Recently enacted rules have ratified the full effectiveness of Uruguay’s tax holiday regime (“ the Tax Holiday”). The main characteristics of the system are summarized below:
1. The Tax Holiday entails an 11 year tax exemption granted to non-residents acquiring UY’s tax residency under the conditions indicated below.
2. Individuals (tax residents in UY) who benefit from the Tax Holiday are exempted from personal income tax (normally assessed at the rate of 12%) over their foreign-sourced financial income (capital gains and foreign rental income included).
3. Under the new regime, the Tax Holiday would be gained by any of the following alternative mechanisms: (i) 184 days of physical presence in UY (during the calendar year); (ii) a real estate investment in an amount of not less than approximately USD 2 million; and (iii) a capital contribution of approximately USD 100,000 per year in a State-owned innovation and research fund to be established by UY’s Administration.
4. At the end of the Tax Holiday, the individual tax resident would be scheduled to start paying personal income tax at the rate of 12%. The new regime grants those individuals, upon the expiration of the Tax Holiday, the option to choose for either (i) start paying personal income tax at half of the standard rate (at a 6% rate) for the term of 5 years upon making (x) an additional real estate investment in the sum of approximately USD 1 million or (y); or making the capital contribution of USD 100,000 per year as referred under (iii) above; or (ii) start paying (for personal income tax) a fixed sum of approximately USD 300,000 per year during a 20-year period.
5. The new regime will come into force on 1 January 2026. Regulations are still pending.
The above communication has been prepared just for information purposes. It cannot be construed as legal advice provided by Bergstein Abogados. Should you have any further question, please feel free to contact Dr. Domingo Pereira (dpereira@bergsteinlaw.com) and/or Dr. Jonás Bergstein (jbergstein@bergsteinlaw.com)
