Castellán

It is important to note that the current regime remains in force until December 31, 2025, while the recent enactment of Law No. 20,446 (Budget Law 2025-2029) introduces some changes that will begin to apply to those who acquire tax residence from January 1, 2026.

1. What is tax residence and how does it differ from legal residence?

Tax residence

- It is the one that defines in which country the person is considered a resident for tax purposes.

- It does not necessarily require being a legal resident or having a specific immigration category.

- It can be proven to interested third parties by obtaining the Tax Resident Certificate issued by the Tax Authority (DGI).

Legal residence

- It is the permission to live and work in Uruguay.

- It is processed before the National Immigration Directorate.

- There may be legal residents who are not yet tax residents and vice versa.

In practice, what is relevant for estate and tax planning is how both residences fit with the regulations of the country of origin and the double taxation avoidance agreements.

2. When is someone considered a tax resident in Uruguay?

A natural person will be a tax resident in Uruguay if they meet any of the following criteria:

a) Presence in Uruguay

- Being in Uruguayan territory for more than 183 days during the calendar year.

- The accumulated days are counted (they do not have to be consecutive).

- Sporadic absences of up to 30 days can be counted as days of presence, if the person maintains their home in Uruguay and their main link with the country is not interrupted.

b) Main center of activities or vital interests

- When the income generated in Uruguay is greater than that generated in any other country (excluding pure capital income).

- It is presumed that vital interests are in Uruguay when the spouse and dependent minor children reside here (unless proven otherwise).

c) Economic interests in Uruguay (investment)

Unless tax residence in another country is proven, it is presumed that a person has their economic interests based in Uruguay if they have any of the following investments in Uruguayan territory (in Indexed Units \u2013 UI; the equivalent in dollars varies according to the UI and the exchange rate of each year):

A. Real estate investment

- Investment worth more than 15,000,000 UI (approx. USD 2.4 million).

- Alternatively, real estate investment worth more than 3,500,000 UI (approx. USD 570,000), with a minimum effective physical presence of 60 days in Uruguay during the calendar year.

B. Investment in companies (promoted projects)

- Direct or indirect investment in companies with projects declared of national interest worth more than 45,000,000 UI (approx. USD 7.2 million), without additional requirements.

C. Investment in companies with job creation

- Direct or indirect investment worth more than 15,000,000 UI (approx. USD 2.4 million), generating at least 15 new direct full-time employment positions during the calendar year.

3. Some key frequently asked questions

Can real estate investment be in several properties?

Yes. It can consist of one or more properties, of different types and locations, as long as the sum in UI exceeds the minimum required.

Does it have to be residential or can it be commercial / rural / industrial?

It can be residential, commercial, rural, industrial, or mixed. The relevant aspects are:

- that the property is in Uruguay,

- that it is registered in the name of the interested party,

- and that it meets the minimum value in UI.

Can part of the property be financed?

Yes. It can be financed. For the purpose of the requirement, the amount agreed upon in the public deed is considered a valid investment.

Do I have to reinvest every year to maintain tax residence by investment?

No. The investment must be maintained, but it is not necessary to make a new investment every year.

In cases that require effective presence days, that permanence must be fulfilled each year.

How are the 183 days calculated?

They are accumulated days. You can enter and leave the country several times, as long as the annual total exceeds 183 days. Temporary absences of up to 30 days can be counted as days of presence, under certain conditions.

4. Tax benefits for new residents

Once a person acquires tax residence in Uruguay, the possibility of optimizing the taxation of their foreign movable capital income (interest, dividends, etc.) through the \"tax holiday\" options provided opens up.

In general terms, the regulation allows to opt once between:

a. paying Non-Resident Income Tax (IRNR) on those returns for a limited period (which, in practice, implies that certain foreign incomes are excluded from the taxable event of Uruguayan Personal Income Tax -IRPF-), or

b. paying IRPF on those same returns at a reduced rate of 7%, instead of the general rate of 12%, indefinitely.

The specific option, deadlines (5 or 10 fiscal years), and the annual accreditation method are analyzed on a case-by-case basis.

With the enactment of Law No. 20,446, modifications are introduced that will begin to apply to those who acquire tax residence from January 1, 2026. In such cases, the benefit will be conditioned to making investments in Uruguay that will be defined by the Executive Branch. It then foresees five additional fiscal years with a rate equivalent to 50% of the current rate (6%), to finally move to the general rate of 12%.

5. What happens with tax residence in the country of origin?

Obtaining tax residence in Uruguay does not automatically imply losing tax residence in another country.

It is key to:

- review the regulations of the country of origin,

- check if there is a double taxation avoidance agreement with Uruguay,

- and analyze how double residence is resolved.

Therefore, we recommend that any relocation or investment decision be accompanied by an integrated analysis between Uruguay and the country of origin (for example, Argentina, Brazil, Chile).

6. What happens with the entry into force of the recently enacted Law No. 20,446?

For those who obtain tax residence until December 31, 2025, tax residence in Uruguay is governed by the aforementioned rules.

Notwithstanding, for those who acquire tax residence from January 1, 2026, among others, the following additional modifications will apply:

A. Tax holiday for new residents (\\\"impatriates\\\")

As we saw, Law No. 20,446 maintains the options and a period of 11 years, but conditions the benefit on making investments in Uruguay that will be defined by the Executive Branch. It then foresees five additional fiscal years with a rate equivalent to 50% of the current rate (6%), to finally move to the general rate of 12%.

B. Scope of IRPF on foreign income

Currently, only foreign movable capital income (interest, dividends) is taxed.
For those who obtain tax residence from January 1, 2026, Law No. 20,446 expands the scope to foreign real estate income (for example, rentals) and foreign capital gains (for example, sale of shares or real estate), aligning the system with OECD standards.

C. Special regime to attract talent (labor IRNR)

Schemes to attract professionals are maintained, but with stricter conditions: not having been a Uruguayan tax resident in the last 5 fiscal years, effective physical presence of at least two-thirds of the year, and obtaining all labor income in Uruguay and in an employment relationship.

7. Practical considerations

The choice of the tax residence criterion is not just a legal analysis; it depends on the client's profile, their asset structure, the country of origin, and whether they plan to live, invest, or simply optimize their international tax situation.

In practice, we recommend evaluating the person's mobility and lifestyle profile, type and location of assets, timing of relocation or acquisition of tax residence, as well as the risks and opportunities of double residence (as there may be simultaneous tax residences, it is essential to review double taxation avoidance agreements or internal mechanisms of each country).

In all cases, the analysis is individual: two people with similar investments may need different strategies according to their country of origin, mobility, asset structure, and final objective.

8. How we can help

Our team accompanies the entire process, from designing the strategy to obtaining the annual Tax Residence Certificate from the Tax Authority, and integrates, when necessary, the procedures for legal residence and the corporate structure (branches, redomiciliations, representative offices).

This includes monitoring its approval and adjusting the tax and asset residence strategy of each client according to the moment they decide to relocate and their investment profile.

Montevideo, December 19, 2025.