Uruguay’s 12% Tax Goes Deeper: The Look-Through Rule and the US-Expat Trap

Uruguay · Taxes

Uruguay’s new tax on foreign income is broader than the headline 12% suggests. A fiscal-transparency rule now looks through offshore companies to tax the resident behind them — and for US expats, who have no tax treaty to fall back on, the exposure is real.

More than a 12% rate

Since 2026, Uruguay has taxed most foreign-source capital income of its tax residents at a flat 12%, covering interest, dividends, foreign rents and certain capital gains. That much has been widely reported.

Less understood is a fiscal-transparency rule that comes with it. It attributes income earned through a non-resident entity directly to a Uruguayan resident who is its beneficial owner.

How the look-through works

If a resident holds more than 5% of a foreign company, the income that company earns can be attributed to them personally, regardless of the structure used. In effect, the offshore company is looked through.

That closes the assumption many new residents made: that holding assets inside a foreign entity kept the income outside Uruguay’s reach. Under the transparency rule, ownership above the threshold is what matters.

Why US expats are most exposed

The group with the sharpest exposure is American taxpayers, who are taxed by the United States on worldwide income wherever they live. With no US-Uruguay tax treaty, the same dividends or gains can be taxed by both countries.

The tool that prevents genuine double taxation is the foreign tax credit, which offsets tax paid in one country against the other. Claiming it correctly, through the right US forms, becomes the priority.

The tightened residency incentives

Uruguay still offers new residents a choice of regimes, including a long holiday on foreign income and a reduced flat rate. But the routes into the most generous holiday have been narrowed for new arrivals.

The low-presence path many used has given way to options built around a substantial property or productive investment. Anyone weighing a move should confirm the current thresholds before committing.

What to do

If you are a Uruguayan tax resident with offshore holdings, map who owns what and whether the 5% threshold is crossed. The transparency rule can pull income onto your personal return that you did not expect.

US taxpayers should coordinate a Uruguayan accountant with a US cross-border adviser so the credit is claimed cleanly. None of this is advice, and the mechanics reward getting help early.

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