URUGUAY Trends and Developments Contributed by: Fabian Birnbaum, FBM Advisory
Uruguay’s International Tax Evolution: Balancing Adaptation With Continuity Introduction Uruguay’s international tax landscape has never been static. Over the last century, it has been shaped by global economic transformations, geopolitical pres - sures and the country’s need to position itself as both competitive and reliable. This evolution has rarely followed abrupt or revolu - tionary paths. On the contrary, Uruguay has tended to reform its system through gradual adjustments, incorporating international standards while attempting to preserve legal certainty, investor confidence and institutional continuity. Even in moments of intense external scrutiny, change has usually been absorbed rather than imposed. For foreign investors and multinational enterprises, this characteristic has been essential. Predictability has often mattered as much as – or more than – the nominal tax burden. The Budget Law approved in the closing months of 2025, with most provisions entering into force on 1 January 2026, must be interpreted within the context of that historical narrative, although the nature of the challenge is different from that posed by previous reforms. In earlier stages, Uruguay was asked to become more transparent, to co-operate and to exchange informa - tion. Today, the international community is concerned not only with visibility but with results: how much tax is effectively paid and which jurisdiction ultimately receives it. This shift has forced Uruguay to adapt once again. However, adaptation, as history shows, does not imply abandoning identity. Rather, it means redefining how traditional principles operate under new global conditions. The gradual construction of a model To understand the present transformation, it is useful to recall how Uruguay arrived at this point. For a signif - icant part of the 20th century, the country developed a system firmly anchored in the source principle. Taxa -
tion was primarily connected to income generated within national territory. This was not merely doctrinal preference; it reflected economic reality. Residents did not typically earn large amounts abroad, and the administrative capacity to control foreign income was limited. As capital mobility expanded during the late 20th cen - tury, Uruguay embraced fiscal competitiveness as a development tool. Free zones, investment promotion legislation, banking confidentiality and flexible corpo - rate vehicles were not isolated measures. They formed part of a broader strategy: compensating for the limi - tations of a small domestic market by offering stability and efficiency to international capital. This model proved successful for decades. Uruguay cultivated a reputation as a safe jurisdiction, respectful of property rights and politically predictable. The international financial crisis, however, marked a turning point. Global tolerance for opacity declined dramatically. Uruguay reacted by modernising its regulatory framework: transfer pricing rules were strengthened, beneficial ownership information became accessible, exchange agreements multiplied and administrative powers expanded. Importantly, these reforms did not dismantle competi - tiveness; instead, they redefined it. Uruguay sought to remain attractive, but now as a compliant jurisdiction. By the mid-2010s, the country had achieved a delicate balance, being integrated into international co-opera - tion networks while still being perceived as a reliable The international debate did not stop there. As multi - national structures grew more complex and digitalisa - tion intensified, attention moved from transparency towards minimum levels of taxation. Governments began to question whether companies, even when fully transparent, were contributing what was consid - ered an appropriate share. platform for investment. A new global expectation The emergence of Pillar Two, with its 15% global minimum tax, represents the most visible expression
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