The Only Low Tax Jurisdiction
In South America

Investing in Uruguay
The Business Environment

Uruguay is strategically located between South America’s two largest economies: Brazil and Argentina. This factor, coupled with Uruguay’s stable economy and institutions, presents a favourable climate for foreign investors seeking to either do business in the country itself, or in neighbouring countries, through Uruguay.

Uruguay’s business law allows local and foreign investors to conduct their activities in the form of several types of locally incorporated corporations, or to act as branches of their parent companies (in the case of foreign firms) without the need to formally incorporate an independent company within the country.

The country’s business environment can be summarized in the following basic principles:

I. Equal treatment for foreign and local investors
Uruguayan law does not discriminate between local and foreign investors. Foreign investors do not face any restrictions and do not require authorization to settle within the country.
They can freely develop industries, engage in trade activities, and obtain access to local banks and financial markets.
Foreign investors are also eligible for promotional tax regimes on their investments.

II. Absence of special requirements for the establishment of new companies
Foreign investors can operate freely in Uruguay. They receive the same treatment as local investors, whether they choose to form a local company or to simply act without formally establishing themselves.

III. Absence of restrictions on the amount of foreign capital that can participate in an investment
Investors can participate in the stock of a local company in any proportion. Local companies can be 100% foreign owned.

Other forms of corporate structures can be adopted, such as joint ventures, and associations of different kinds.

IV. Free entrance and repatriation of capital and dividends
Freedom of capital repatriation and profit remittances abroad is guaranteed. This can be done at any time, regardless of the moment the initial investment was carried out.

V. Favourable tax treatment on imports of capital equipment
Imports of capital equipment have favourable tax regimes: import duties and other taxes are not levied in many cases.

VI. Freedom of prices and lack of exchange controls
The Uruguayan economy has no exchange restrictions. Transactions can be carried out in any currency, and can be freely exchanged locally. There are no administrative price controls.

VII. Freedom of choice regarding nationality when hiring labour
Uruguayan law allows local and foreign investors to hire foreign labour, with only a few minor restrictions in certain areas (these regarding the proportion of foreign workers hired).

VIII. Possibility of absolute anonymity for investors
Investors are guaranteed anonymity by way of operating through bearer-stock corporations. The Uruguayan banking system has one of the world’s strictest banking secrecy laws which further guarantee anonymity.

IX. An open trade policy, and an expanding market through the consolidation of the Mercosur trade agreement
Uruguay is strategically located at the heart of the MERCOSUR trade area, (formed by Argentina, Brazil, Paraguay and Uruguay in 1991). This trade agreement provides investors in Uruguay with an expanded market of two-hundred million consumers.

X. A solid and independent judicial system
Respect and enforcement of the law (including commercial law) is guaranteed by an independent judiciary. Contracts can be regulated by the law of choice of the parties, and arbitrage clauses can be agreed upon.

XI. Legal protection of private property and copyright
Private property, patents, and copyrights are expressly protected by law.

XII. An important financial centre
Uruguay is home to the region’s most important financial centre. The banking sector consists of twenty-two private banks and government-owned banks. The private banks are all totally or partially owned by leading American or European financial institutions. The banks are controlled by the Central Bank of Uruguay, which has a strict policy regarding the authorization of new banks.

XIII. Absence of income tax for individuals
No income tax is levied on individuals.

XIV. The existence of instruments to channel offshore investments virtually tax-free
Uruguay is South America’s only off-shore low-tax jurisdiction.

XV. Availability of political-risk insurance
Political-risk insurance is available through an existing agreement between the Uruguayan government and the U.S. Overseas Private Investment Corporation. The insurance covers all risks except general credit risk, and claims are subject to international arbitration panels.

Business Entities

Uruguay’s business law allows local and foreign investors to conduct their activities in the form of several types of locally incorporated corporations, or to act as branches of their parent companies (in the case of foreign firms) without the need to formally incorporate an independent company within the country.

For the investor who chooses to incorporate a company in Uruguay, the most common form is the “Sociedad Anonima” or “S.A.” (Alike to Germany’s “Ags”, Italy’s “SpAs”, or Britain’s “PLC’s”). The advantages of acting through a “Sociedad Anonima” are the following:

– The company can be incorporated immediately.
– The company is a limited-liability one.
– The company may have one sole owner (an individual or a company).
– The company’s shares can be in the form of bearer shares.
– The company can name directors other than their shareholders.
– The company’s annual formal requirements are minimal (mandatory approval of financial statements and filing of tax forms).

The Tax System

Uruguay’s tax system consists of indirect taxes, direct taxes, taxes on capital, and social security taxes. One of the key advantages of Uruguay’s tax system is the absence of personal income taxes, and of taxes on financial transactions.

(A) Indirect Taxes

Value Added Tax (VAT)

This tax is multistage and non-cumulative. It is levied on each stage in which value is added to a good or service. This tax is known as “Impuesto al Valor Agregado” (IVA), or “Value-added tax”(VAT) and it is levied on the price of the good or service. Its basic rate is 23% (14% for certain basic goods). It applies to the import (with exceptions) or sale of goods and services within the country, except for banking services. Exports are not taxed.

Tax on Luxury and Other Specific Goods

An additional consumption tax is levied on certain goods such as automobiles, alcoholic beverages, gasoline and tobacco. The rate ranges from 0% to 100%. For most products, it is 20%.

Tax on Transfer of Property

The transfer of real estate is taxed. The rate is 2% of the fiscal value of the property, for each of the parties in a transaction. The sale (partial or total) of shares of a company which owns real estate is not taxed.

(B) Direct Taxes

Income Tax For Corporations

Direct taxes are levied on the income of corporations. The tax is levied on income generated within the country, regardless of nationality. It includes branches or subsidiaries of foreign companies. The tax is assessed on the income of 12-month periods. The rate is 35%. To calculate the tax, the carry-over of losses is permitted up to a period of three years. There are special regimes which establish exemptions on certain activities.

Taxes on Capital

Both corporations and individuals are taxed on their net worth. In the case of individuals, there is a minimum non-taxable amount of approximately USD 50,000. The tax rate ranges from 0.7 to 3% of the net worth in the case of individuals, and between 1.5% and 2.8% for corporations. The tax only takes into account assets located within the country.

Social Security Taxes

Both the employer and the employee must pay social security taxes. The employer’s contribution is 18.5% of the salary. The employee’s contribution ranges between 19% and 24%.

Promotional Investment Regimes

Certain activities are benefited by special tax regimes and direct subsidies, specially created in order to promote investments in those areas. The most important promotional regimes are:

Tourism

Investments in infrastructure for the tourist industry are benefited by generous tax exemptions. This applies to hotels, resorts, and various other types of establishments. The tax benefits include:

– The company can be incorporated immediately.
– Exemption of corporate income tax.
– Exemption of capital/assets tax for a period of 10 years.

Forestry

Since 1987, a special law guarantees numerous tax benefits and direct subsidies for investors in forestry plantation and industrialization:

– Exemption from all national taxes.
– A guarantee that no new taxes will be imposed for a period of twelve years since the first plantation.
– A direct government subsidy proportional to the planted area.
– Exemption from import duties on equipment and vehicles.
– Special credits are made available through the state-owned Banco de la Republica.

Industrial Promotion

– Exemption of import tariffs and other taxes on the import of capital goods.
– Exemption of capital/assets tax.
– Partial exemption of corporate income tax.
– Special funds that grant generous credit schemes.

Free Trade Zones

Uruguay has established several Free Zones in parts of its territory. These areas can be used to store, commercialize, and assemble goods, for their introduction into Uruguay, or to third countries. Other activities that can be carried out include financial services. Goods shipped from third countries to a Free Zone are not treated as imports, and therefore do not pay taxes or import tariffs. Users of Free Zones are exempt from all national taxes, except for social security taxes on local labour.