Investment in Uruguay, both national and foreign, is declared of national interest by law. Thus, foreign investors are granted the same incentives as local investors and there is no tax discrimination or restrictions for transferring profits abroad.
Uruguay has several incentives which adjust to different types of activities, from industrial to commercial and service activities intended to be performed in the country. Schemes provided for by the Investment Law, free zones, free port and free airport schemes, public-private partnership agreements, industrial parks and temporary admission are some of the main incentive schemes available in the country.
The Investment Law conveys that promotional declaration can fall on a specific sector activity. Several sectors have been promoted under this framework. Furthermore, several sectors enjoy specific incentive schemes including, but not limited to, external financial intermediation, afforestation, graphic industry, maritime and air navigation, software, vehicles or auto parts, biofuels, communication and housing industry.
Investment Promotion Law
The investment promotion system is provided for by Law No. 16,906, whereby the promotion and protection of investments made by national and foreign investors in the national territory are declared of national interest.
Automatic benefits for investment and benefits regarding specific investments are obtained under this law. According to the latter criterion, companies operating in any sector of activity that produce an investment project which is further promoted by the Executive Branch will be eligible for additional benefits.
Benefits available for companies whose investments are promoted by the Executive Branch include Corporate Income Tax (IRAE) exemption for a maximum amount equivalent to 100% of the total invested amount. In addition, investments may be exempt from Wealth Tax (IP) on movable fixed assets and civil works, and Value Added Tax (VAT) may be recovered for purchases of materials and services for the latter. Moreover, the import of movable fixed assets, which are not competitive with the national industry, is exempt from import taxes or duties.
Specific sector schemes
The Investment Law conveys that promotional declaration can fall on a specific sector activity. In this framework, the following sectors have been promoted: Call Centers, Shipbuilding and Electronics Industry, Manufacturing of Agricultural Machinery and Equipment, Power Generation, Tourism, Forestry Industry, Treatment and Final Disposal of Industrial Solid Waste, Vehicle Manufacturing and freight transportation equipment, Hydrocarbon and Biotechnology Industry.
Companies which fall under these categories and are eligible for a promotional declaration under the Investment Law should appear before the Commission for the Enforcement of the Investment Law (COMAP) to have access to said benefit.
Moreover, there are other benefits granted by Uruguay according to the sector, regardless of the provisions set forth by the Investment Law. The following sectors are favored with these incentives: External Financial Intermediation, Afforestation, Graphic Industry, Maritime and Air Navigation, Software, Vehicle and auto parts, Biofuel, Communication and Housing Industry.
The promotion and development of Duty Free Zones in order to foster investments, export operations, employment and international economic integration have been declared of national interest by law. This scheme will enable the development and export of goods and services to the world free from any national tax.
Free Zones can be public or private, but in both cases they should be authorized and controlled by the National Free Zone Bureau. They are entitled to develop trading, industrialization or service provision activities. At present there are twelve Free Zones in the cities of Canelones, Colonia, Colonia Suiza, Florida, Fray Bentos, Libertad, Montevideo, Nueva Helvecia, Nueva Palmira, Punta Pereira and Rivera.
Legal entities which set up as free zone users are exempt from any current or future national tax. In particular, they are exempt from Income Tax, VAT, Wealth Tax, Excise Tax and Corporation Control Tax. Assets going in and out the duty free zone are tax-exempt. This exemption is not applicable to social security contributions, except for foreign personnel who may choose to contribute in their country of origin.
Currently in Uruguay there are seven approved industrial parks: Parque Agroindustrial Alto Uruguay, Parque Industrial de Juan Lacaze, Parque Industrial Paysandú, Parque Productivo Uruguay, Parque Industrial las Piedras, Parque Tecnológico Industrial del Cerro and Plaza Industrial S.A.
In these parks, apart from industrial operations, storage, packaging, selection, classification, fractioning, assembly, disassembly, handling or combination of goods or raw materials can be performed, provided they are exclusively associated to the industrial activities set up in the parks.
Natural and legal persons that develop an industrial park, as well as the companies that operate therein, may be included in the benefits and obligations set forth in the Investment Law, with specific additional benefits.
Free Ports and Airports
The Free Port regime represents one of the mainstays for Uruguay to be positioned as a logistic platform in Mercosur and as a distribution center for goods in transit. This regime is applicable to the commercial ports of Montevideo, Colonia, Fray Bentos, La Paloma, Nueva Palmira, Paysandú and Puerto Sauce, as well as Carrasco International Airport.
When operating in a free port, goods circulate freely without the need for permits or formal procedures. During their stay at the port customs area, goods are exempt from all import taxes or import-related taxes. The following activities can be carried out:
· Merchandise-related activities: activities that, without changing its nature, can add value to the merchandise, change its presentation or implement its free disposition or destination.
· Activities related or associated to services rendered to merchandise: loading, unloading, stowage and mobilization of bulk items, transportation, transshipment, reshipment, transit, removal, deposit, storage, disposition, ship supply, ship repairs and other related services.
In 2011, the Public-Private Partnership Law, which sets forth the regulatory framework for public-private partnership (PPP) agreements was approved. PPP agreements are those in which a Public Administrative Body entrusts, for a given period, the design, construction and operation of infrastructure or any such services to a private party, in addition to financing.
Said agreements can be entered into for the development of infrastructure in the following activity sectors:
• Road works (including rural roads), railway, port and airport works;
• Energy infrastructure works;
• Waste disposal and treatment works;
• Social infrastructure works, including prisons, medical centers, educational establishments, social housing, sports complexes and improvement works, urban supply and development.
Foreign-trade related regimes
Uruguay has an export promotion policy in place that is applied through varied instruments in terms of nature and scope, all of which satisfactorily comply with the regulations set forth in WTO's Code of Subsidies.
Tax rebate: In addition to a tax rebate regime as regards the Value Added Tax, there is an indirect tax rebate system, by virtue of which the exporter can recover internal taxes which make up the cost of the exported product.
Temporary admission: Temporary Admission (AT, for its Spanish acronym) allows you to enter into the market, exempt from taxes, foreign goods from outside the national customs territory, provided that preestablished purposes and requirements are met. Such merchandise should be exported after having undergone specific transformation, manufacturing, repair or value-adding processes, with effective employment of labor. Also, reexport or nationalization of merchandise is admitted, prior authorization, in the condition they were introduced.
Draw-back: This regime gives the possibility to claim the refund of taxes and levies paid for the import under the general scheme after the export of the corresponding merchandise.