On May 6, 2026, the Executive Branch issued a Decree still unnumbered (the Decree) regulating the application of Personal Income Tax (IRPF) on foreign capital income, within the framework of the amendments introduced by the National Budget Law No. 20,446 (the Law) dated December 2025 (Tax regime applicable to individuals with tax residence in Uruguay for their foreign income ). 

It should be noted that this Law expanded the scope of foreign income taxation under IRPF, including not only movable capital returns (e.g. interest or dividends), but also real estate capital returns and equity increases (capital gains, such as sale of shares) derived from foreign assets. The applicable rate is 12%. In addition, the rule incorporated a tax transparency regime, whereby certain income obtained through Uruguayan and foreign entities is directly attributed to individuals who are IRPF taxpayers. 

It is important to note that the Decree does not regulate aspects related to the Tax Holiday regime, which will be regulated in a subsequent decree.  

Please find below a summary of the main aspects of such regulation. 

 

1. TAX TRANSPARENCY REGIME

 

The Law incorporated a tax transparency regime whereby the aforementioned income obtained through entities (local or foreign) is directly attributed to resident individuals who are IRPF taxpayers, depending on their status as ultimate beneficial owners (more than 5%), regardless of the structure used. 

The Decree introduced the following clarifications in relation to the tax transparency regime: 

- Open investment funds (local): open-fund quota holders may temporarily exceed the 5% interest threshold for up to 30 days in each calendar year, without being included under the allocation scheme, provided that such excess results from passive changes in the composition of the fund and not from new investments made by the taxpayer, or from the creation of the fund. 

- Combination with corporate income: the allocation scheme does not apply where foreign income is obtained in combination with corporate income, unless Tax Authority demonstrates that individuals made the investment abroad directly or through an entity. 

- Non-resident trusts and similar entities: income obtained through non-resident trusts, investment funds, or other similar entities is allocated to their current beneficiaries. In the absence of current beneficiaries, income is allocated to the settlor, until the status of beneficiary is established. 

 

 2. EXCLUSIONS TO EQUITY INCREASES (CAPITAL GAINS)

 

The Decree clarified that the following situations are not deemed to be equity increases taxed by IRPF: 

- Transfers by reason of decease: transfers of goods by succession, as well as those originating in contractual stipulations that become effective subject to the decease of the holder. 

- Awards of goods by non-resident entities: awards of foreign assets made by non-resident entities subject to the tax transparency regime in favor of individuals holding interest in such entities, provided that such individuals maintain the status of ultimate beneficial owners for at least 95%. 

The dissolution of marital community property regime or partition is not deemed to be equity increases.  

 

3. DETERMINATION OF INCOME

 

The Decree made relevant clarifications on the determination of the taxable amount of certain foreign income and equity increases. In particular, the following aspects are highlighted: 

- Return of holdings in funds and collective investment entities: the Decree clarified that, in cases of return of holdings in investment funds or other collective investment entities, taxed income will be determined as the difference between the amount returned and the acquisition or payment value of the holdings, considered as movable capital return (not equity increase). For this purpose, holdings will be valued in the currency of the investment, converted into national currency at the date of the return. 

- Debt securities with and without explicit interest: in the case of securities that do not provide for explicit interest (for example, “zero coupon” securities), taxed return is determined as the difference between par value and acquisition value, provided they are held until maturity. For securities with explicit interest, returns are charged to the holder at the time of payment or making available. Likewise, where these securities are held until maturity and have been acquired at a value other than par value, the resulting difference is considered capital return, and may be positive or negative. 

- Sale of real estate located abroad: income is determined as the difference between the sale price and the tax cost of the real estate, considering the value resulting from the purchase deed and any properly documented improvements, converted to the exchange rate of the day prior to the transaction. Supporting documentation must be translated (if applicable), legalized and apostilled.  

Taxpayers may opt for a notional regime of determination of income, applicable to all real estate sold in the year, consisting of a 15% of the sale price. Such option will be annual. This implies an actual IRPF rate of 1.8% on the sale price. 

- Sale of other assets located abroad: for the sale of assets other than real estate (such as shares, certificates, securities or other financial assets), the taxed income is generally determined by the difference between the sale price and the tax cost, considering the investment in the original currency and its conversion to national currency at the exchange rate of the day prior to the transaction. Where identical assets acquired at different prices are sold, and are not entirely sold, the tax cost shall be determined by applying the weighted average of the different acquisitions. 

 
In addition, for assets listed on a renowned prestigious stock exchange or included on the information systems of the Ministry of Economy and Finance or the Central Bank of Uruguay to be established by Tax Authority and acquired prior to the start date of the scheme (January 1, 2026), the Decree sets forth as tax cost the list value at December 31, 2025, clarifying that, in the event that the result of the sale is negative, the loss may not be compensated by other income.  

Finally, the option of applying an annual notional regime considering as taxed income 20% of the sale price is provided for. This implies an effective IRPF rate of 2.4% on the sale price. 

- Negative results offset: The Decree provided that negative results from foreign equity increases may be offset with other gains from equity increases or gains from foreign movable capital returns. Moreover, negative foreign movable capital returns shall be offset with other foreign movable capital returns. 

- Tax credit for taxes paid abroad: the Regulatory Decree sets forth that IRPF taxpayers may count as credit the similar tax actually paid abroad for income included in the scheme, crediting it against IRPF generated by such income. Credit to be computed may not exceed the portion of the tax determined in Uruguay corresponding to the respective income. Additionally, calculation of taxes paid abroad through entities allocating their income under the tax transparency regime is enabled. 

 

4. LIABILITY FOR THIRD-PARTY TAX OBLIGATIONS

 

The Decree determined certain liability for third-party tax obligations in relation to foreign income taxed under IRPF. In particular, the following scenarios are emphasized: 

- Brokerage and custody of foreign assets: resident entities that, acting on behalf of the taxpayer, carry out in a professional and customary manner in the Republic of Uruguay intermediation between offer and demand of movable assets in non-resident entities, and exercise custody of such assets, are deemed to be liable for third-party tax obligations. In these cases, the Decree provided for the application of a monthly withholding at the rate of 8% (which may be final), made and payable in the following month, calculating on the accumulated income from the beginning of the financial year, with deduction of any withholding made in previous months. 

- Entities subject to the tax transparency and income allocation regime: IRAE taxpayers and non-resident entities who have appointed a representative shall be held liable for third-party tax obligations regarding any income to be charged to IRPF taxpayers. In such cases, withholding shall be monthly and payable within one month following the accrual of the allocated income, applying the general rate of 12%, and further determined on the basis of the accumulated income from the beginning of the financial year, deducting any amounts previously withheld. 

Please find below some general remarks about liability for third-party tax obligations: 

- Determination of equity increases: taxpayers must opt for the income determination criterion (actual or notional) and notify their option to any applicable liable party. Upon failure to notify, the liable party shall apply the criterion of actual determination. 

- Tax credit: liable parties may count as credit any similar income taxes actually paid abroad, until concurrency with the corresponding IRPF. 

- Transitional regime (financial year 2026): during the financial year 2026 withholdings applicable to foreign income shall become payable from the month of July. 

 

5. ADVANCE PAYMENTS

 

The Decree provided a system of IRPF advance payments for those taxpayers who obtain taxed foreign income and who are not subject to withholding mechanisms by appointed liable parties. 

In particular, taxpayers shall make semi-annual advance payments under the conditions determined by Tax Authority, calculated by applying the 12% rate on the total income accumulated in the corresponding period. Advance payments shall be determined taking into account income accumulated from the beginning of the financial year, deducting, as appropriate, any earlier advance payments. 

Likewise, the Decree sets forth that taxpayers may consider advance payments as final, becoming thus released from the obligation to file tax statements for such income. 

 

6. SIMPLIFIED TAX REGIME (FIXED PAYMENT)

 

The Decree regulated the simplified tax regime applicable to resident individuals (who have not had Tax Holiday, since these individuals are already subject to a special regime established by Law), with the possibility of opting for payment of a fixed annual amount, replacing any tax settlement under the general regime (foreign returns and equity increases). Such fixed payment amounts to the sum of UI 1,875,000 (approximately USD 300,000) per person (without reduction for spouses), for a term of up to 20 years. Tax Authority shall establish the terms and conditions applicable to this regime.