Tax insight

Uruguay Budget Law

Insight
5 minute read
January 20, 2026

What happened?

Uruguay enacted, on December 16, 2025, a National Budget Law for the five-year period 2025–2029 (Law 20,446, the ‘Budget Law’) that includes relevant international tax provisions.

The Budget Law entered into force on January 1, 2026, except for provisions that expressly set a different effective date. This is the case of the Domestic Minimum Top-up Tax (DMTT), which is effective for fiscal years ending on or after December 16, 2025.

A comprehensive regulation decree is pending, expected to be issued by the Ministry of Finance in the coming months, and would regulate the tax provisions included in the Budget Law.

Why is it relevant?

The Budget Law introduces amendments to the taxation of Multinational Groups (MNGs), individuals, and, in general, those entities and individuals doing business and investing in Uruguay.

In addition to introducing a DMTT, the Budget Law also includes other important tax amendments and benefits. From a corporate perspective, it includes changes to the taxation of indirect transfers of Uruguayan assets (including Uruguayan entities) and to the income tax withholding on dividend/profit distributions. The Executive Branch has been empowered to grant tax credits to companies that carry out activities in Uruguay that contribute to economic development. These include companies that make significant investments, create direct or indirect employment, promote the development of new technologies, and favor Uruguay’s international integration through the scale of their operations. Also included are authorizations to implement incentive mechanisms for domestic or foreign companies that develop audiovisual projects in Uruguay.

Actions to consider

The implementation of a (Q)DMTT in Uruguay aligns the country with the OECD’s Pillar Two framework. This provision may affect MNGs operating in Uruguay, particularly those benefiting from tax incentives, by increasing their effective tax rate to meet the 15% global minimum threshold. Taxpayers should assess the implications at a group level, from both domestic and international perspectives.

In light of these changes, a timely assessment of the group’s structure and operations in Uruguay is advisable. This review includes evaluating the potential application of safe harbor rules, substance-based exclusions, application of legal tax stability provisions (e.g., Free Trade Zones), and other mitigating provisions.

Also, stakeholders are encouraged to proactively evaluate potential exposure under the application of the Budget Law tax provisions, focusing on the new source-extension rules applicable to indirect transfers of Uruguayan assets, IRNR implications on dividend distributions, and tax holidays.