Important Tax Developments in Uruguay and Chile: Strategic Planning Opportunities for High-Net-Worth Families
Executive Summary
Significant tax reforms are advancing through the legislatures of Uruguay and Chile that could substantially impact cross-border wealth planning strategies for our clients. Uruguay’s proposed 2025-2029 budget legislation introduces fundamental changes to its tax regime, including a new 10-year tax holiday for qualifying new residents and expanded taxation of foreign-source income. Meanwhile, Chile’s “Pacto Fiscal” reform package proposes to double withholding taxes on public fund distributions and eliminate favorable treatment for private investment funds.
These developments require immediate attention from families with existing investments or residency connections to these jurisdictions, as well as those considering future opportunities in these markets. This memorandum provides comprehensive analysis and actionable planning strategies to help you navigate these changes effectively.
Uruguay – National Budget Bill 2025‑2029
New Qualified Domestic Minimum Tax Aligns with Global Standards
Uruguay’s bill would create a domestic complementary minimum tax (Impuesto Complementario Mínimo Doméstico or IMCD) that functions as a Qualified Domestic Minimum Top Up Tax. The IMCD applies to entities located in Uruguay that belong to multinational groups with consolidated revenues of at least €750 million. Where a group’s effective tax rate on Uruguayan income falls below 15 percent, the IMCD would collect the difference. The top up is calculated by dividing adjusted covered taxes by admissible net income, with exclusions for payroll and tangible assets to preserve economic substance. Although Uruguay already offers tax incentives for free zones, software exports and other promotional regimes, the IMCD would reduce the net benefit of those regimes by imposing a minimum effective rate. Legislators and the private sector are still debating whether the IMCD would apply to fiscal years beginning in 2025 or 2026 and whether free zone companies will be exempt.
Key Considerations:
The tax calculates the difference between actual tax paid and the 15% minimum threshold
Economic substance provisions protect legitimate business operations through exclusions for payroll and tangible assets
Traditional tax incentives for free zones and software exports may see reduced effectiveness
Implementation timing remains under debate, with potential application to fiscal years beginning in 2025 or 2026
Expanded Individual Taxation Scope: A Paradigm Shift
The proposed expansion of Uruguay’s Personal Income Tax (IRPF) marks a significant departure from the country’s historically territorial tax system. The new framework would capture “wealth increases” from foreign assets, including capital gains from international equity sales. The bill would expand the Personal Income Tax (IRPF) by taxing “wealth increases” from foreign assets, such as capital gains from international equity sales. For many high-net-worth individuals, this marks a shift from a territorial system to one that looks more like a worldwide income tax. The bill would also allow credits from Uruguay’s National Health Fund (FONASA) to be offset against personal income tax liabilities. Clients with foreign equity plans or offshore investment portfolios should expect that realized capital gains could become taxable in Uruguay if they are tax residents
What This Means for You: Foreign investment portfolios and equity compensation plans become potentially taxable upon realization. The shift toward worldwide taxation requires careful review of existing investment structures.
Unprecedented 10-Year Tax Holiday for New Residents
A headline change is the creation of a ten-year window period or “tax holiday” regime. Individuals who acquire Uruguayan tax residency on or after 1 January 2026 could exclude their foreign source income (e.g., dividends, interest and capital gains) from IRPF during the year they become resident and for the following ten years. After the window period ends, the same income would be subject to IRPF at only half the ordinary rate for five additional years. The executive branch will prescribe the types of domestic investments required to qualify for this regime. Notably, the current window period regime (which does not require investment) can only be elected until 31 December 2025. High net worth individuals considering immigration to Uruguay should weigh the ten year holiday against the existing Non-Resident Income Tax (IRNR) regime (a flat tax on Uruguayan source passive income). Those participating in the Qualified Talent Program may elect to pay IRNR at 12 percent instead of the progressive IRPF (10 – 36 percent) and may opt out of Uruguay’s social security system.
Legislative Process and Uncertainty
The Uruguayan bill is subject to parliamentary review. Each chamber has 45 days to consider the proposal, and amendments by the second chamber trigger a 15 day review by the first chamber. Only after both chambers agree (or time expires) does the bill proceed to the General Assembly, which also has 15 days for review. Therefore, clients should recognize that substantive changes could occur, and the effective dates for the IMCD or window period regime may shift.
Critical Timing Alert: The current tax holiday regime, which requires no mandatory investment, expires December 31, 2025. Clients considering Uruguayan residency should evaluate whether to secure benefits under the existing program before this deadline.
Chile: Investment Fund Taxation Overhaul
Doubling of Withholding Tax on Public Fund Distributions
The proposal would also remove the preferential treatment for private investment funds. Currently, many private funds are exempt from corporate income tax, and investors are taxed only when profits are distributed. Beginning 1 January 2027, private funds would be subject to Chile’s standard corporate income tax (27 percent), except when the fund invests in certified venture capital. The government would require annual certification by the state development agency (CORFO) to confirm venture capital status. This measure aims to prevent indefinite deferral of corporate tax and may discourage structuring investments through Chilean feeder funds.
Other Elements of the Reform
Beyond investment funds, the Pacto Fiscal bill includes several other measures. It introduces a transparent regime for new SMEs, adjusts the Global Complementary Tax marginal rate (raising the top rate to 40 percent for high income individuals) and creates new deductions for renters. It also proposes a comprehensive modernization of asset valuations for inheritance and gift taxes, replacing “current market value” with a “normal market value” standard. While these provisions are important, the increase in withholding tax on investment funds is likely to be most relevant to foreign investors and cross border structures.
Planning Considerations for High Net Worth Families and Trust Structures
1. Modeling Competing Uruguayan Regimes
Clients contemplating Uruguayan tax residency should model the relative benefits of the proposed window period regime versus existing alternatives. The ten year holiday and subsequent half rate period could be attractive for individuals with substantial foreign passive income. However, electing IRNR (currently 7 percent for certain income categories) or the 12 percent regime available to qualified talent may produce better results depending on the composition of income and investment horizons. Because Uruguay’s law would require specific domestic investments to access the holiday, clients must assess whether those investments align with their portfolio objectives. Those who can still elect the current window period regime should do so before 31 December 2025 if appropriate.
2. Monitoring Uruguay’s QDMTT for Corporate Structures
Family offices or closely held companies operating in Uruguay could fall within the QDMTT if part of a larger multinational group. While the IMCD only applies to groups with revenues above €750 million, the administrative definitions of “multinational group” and “consolidated revenues” may capture certain private investment platforms. Structures relying on Uruguayan free zone exemptions or COMAP incentives should evaluate whether a 15 percent top up tax would reduce the benefit of those regimes. Entities should also monitor any amendments relating to free zone protections and potential retroactive claims for damages.
3. Timing Distributions from Chilean Funds
Clients holding units in Chilean public investment funds should consider the timing of distributions. Since the proposed withholding increase from 10 percent to 20 percent would apply to distributions made on or after 1 January 2026, accelerating distributions before year end 2025 could mitigate the impact. Similarly, for private investment funds, profits distributed before 2027 may avoid exposure to corporate tax. However, accelerated distributions could have U.S. tax consequences (e.g., for passive foreign investment companies) and may affect estate planning; therefore, any acceleration should be coordinated with U.S. advisors.
4. Re-Evaluating Holding Structures and Treaty Positions
The combined effect of Uruguay’s expanded IRPF and Chile’s higher withholding may prompt families to revisit cross border holding structures. For example, U.S. domiciled trusts holding Chilean fund units may face higher leakage and should explore whether investing through treaty eligible jurisdictions or alternative vehicles could reduce the burden. Likewise, individuals planning to take up Uruguayan residency should ensure that treaty tie breaker positions (such as under the U.S.–Uruguay Tax Information Exchange Agreement) are documented before the effective date. Maintaining evidence of residency dates, funding and structuring decisions will help defend treaty claims if the laws become effective.
5. Estate and Succession Planning
Uruguay’s proposed expansion to foreign capital gains and Chile’s new valuation rules for inheritance and gift taxes underscore the importance of careful estate planning. Clients should review how Uruguayan IRPF or Chilean inheritance taxes might apply to trusts and beneficiary distributions when assets are disposed or transferred. Early transfers or the use of U.S. trusts may shield assets from foreign taxes, but these strategies must be balanced against U.S. estate and gift tax rules. Our firm can assist in modeling cross border estate strategies that integrate Florida law, federal tax considerations and these proposed Latin American reforms.
Conclusion:
These proposed reforms reflect a regional trend toward broader tax bases and international harmonization that will fundamentally reshape cross-border planning for Latin American wealth. While neither Uruguay’s budget bill nor Chile’s Pacto Fiscal have been enacted, the likelihood of substantial tax changes demands proactive planning.
For clients who may be impacted, we recommend a comprehensive review of existing Uruguayan residency plans before the December 31, 2025 deadline. Those potentially impacted by the Chilean reform should assess Chilean fund holdings for potential 2025 distribution acceleration and document current structures and treaty positions.
We stand ready to develop customized strategies tailored to your specific circumstances. This includes modeling comparative scenarios under different regime elections and coordinating with your international advisors to ensure comprehensive planning. We will continue to monitor legislative developments and provide timely updates so to execute restructuring strategies to optimize your position before key deadlines.
The intersection of Florida law, U.S. federal tax regulations, and these Latin American reforms creates both complexity and opportunity. Our cross-border expertise positions us to help you navigate these changes while maximizing available benefits and minimizing tax exposure.
Please contact our office to schedule a comprehensive review of how these developments affect your international wealth planning strategy and to discuss personalized planning opportunities. Early action will provide the greatest flexibility in responding to these significant tax law changes.