.
Investment funds
The third route requires contributions of at least UI 625,000 a year, roughly US$100,000, to investment funds that finance productive projects, research or innovation. The executive branch defines which funds qualify. The law describes this as an annual condition, so it is a recurring commitment rather than a one-off payment.
What happens when the holiday ends
Law 20,446 gives people who used the holiday two options once the eleven years are over. Both apply only to the foreign capital income covered by the regime.
| Option | What it means | Condition |
|---|---|---|
| Reduced rate | IRPF at 50% of the normal rate for five years (about 6% at today's 12% rate) | Keep making fund contributions of UI 625,000 a year, or own real estate above UI 6.25 million (about US$1 million) |
| Fixed annual tax | A flat IRPF payment of UI 1.875 million a year (about US$300,000) on all covered income | Falls to UI 1.25 million (about US$200,000) in years with 183+ days of presence, or with a direct investment above UI 45 million in a company |
Spouses of people who choose the fixed amount can join at 15% of the applicable amount. The fixed-amount option is annual and can be used for up to twenty tax years. It is clearly designed for people with very large foreign portfolios, for whom 12% of annual income would exceed the flat figure.
People who are already in a tax holiday
Law 20,446 changed the earlier article as well. Elections under the old rules, including the 7% option, could be made only once and only until December 31, 2025. The 7% rate remains in the rate table for people who chose it under the old article.
People who became resident before 2020 had a shorter five-plus-one-year holiday. Law 19,937 lets them extend it to a maximum of ten years if they bought Uruguayan real estate worth more than UI 3.5 million after January 2021 and spend at least 60 days a year in the country. The DGI's tax holiday page explains the annual reporting this extension requires.
The new law also lets people whose old holiday expired before 2026, and people still inside it at the end of 2025, use the post-holiday options once their period ends. How the transitional rules apply to a specific person depends on when they arrived and which election they made.
How the election is made
Under the DGI's procedure, the election is filed once on form 0306 and cannot be changed afterward. Taxpayers can download proof of the election from the DGI's online services, and banks or other payers can check that it is active. Decree 95/026 and DGI Resolution 1517/026, both issued in 2026, set out the detailed rules for the expanded taxation of foreign income.
What the tax holiday does not cover
The holiday is narrower than many summaries suggest. It does not exempt:
- Salary, fees or business profits from work done in Uruguay, which stay taxable under the normal IRPF scale.
- Income from Uruguayan sources, such as local rent or interest from local banks.
- Income from financial derivatives, which the law treats separately.
- Tax owed to another country. A person who stays tax resident elsewhere, or who is a US citizen, can still owe tax there on the same income.
There is a separate employment program in the same law. Article 190 lets qualified professionals who move to Uruguay to work for technology, innovation or global services companies opt for IRNR on their salary for the year of arrival plus four years. They must not have been resident in the previous five years, must spend at least two-thirds of the year in Uruguay, and must earn all their work income locally as employees.
For context on how Uruguay compares with its neighbors, see our overview of low-tax countries in Latin America and the wider list of territorial tax countries. Residence permits are a separate process from tax residence; our guide to golden visas in Latin America covers the immigration side.
Frequently asked questions
How long is Uruguay's tax holiday?
For people who become resident from 2020 onward, it covers the tax year in which they become resident plus the following ten tax years, so eleven years in total. People who became resident before 2020 had a shorter period, which some can extend to ten years under Law 19,937.
Is the 7% option still available?
Not for new arrivals. The old article allowed a permanent 7% IRPF rate on foreign capital income, but elections could only be made until December 31, 2025. People who chose 7% before that date keep the rate under the current rate table.
Do I need to buy property to get the tax holiday in 2026?
No. Property worth more than UI 12.5 million is one route, but people who spend more than 183 days in Uruguay each year can qualify without an investment, and annual contributions of at least UI 625,000 to qualifying funds are a third route.
Does Uruguay now tax foreign capital gains?
Yes, from January 1, 2026, residents outside a tax holiday pay IRPF on gains from selling foreign assets that produce capital income, such as shares in foreign companies. The 2026 holiday covers those gains for people who qualify.
Does a Uruguayan tax residency certificate end tax residency elsewhere?
Not by itself. Each country applies its own rules, and a treaty may decide where a person is resident if two countries claim them. Our guides on tax treaty tie-breaker rules and tax residency certificates explain how this works.
Important: This article is general information, not tax, legal or financial advice. Rules change often and depend on your personal circumstances. Speak with a qualified professional in each relevant country before you act.