Uruguay’s new budget law, signed on December 16, ends the US$550,000 property route to its 11 year tax holiday. From 2026 it takes about US$2 million in property, a yearly innovation fund contribution or real residence.
Uruguay has changed the terms of one of its best known incentives for wealthy newcomers. Law 20.446, the national budget for 2025 to 2029, was promulgated (signed into law by the executive) on December 16, 2025. Among hundreds of articles, it reshapes the so called tax holiday that has drawn thousands of foreign families, many of them Argentine, to Uruguay since 2020. The new rules apply from January 1, 2026.
Uruguay taxes individuals mainly on income earned in Uruguay, but since 2011 its personal income tax, the IRPF (Impuesto a la Renta de las Personas Físicas), has also applied at 12% to foreign dividends and interest received by residents. To attract new residents, the government created a holiday: people who became tax resident could choose not to pay that tax on foreign capital income for a period. A 2020 reform stretched it to the year of arrival plus ten more years, eleven in total.
The reform also made tax residency easy to obtain. Instead of living in Uruguay for more than 183 days a year, a newcomer could qualify by buying property worth roughly US$550,000 to US$600,000 and spending at least 60 days a year in the country. Residents who preferred a permanent option could instead choose a flat 7% rate on foreign dividends and interest with no end date.
For people who become tax resident from January 1, 2026, the holiday is still eleven years, but the ways to qualify for it change:
The old 60 day property route no longer leads to the holiday, and the perpetual 7% option closes to new residents. Without the holiday, foreign dividends, interest and now also capital gains on foreign assets are taxed at 12%, with a credit for tax already paid abroad. Foreign salaries for remote work are not affected by these changes.
The law also adds options for later on. When the eleven years end, a resident can pay 6%, half the normal rate, for five more years by making a further qualifying investment, or choose a fixed annual payment for twenty years tied to a large investment in a Uruguayan business. Many of the details, including how the innovation contributions will work, depend on regulations the executive has yet to issue.
People already enjoying the holiday keep it for the rest of its term. Advisers in Montevideo have been clear that the new conditions apply to current beneficiaries only once their exemption period ends. Anyone who has already chosen the 7% rate also keeps it.
The government's rationale is a mix of revenue and fairness. Uruguay is under pressure to bring its tax rules into line with international standards on taxing offshore income, and the old regime allowed a relatively modest property purchase to unlock a decade of tax free foreign income.
For most people the residency itself is unchanged. Uruguay still grants permanent residency based on stable income from abroad, without any investment, and still offers naturalisation after three years for families and five for single applicants who genuinely live there.
What has changed is the tax planning. If you intend to actually live in Uruguay most of the year, the holiday remains available. If you want the holiday while spending only part of the year there, the entry price is now about US$2 million in property or a long term innovation commitment. For everyone else, a 12% rate with credit for foreign tax is still moderate by international standards. We help clients apply for residency, and the licensed accountants and lawyers in our local team in Uruguay advise on the tax side.
This article is general information, not legal, tax or investment advice.
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