Published on and written by Cyril Jarnias
Moving to Uruguay is attracting more and more expats, drawn by its political stability, rule of law, and a tax system based on the principle of territoriality. But behind this reputation as the “Switzerland of South America” lies a precise tax mechanism that must be mastered, especially when dealing with combined international income and real estate investment.
This article provides a comprehensive overview of income tax and real estate taxation in Uruguay, specifically tailored for expats. The information presented is based exclusively on facts from an official research report.
Territoriality, DGI, and the General Framework: What You Need to Know Before Moving
The foundation of the Uruguayan tax system is territoriality. In practice, Uruguay primarily taxes what is generated within its territory: activities carried out in the country, assets located locally, rights used economically in the country. Foreign-source income is largely excluded, except for specific exceptions (mainly certain passive income like interest and dividends for residents).
The end of the fiscal year in Uruguay, which coincides with the calendar year from January 1 to December 31.
Another key point for expats: Uruguay does not apply exchange controls. Capital, including proceeds from the sale of a property, can be repatriated freely, even in US dollars, which reassures many foreign investors.
Becoming a Tax Resident in Uruguay: Length of Stay, Vital Interests, and Investment
Before discussing tax, you need to know whether you are considered a tax resident or not. The status does not depend on a visa but on objective criteria that the DGI reviews each year.
Three main avenues can qualify someone for tax residence:
Physical Presence: The 183-Day Rule
An individual generally becomes a tax resident if they spend more than 183 days in Uruguay during the same calendar year. Arrival and departure days are counted, while simple transit days to another country are not. Short absences (e.g., less than 30 days) are still counted, unless one can prove tax residence in another country via a certificate issued by the foreign administration.
Center of Vital or Economic Interests
One can also be considered a tax resident even without exceeding 183 days, if Uruguay is the center of their vital or economic interests.
This is notably the case when:
– the spouse and minor children usually reside in the country,
– the main source of income or the bulk of assets is located in Uruguay,
– economic activities are primarily carried out in the country.
When one family member is deemed a resident, the spouse and dependents are, by presumption, also considered tax residents, unless proven otherwise.
Residency by Investment: The Real Estate Advantage for Expats
The third path, widely used by investor expats, is based on investment thresholds. The legislature has provided several scenarios, two of which are particularly interesting for those combining stay and real estate acquisition.
On one hand, real estate investment can serve as a basis for tax residence. The regulations stipulate, for example, that owning real estate in a territory can be a criterion for establishing tax residence there, thus subjecting the taxpayer to tax in that country.
– an investment in a property worth at least approximately USD 400,000 (equivalent to 3.5 million indexed units, UI) accompanied by a minimum presence of 60 days per year,
– or, for some newer regimes, higher thresholds (approximately USD 2 million) to access extended tax benefits on foreign-source income.
On the other hand, an investment in a local company can also pave the way to tax residence, for example:
– participation in a company for an amount exceeding approximately USD 1.7 million and creating at least 15 full-time jobs,
– or participation in a company whose project is declared of national interest, beyond a certain investment volume.
These different options are governed by decree 148/007 and the consolidated texts of 2023, and are in addition to the 183-day rule.
IRPF and IRNR: How Uruguay Taxes Expats’ Income
The key distinction for an expat is the following: having a clear vision of the professional and personal stakes involved.
– tax resident: subject to IRPF on Uruguayan-source income, plus certain foreign-source passive income,
– non-resident: subject to IRNR only on Uruguayan-source income.
IRPF for Residents: Two Income Blocks, Two Logics
The IRPF (Personal Income Tax) is a personal tax established in 2007, with a dual structure:
– employment income (salaries, fees, personal services): progressive scale,
– capital income (interest, dividends, rents, capital gains, royalties, etc.): flat rates, most often 12%.
For expats who become residents, it is crucial to distinguish between these two categories.
2025 Scale on Employment Income
For the 2025 tax year, the IRPF brackets on employment income are as follows in Uruguayan pesos:
| Annual Employment Income Bracket (UYU) | IRPF Rate |
|---|---|
| Up to 552,384 | 0% |
| 552,385 to 789,120 | 10% |
| 789,121 to 1,183,680 | 15% |
| 1,183,681 to 2,367,360 | 24% |
| 2,367,361 to 3,945,600 | 25% |
| 3,945,601 to 5,918,400 | 27% |
| 5,918,401 to 9,074,880 | 31% |
| Over 9,074,880 | 36% |
Employees generally have this tax withheld at source by the employer. Deductions remain limited: social security contributions, standard amounts for dependent children, certain housing expenses (rents or mortgage interest for the primary residence) under specific conditions.
Taxation of the household follows specific scales that vary depending on whether each spouse exceeds an income threshold equivalent to 12 times the annual minimum wage.
Capital Income for Residents
Capital income is generally less heavily taxed but follows a distinct logic from that of salaries. Simplified:
| Type of Capital Income (Uruguayan source) | Indicative IRPF Rate |
|---|---|
| Interest, rents, securities capital gains | 12% |
| Dividends/profits distributed by a company taxed under IRAE (corporate tax) | 7% |
| Dividends from listed companies | 0% |
| Interest on Uruguayan public securities | 0% |
| Royalty income | 7% |
Some specific formulas apply to structured products or trust units, with rates ranging from approximately 0.5% to 12% depending on the currency and duration.
Residents and Foreign-Source Income: What Is Taxed and What Remains Out of Scope
In the Uruguayan system, the basic rule remains the non-taxation of foreign income for residents, but it has important exceptions concerning passive income (interest and dividends from abroad). Capital gains on foreign assets are, in principle, exempt.
For new tax residents, the legislature has created attractive regimes: a temporary exemption (tax holiday) or, alternatively, a permanent reduced rate on certain foreign passive income.
We will cover this in more detail later, as it is one of the most strategic points for an expat.
IRNR for Non-Residents: A Source Tax on Uruguayan Income
Expats who do not meet the tax residence criteria are taxed under the IRNR (Non-Resident Income Tax) only on their Uruguayan-source income.
In general, it is recommended to adopt a methodical and thoughtful approach to tackle any task or project. This involves clearly understanding the objectives, organizing the necessary steps, and adapting to circumstances while maintaining a clear vision of the final outcome.
– Uruguayan-source employment income may be subject to a flat rate of 25%,
– other income (interest, dividends, rents, technical fees, etc.) is taxed at rates from 7% to 12% in most cases,
– when the beneficiary is established in a low- or no-tax jurisdiction, the rate can rise to 25%.
The IRNR mainly operates through withholding at source: the Uruguayan entity paying the income (employer, company, institutional tenant, etc.) is required to withhold and remit the tax to the DGI.
For technical services provided from abroad to a Uruguayan company, the nominal rate is often 12% (or 25% if the provider is in a tax haven). However, if these services represent a very limited fraction of the local company’s turnover, the taxable income may be reduced to 5% of the remuneration, bringing the effective rate down to 0.6% or 1.25%.
The “Tax Holiday” for New Residents: A Central Tool for Expats
Uruguay has implemented a favorable regime aimed at attracting wealthy individuals or those with significant international capital income. This mechanism, often called a “tax holiday“, specifically targets foreign passive income (interest and dividends).
Two Main Options for New Residents
Individuals who become tax residents from 2020 onwards have a choice:
1. 11-year exemption on foreign passive income For the year of arrival plus the next 10 years, dividends and interest from foreign sources can be completely exempt from IRPF. After this period, they will be taxed at the standard rate of 12%.
New residents can waive the temporary exemption and opt for the immediate taxation of their foreign dividends and interest at a reduced rate of 7%, applicable indefinitely, instead of the standard 12% rate.
This choice is generally irrevocable, and its usefulness will depend on the intended length of residence, income profile, and country of origin (presence or absence of a foreign tax credit).
Upcoming Extension and Stricter Conditions to Access the Tax Holiday
The most recent reforms, linked to the national budget 2025–2029, foresee stricter conditions for new residents starting in 2026. To benefit from the extended tax holiday on foreign capital income (dividends, interest, capital gains), it will notably require:
Minimum number of days of physical presence per year to justify tax residence in Uruguay.
The regime would then unfold in several phases:
– 11 years (year of arrival + 10 years) of exemption on certain foreign capital income,
– then an additional 5 years at a reduced rate (e.g., 6% instead of 12%),
– before switching to the general 12% regime, or possibly to an annual lump-sum regime for higher-income profiles.
For expats already established or who acquire their residence before the end of the transitional period, access conditions generally remain more flexible (e.g., real estate investment of approximately USD 400,000 and presence of 60 days per year to extend the exemption period).
Income Tax and Real Estate Rentals: IRPF or IRNR Depending on Status
As soon as an expat buys a property in Uruguay to rent it out, the resident/non-resident distinction determines the applicable regime.
Non-Resident Landlord: Rent Taxed under IRNR
For a non-resident receiving rents from an apartment in Montevideo or a house in Punta del Este, this income is undoubtedly of Uruguayan source and therefore subject to IRNR.
The main characteristics are as follows:
– net rent may be taxed at a flat rate of approximately 12%,
– some regulations mention a withholding of around 10.5% on gross rent, considered final taxation,
– expenses directly related to the property (property taxes, administration fees, agency commission, maintenance, etc.) are deductible to determine the taxable base in net regimes.
A non-resident owner typically entrusts the management of their property to a third party (agency or administrator). This manager collects the rents and handles tax obligations, notably the withholding of the Non-Resident Income Tax (IRNR) and its payment to the General Tax Directorate (DGI).
Resident Landlord: Rents Integrated into IRPF
For a tax resident, rents fall into the capital income category and are generally taxed at 12%. They are not aggregated with employment income in the progressive scale but are declared as separate income at a fixed rate.
An important nuance concerns the primary residence: renting out the taxpayer’s primary residence generally benefits from partial or total exemptions, reducing the tax burden in this specific case.
Deductible expenses are similar to those for non-residents: property taxes, management fees, administrator’s commission, certain property-related taxes, etc.
Property Tax in Uruguay: Structure and Reality for Expat Owners
For an expat buying a property, the annual “cost of ownership” is essential. In Uruguay, real estate taxation consists of several layers of taxes, straddling national and municipal levels, with an overall level that generally remains moderate compared to other countries.
Main Components of Annual Real Estate Taxation
Four main categories of levies consistently appear in calculations:
– Contribución Inmobiliaria: the quintessential municipal property tax, based on the cadastral value,
– Impuesto de Enseñanza Primaria: national tax for funding primary education,
– Impuesto al Patrimonio: net wealth tax on assets located in Uruguay, including real estate,
– Tributos Adicionales Municipales: local fees for services (lighting, roads, sanitation, etc.).
Together, these taxes typically represent between 0.4% and 2.5% of the property’s cadastral value per year. In practice, for an average-sized apartment or house, the total annual bill often ranges between UYU 10,000 and UYU 40,000.
Cadastral Value: A Key Point for Reducing Charges
All these taxes are calculated based on the cadastral value (tax value), not the market value. This value is set and periodically revised by municipalities but often remains lower than the actual sale price, reducing the taxable base.
Each Uruguayan department publishes its own revision index, which can lead to substantial variations between areas, for example between Montevideo, Maldonado (including Punta del Este), and more rural departments.
Contribución Inmobiliaria: A Progressive or Flat Municipal Tax
The rate and calculation method depend on the department.
In Montevideo, the capital, a progressive scale is applied to the cadastral value. For 2025, the published brackets are, for example:
| Cadastral Value Bracket (Montevideo, UYU) | Contribución Inmobiliaria Rate |
|---|---|
| 1 to 957,675 | 0.18% |
| 957,676 to 2,394,188 | 0.75% |
| 2,394,189 to 4,788,369 | 1.00% |
| 4,788,370 to 8,250,606 | 1.20% |
| 8,250,607 to 16,501,215 | 1.65% |
| Over 16,501,216 | 1.80% |
In the department of Maldonado (home to Punta del Este), rates are often simpler, roughly between 0.25% and 0.50% of the cadastral value. In smaller departments (Rivera, Tacuarembó, Cerro Largo), rates are generally between 0.25% and 0.30%, sometimes almost proportional without real progressivity.
For rural properties, a specific national property tax around 0.7% is added or substitutes the urban schemes.
Concrete Calculation Examples
A few scenarios illustrate the real charge:
| Property Type | Cadastral Value (UYU) | Contribución Inmobiliaria (approx.) | Enseñanza Primaria (approx.) | Total Annual (approx.) | Effective Rate on Cadastral Value |
|---|---|---|---|---|---|
| Apartment in Montevideo | 2,500,000 | 13,506 UYU | 5,000 UYU (0.20%) | 18,506 UYU | ≈ 0.74% |
| House in Maldonado | 6,000,000 | 27,000 UYU (0.45%) | 12,000 UYU (0.20%) | 39,000 UYU | ≈ 0.65% |
| Rural plot | 1,500,000 | 10,500 UYU (0.7%) | 0 UYU (often exempt) | 10,500 UYU | 0.7% |
These amounts do not include potential wealth tax or additional municipal taxes, but give an idea of the order of magnitude for an expat owner.
Impuesto de Enseñanza Primaria: The National “Education” Tax
This national tax applies to almost all urban and suburban properties (rural land is generally exempt) and funds public primary education. The main characteristics are:
Main characteristics and costs of the real estate contribution (Contribución Inmobiliaria) for property owners.
The tax is calculated on the property’s cadastral value, as established by the authorities.
The applied rate in practice varies between 0.15% and 0.30% of the cadastral value.
Possible exemption for properties whose cadastral value is below approximately UYU 271,000.
For a standard dwelling, the annual cost is generally between USD 40 and USD 100.
The structure is often progressive: more expensive properties bear a rate close to 0.30%, while smaller properties are at 0.15%, or even exempt.
Wealth Tax: When Property Value Triggers the Net Wealth Tax
Uruguay applies a net wealth tax (Impuesto al Patrimonio) on assets located in the country (real estate, cash, shares in local companies, etc.). Foreign assets remain out of scope.
For individuals, the tax only applies to the portion of net worth above a threshold. The most recent data indicates, for example:
| Taxpayer Category | Exemption Threshold (approx.) |
|---|---|
| Individual | 6,381,000 UYU (approx. USD 146,000) |
| Tax Household | 2 × 6,381,000 UYU (approx. USD 293,000) |
Rates are progressive, within a range that, according to sources, goes from 0.1–0.2% to approximately 0.8–1.5%. Non-residents are taxed at generally higher rates, often up to 1.5%.
Important particularity for owner-occupiers of their primary residence: only half of the cadastral value of the primary residence is taken into account when calculating the wealth tax base, which excludes a significant number of households, including settled expats.
Debts contracted with local banks to finance a Uruguayan asset can be deducted from the taxable base.
Payment Modalities: Schedule, Discounts, and Penalties
Real estate taxes are generally payable once a year, but most departments offer installment payments:
Deadlines for paying the Real Estate Contribution (Property Tax) vary by department. Here is a summary of the main payment options.
Possibility to pay in one lump sum or in three quarterly installments.
Three traditional installments (February, May, September), sometimes extending to five payments depending on the year.
Most often adopt a three-installment payment scheme.
Payments can be made:
– via the municipalities’ online portals,
– through payment networks like RedPagos and Abitab,
– at major banks,
– at municipal administration counters.
A significant discount is provided for early payment: for example, up to 10% discount in Maldonado for full payment in January; in other departments, discounts of 5 to 8% are common. Late payments trigger interest on arrears (around 10% per year in some departments) and can lead to the cancellation of payment plans.
Reliefs and Exemptions: Seniors, Modest Properties, Rural
Exemptions and reductions often fall under the jurisdiction of each department. Among typical cases:
– partial reduction for property owners over 65 years old, subject to income conditions,
– exemptions or very reduced rates for properties with low cadastral value,
– relief for rural farms used for productive agricultural purposes,
– specific adjustments for properties adapted for disability.
These schemes usually require a formal application and the provision of supporting documents.
Real Estate Taxation on Purchase and Resale: Transfer, Capital Gains, and Fees
Beyond annual taxes, an expat must factor in the costs and taxes related to real estate transactions.
ITP: The Transfer Tax
When a property changes ownership, a Transfer Tax (Impuesto a las Transmisiones Patrimoniales, ITP) is due. The legal rate is 4% of the cadastral value, in practice split between buyer and seller (2% each).
Some regulations also mention a version of 2% solely charged to the buyer in specific contexts, but in the most common scheme, each party assumes 2% of the tax value, which is often 30–40% of the market price. The real burden of the ITP thus remains moderate compared to a tax calculated on the actual sale price.
Notary, Registration, and Commissions: The Overall Cost of an Acquisition
The *escribano público* (notary) plays a central role in any Uruguayan real estate transaction: title verification, tax control, deed drafting, registration. Their fees are around 3% of the sale price, plus VAT (22%), for a total approximate cost of 3.66%, although some negotiate lower rates (down to 1.5% + VAT).
Added to this are:
– stamp duties for registration (approx. 0.55% of the price),
– registry fees (USD 600 to 800),
– legal certificates (USD 600 to 1,300),
– title search (USD 200 to 400),
– real estate agency commission (often 3% + VAT, usually paid by the seller, but practice may vary).
Overall, the buyer’s side should budget between 5% and 8.5% of the sale price in transaction costs, in addition to the ITP.
Real Estate Capital Gains: IRNR for Non-Residents, IRPF for Residents
In case of property resale, Uruguay taxes the capital gain on assets located in the country, whether for residents or non-residents.
Non-residents are subject to the Non-Resident Income Tax (IRNR) on real estate capital gains. The flat rate is 12%, applied to the net capital gain. This is calculated by subtracting the inflation-adjusted acquisition cost from the sale price, using the Consumer Price Index. Note: if the seller is domiciled in a low-tax country, the tax rate can rise to 25%, or even higher in case of using opaque legal structures.
– Residents: capital gains on properties located in Uruguay fall under the “capital income” block of IRPF and are generally taxed at 12%. A particularity concerns the sale of the primary residence, which may be subject to the IRPF progressive scale instead of the fixed rate, which can be more or less advantageous depending on the situation.
Real estate capital losses can generally only be offset against other capital gains, and only for a limited carry-forward period (e.g., two years).
Wealth Tax and Holding via a Company: Impact for Expats
Some expats consider holding their property via a local or foreign company. This changes the treatment under the wealth tax, and potentially that of capital gains.
Tax rate on net wealth in Uruguay for local companies, can reach 2.8% for banks.
Holding a property via a company can offer advantages in terms of transfer or international structuring, but it can increase the wealth tax burden compared to direct ownership, especially for a single property. This trade-off should therefore be analyzed with local tax advice.
Absence of Inheritance and Gift Tax: An Asset for Estate Planning
For expats concerned about inheritance rights, Uruguay offers a major advantage: there is no general tax on inheritances, donations, or bequests, whether for real estate or financial assets.
In France, transfers of a property following a death may be subject to a reduced-rate Transfer Tax (ITP), for example 3% of the cadastral value, charged to the heirs. This regime differs from the progressive scales on the total value of the inheritance applied in some other countries. Regarding gifts, they are fiscally treated as sales for calculating any potential capital gain for the donor (difference between market value and acquisition cost). However, a gift itself does not trigger a specific gift tax.
For an expat coming from a country with high inheritance taxation, structuring assets around a property in Uruguay can thus constitute a particularly attractive estate planning strategy, subject to the rules of their country of origin (forced heirship rules, potential exit tax, etc.).
Income Tax, Tax Treaties, and Double Taxation
Uruguay has signed double taxation avoidance agreements with a significant number of countries (Argentina, Brazil, Belgium, Spain, Switzerland, Portugal, Germany, Italy, Luxembourg, Mexico, South Korea, Singapore, United Arab Emirates, United Kingdom, among others).
These treaties generally specify:
– residency criteria in case of dual residence,
– the priority country to tax certain income (dividends, interest, capital gains, pensions, etc.),
– limits on withholding tax on certain flows,
– the tax credit mechanism in the country of residence.
No comprehensive tax treaty exists between the United States and Uruguay, but a social security agreement and a tax information exchange agreement do exist. American expats residing in Uruguay must report their worldwide income to the US. They can use mechanisms like the foreign earned income exclusion, foreign tax credits, and must comply with reporting obligations for foreign accounts (FBAR, FATCA).
On the Uruguayan side, the principle of territoriality de facto reduces the risks of double taxation: except in specific cases (foreign passive income for residents, especially after the 2026 reforms), Uruguay does not tax what is already taxed abroad. When certain foreign income becomes taxable in Uruguay (dividends and interest, capital gains on certain foreign assets), the law provides for a unilateral tax credit generally capped at the Uruguayan rate (e.g., 12%).
Procedures, Certificates, and Reporting Obligations for Expats
For an established expat, the administrative aspect is almost as important as the tax rates. A few benchmarks are essential.
For tax residents, the IRPF declaration is made via form DGI 1102, with a deadline generally at the end of April. Non-residents subject to IRNR are often taxed at source, but a direct declaration may be required before May in case of a permanent establishment. A tax residence certificate, valid for one fiscal year and issued electronically since 2016, can be obtained upon request (form 5202) from the DGI.
For expats operating in free trade zones like Zonamerica or World Trade Center Free Zone, special regimes exist. Companies there benefit from massive exemptions from national taxes (corporate tax, VAT, wealth tax). Foreign employees in these zones can, under certain conditions, choose to be taxed under IRNR instead of IRPF and be excluded from the Uruguayan social security system, which significantly alters the salary withholding structure.
Conclusion: An Attractive Tax Framework, Provided You Master It
For an expat, Uruguay’s taxation combines several attractive features:
– primarily territorial taxation, with a broad exemption for foreign income,
– favorable regimes for new residents with international capital income,
– overall moderate real estate taxation, thanks to cadastral values lower than market values and reasonable rates,
– absence of inheritance and gift taxes, opening up estate planning opportunities.
The system combines progressive scales on employment, specific rates for each type of capital income, a variable IRNR, and several property and wealth taxes. New rules starting in 2026, like the extended taxation of foreign capital income and a stricter tax holiday, will increase this complexity.
For any expat considering buying a property and a long-term move, the key is to articulate three dimensions:
For a successful tax relocation to Portugal, three aspects are essential: determining your tax resident status by choosing the most suitable path (183-day stay, real estate investment, or economic activities), structuring your worldwide income considering foreign capital income and applicable tax treaties, and optimizing real estate taxation by mastering cadastral value, choosing the investment location, and using exemptions or payment discounts.
Uruguay will likely remain one of the most attractive jurisdictions in Latin America for expats and investors, but it is a country where, more than ever, a good understanding of the tax rules – or guidance from a local professional – makes the difference between a simple relocation and true optimization of your setup.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
