URUGUAY: NON-RESIDENT & FOREIGN PASSIVE INCOME TAX REGULATIONS
Uruguay takes a major step toward the taxation of offshore structures and foreign passive income.
Through Decree No. 95/026, the Uruguayan Government has introduced the long-awaited regulatory framework implementing the amendments enacted by Law No. 20,446, substantially expanding the IRPF regime applicable to foreign-source income obtained through non-resident entities and investment structures.
This is not merely a technical update. It represents one of the most significant expansions of Uruguay’s international tax transparency and anti-deferral framework in recent years.
🔎 Among the Key Changes Introduced:
1️⃣ Expanded Fiscal Transparency / Look-Through Regime
The Decree substantially modifies the attribution regime applicable to foreign passive income earned through non-resident entities.
Certain foreign passive income earned through non-resident entities may now be directly attributed to Uruguayan resident individuals qualifying as final beneficiaries, applying a broad beneficial ownership concept with a reduced 5% participation threshold.
The regime applies mainly to foreign-source capital income, capital gains derived from foreign assets, and passive income structures involving investment funds and trusts.
The Decree also establishes specific anti-deferral and look-through rules for non-resident trusts, open investment funds, interposed entities, and hybrid passive structures
2️⃣ Offshore Structures Under Greater Scrutiny
The new rules expressly target foreign holding companies, investment funds, trusts and fiduciary structures, interposed entities, passive investment vehicles, and custody and brokerage arrangements.
3️⃣ Broader Taxation of Dividends and Foreign Passive Income
The Decree expands the scope of taxable dividends and profits distributed by Corporate Income Tax (IRAE) taxpayers, resident entities, and non-resident entities, particularly where such income derives from foreign passive income, foreign-source capital gains, movable and immovable capital income, offshore investment structures, and income not previously taxed under the attribution regime.
4️⃣ Foreign Real Estate and Foreign Asset Transfers
New rules are being introduced to determine taxable gains arising from sales of foreign real estate, transfers of foreign assets, and transfers of interests in investment funds
Key provisions include:
▪️ Cost basis determined in the original investment currency
▪️ Mandatory supporting documentation
▪️ Optional simplified taxable base regimes:
✔️ 15% of the sale price for foreign real estate
✔️ 20% of the sale price for other foreign assets
Special valuation rules also apply to listed securities and assets reported through financial information systems used by the Ministry of Economy and Finance (MEF) and the Central Bank of Uruguay (BCU)
5️⃣ New Withholding and Reporting Obligations
Financial institutions and intermediaries become key compliance players.
Banks, brokers, custodians, investment funds, trusts, fiduciary entities, and certain intermediaries operating in Uruguay may now act as withholding agents, assuming:
▪️ Monthly withholding obligations
▪️ Reporting obligations
▪️ Foreign tax credit verification obligations
▪️ Documentation retention requirements regarding foreign taxes paid
Withholding rates generally range from 6% to 12%.
Specific transitional rules will apply during fiscal year 2026.
6️⃣ Foreign Tax Credit Mechanism
The Decree confirms the possibility of crediting analogous foreign income taxes against Uruguayan IRPF, subject to documentation and limitation rules, provided that:
▪️ The foreign tax is analogous to IRPF
▪️ It relates to the same income taxed in Uruguay
▪️ The credit does not exceed the Uruguayan tax attributable to that income
The credit mechanism may also apply where income is attributed through transparent entities.
7️⃣ Simplified Regime
A new and optional simplified regime is created for taxpayers earning income covered by the foreign passive income rules.
Eligible taxpayers may elect a fixed annual tax regime of UI 1,875,000 for up to 20 consecutive years.
The Decree implements amendments introduced by Law No. 20,446 and generally applies to income accrued as from January 1st, 2026, although several transitional provisions apply during the fiscal year 2026.
📌 Why this Matters
Uruguay continues moving toward greater alignment with OECD-driven transparency, anti-deferral, and offshore reporting standards, reinforcing global trends already seen under BEPS initiatives, beneficial ownership frameworks, CFC-style mechanisms, and enhanced scrutiny of cross-border passive income structures.
Multinational groups, HNWIs, family offices, investment structures, and cross-border wealth planning arrangements involving Uruguay should carefully assess the operational, reporting, and compliance implications arising from these new rules.
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