Phoenix 24
A tax shift that could push wealth across borders toward a lighter regime.
Montevideo, September 2025
Uruguay’s Ministry of Economy, under the leadership of Gabriel Oddone, is evaluating the inclusion of a new levy in the upcoming budget law: a tax on profits earned abroad by residents. If approved, it would affect an estimated 62 billion dollars — nearly 80% of the country’s GDP — in deposits and foreign assets. The proposal aims to expand the scope of the Personal Income Tax (IRPF), which currently excludes most overseas capital gains from taxation, taxing only interest income.
Since 2007, the IRPF has taxed interest earned on deposits abroad, but capital appreciation, dividends, and rental income remain exempt. The proposed change would bring those returns under fiscal scrutiny, triggering debate between advocates of greater tax fairness and critics warning of reduced competitiveness and capital flight.
Financial and business leaders fear the measure would accelerate relocation of investments to jurisdictions with lighter rules. Paraguay stands out as the most likely destination. Its tax regime, combined with stability, low rates, and relatively simple procedures, has long attracted regional capital, particularly from Argentina and Brazil, and now potentially from Uruguay as well. In their view, such conditions make Paraguay a safe haven for both savings and new ventures.
Some in government back the plan. The left-leaning Frente Amplio previously explored a temporary 2% tax on foreign deposits in 2021. Labor unions and progressive lawmakers argue that taxing foreign gains would improve equity in the system and generate resources for social priorities such as early childhood programs, healthcare, and education.
But the push also generates backlash. Legislator Diego Echeverría warned that even discussing the measure undermines investor confidence: “It is a blow to certainty for those who chose to settle in Uruguay.” He pointed to risks for jobs, credibility, and Uruguay’s investment climate.
Economist Aldo Lema stressed that the actual fiscal yield might be marginal. Much of the capital is already linked to instruments where interest income is taxed. Including only capital gains from shares, real estate, or crypto would add little to revenue. He also questioned the future of Uruguay’s 10-year tax exemption for foreign residents, a regime that has lured affluent migrants to settle in the country.
Similarly, expert Deby Eilender cautioned that Uruguay already struggles with limited domestic savings flowing into investment. An added tax could further discourage much-needed capital, particularly for small and medium enterprises.
On the technical side, analysts such as Juan Bonet note that neither foreign-held wealth nor foreign-generated capital gains are currently taxed, unlike interest and dividends. Targeting highly mobile capital without stronger oversight mechanisms could reduce rather than expand the tax base.
In short, the debate is about more than revenue. It is about Uruguay’s identity as a fiscal hub in South America. If the long-standing framework of light taxation on external gains shifts, investors may recalibrate rapidly. Paraguay has already built a ready-made alternative.
The dilemma for Uruguay is whether to pursue greater fiscal justice at the risk of losing competitiveness. The test lies in whether the reform can produce meaningful revenue without triggering an exodus of capital. The answer will shape Uruguay’s fiscal architecture for years to come, and in the process redefine its place in the regional competition for investment.
The visible and the hidden, in context.
Lo visible y lo oculto, en contexto.