The current investment promotion system is outlined in law No.16.906, which declares that the promotion and protection of investments made by domestic and foreign investors in the country is an issue of national interest. The regulatory framework for that regime has been developed and enhanced in recent years, leading to the regulations currently in force contained in Decree N ° 02/2012.
It is very important to note that the regime does not distinguish between local and foreign investment, both of which can enjoy the same benefits.
- An eligible investment is understood to be the acquisition of the following assets intended to make up the fixed assets of the companies:
- Personal property destined directly to the activity of the company with a minimum individual value of approximately USD 50, being expressly excluded those property destined for the home. These possible investments include machinery, facilities, equipment in general, furniture and utility vehicles.
- Improvements in civil works in own or third-party properties as long as there is a current contract.
- Seedlings and implantation costs (multi-year nursery plants, fruit trees and shrubs).
- Likewise, used goods acquired on the spot, directly or indirectly affected by the production process, will also be considered eligible, provided that they have never been subject to tax
- benefits before.
The investments foreseen in the projects, computable to obtain the benefits, will be those executed from the beginning of the fiscal year of presentation of the request for the promotional declaration by the company, or in the 6 (six) months prior to the first day of the month of presentation of said request and for up to a maximum total period of 10 (ten) exercises that must be contemplated in the project schedule.
Indicators to grant benefits
Although there are specific indicators in relation to the different activities, the evaluation of investment projects is carried out
based on a score derived from a general matrix where the following indicators are considered and weighted:
- Employment generation 50 %
- Increase of exports 20 %
- Decentralization 15 %
- Clean technologies 20 %
- Research, development and innovation 20 %
- Sector indicator 25 %
To access the promotional regime, companies must ensure at least 1 point in this matrix of indicators that allows them to obtain a minimum base of 30% exemption from IRAE to be
used within a period, also at least, of 4 years
Among the benefits to be obtained, we highlight the following:
Corporate Income Tax (IRAE): depending on the percentage that arises from the matrix of indicators, and by virtue of temporary regulations that allow in certain periods to increase said benefits with additional percentages, a Minimum savings floor of 30% of the invested amount.
It is also highlighted that, to those companies categorized as micro or small that present investment projects within the fiscal year for a cumulative total of up to UI 3,500,000,
they are granted an additional 10% of IRAE benefit and an additional exercise to the term of exemption obtained for said tax.
Property Tax (IP): In the case of real estate, the exemption will include civil works carried out, for a term of eight years if the project is located in Montevideo and a 10-year exception
if it is based in the interior of the country.
National Value Added Tax (IVA): the approved projects will be able to enjoy the refund of this tax associated with the purchase in place of materials and services destined
for civil works and of movable property destined for the project.
Taxes and taxes on the import of goods: movable goods and civil works materials that are declared noncompetitive with the national industry by the National Directorate of Industries (DNI-MIEM) will enjoy a total exemption from import taxes and fees.
On the other hand, there are in the current regulations some specific incentives for users of industrial parks and science-technology parks linked both to the increase in
the percentage of exemption from IRAE and to the term to enjoy said benefit.
Goods can be imported without significant restrictions, except for a few special products that can only be imported with prior authorization from the Executive Power. Customs duties are imposed on the customs value of imported goods, which is determined according to the valuation criteria provided by the World Trade Organization.
Uruguay is a member of MERCOSUR (Southern Common Market), so imports of any product from these countries are generally free of customs duties. Imports of goods
from other countries are subject to a common external tariff (CET).
In addition to custom rates, imports are subject to VAT at a rate of 22% plus import surcharges.
A at a rate of 22% plus import surcharges.
Exports are not subject to any taxes and there are practically no prohibitions regarding the type of goods to be exported.
Various instruments are offered to promote exports:
- Reimbursement of taxes: there is a system for reimbursement of indirect taxes where the exporter can recover internal taxes that are added to the cost of the exported product.
- Temporary admission: supply imports for exportable products are exempt from customs tariffs if the final products are exported within an 18 month period.
- Refund: for certain products, the refund system allows the reimbursement of tariffs paid on imports at the time of export
- Special financing: exporters can access credit at a preferential interest rate.
Projects of great economic dimension
Although there was already a previous regulation that protected this type of “megaprojects” called Large Economic Dimension (GDE), on May 4, 2020 Decree 138/020 was published, where construction activities for sale were declared promoted. or leasing of real estate destined to offices or housing and urbanization that, among other conditions, have a value in civil works and personal property destined for common use areas greater than 60: 000,000 Indexed Units, something like some USD 6,500 .000 approximately.
Likewise, and along the same lines, through a new Decree published on November 24, 2020, new modifications were established seeking to grant greater facilities to this type of undertakings, basically, reducing the amounts required to be included within the definition of GDE projects.
Those constructions that:
- They have a value in civil works and personal property destined to common use areas, of 20: 000,000 UI or higher (about USD 2,200,000 approx.).
- They are registered with the BPS with or without activity as of the entry into force of this Decree, and in which investments for a value in civil works and personal property destined to common use areas of 20: 000,000 UI or higher remain to be executed .
- In the cases of investments less than 60: 000,000 UI, the project as a whole must have at least 5% of the area destined for common use, in the rest of the cases it must have at least 10%.
The following table details the income tax exemption (IRAE)
|IRAE exemption||Investment in UI||Approximate investment in USD|
|5%||20.000.000 and 40.000.000||2.250.000 and 4.500.000|
|10%||40.000.001 and 60.000.000||4.500.000 and 6.700.000|
|15%||60.000.001 and 90.000.000||6.700.000 and 10.100.000|
|20%||90.000.001 and 205.000.000||10.100.001 and 23.000.000|
|25%||205.000.001 and 287.000.000||23.000.001 and 32.200.000|
|30%||287.000.001 and 574.000.000||32.200.001 and 64.300.000|
The maximum term for the use of the benefit will be up to 10 years, starting in the first fiscal year in which tax income is obtained (and with a maximum of up to 4 years from the promotional declaration).