NATIONAL INTEREST
Investment in Uruguay is declared of national interest by law. The foreign investor benefits from the same incentives as the local investor, without discrimination from the point of view of taxes or restrictions for the transfer of profits abroad. There are general and automatic incentives for investment.
REGULATIONS
The regime for the promotion of investment is foreseen in Law 16.906, which declares the activities related to the promotion and protection of the investment made in the national territory by national or foreign investors as activities of national interest. The regulatory framework for the regime has been developed and enhanced in recent years, leading to the regulations currently in force contained in Decree Nº 092/998 dated 21/APR/1998, Decree Nº 455/007 dated 26/NOV/2007, Decree Nº 002/2012 dated 9/JAN/2012, Decree Nº 299/015 dated 9/NOV/2015 and Decree Nº 143/018 dated 22/MAY/2018.
These tools offer two different sets of fiscal incentives: general and specific.
INVESTMENT INCENTIVES
GENERAL INCENTIVES
BENEFICIARIES
The beneficiaries of these fiscal incentives are all the taxpayers of the Economic Activities Income Tax (IRAE) and the Agriculture – Livestock Goods Sales Tax (IMEBA) that carry out industrial or agricultural activities and the cooperatives.
The tobacco industry is specifically excluded, given the global trend of anti-tobacco policies.
BENEFITS
For these subjects, the Investment Law establishes automatic granting of different benefits for the acquisition of the following assets:
- Personal property to be directly used in the production cycle (industrial machinery, industrial facilities, agricultural machinery and utilitarian vehicles described in Decree Nº 59/998 dated 4/MAR/1998).
- Equipment used for the electronic processing of data and personal property necessary for the complete operation of these.
The automatic benefits are the following:
- Net worth tax (IP) exemption for the goods previously mentioned, which are considered as taxable assets for the purposes of deduction of financial liabilities for the calculation of the tax. The present exemption will not operate in the event that the referred goods should be valued presumptively.
- Exemption from the Net Worth Tax (IP) to male and female breeding animals, cattle and sheep, and dairy cattle, which comply with the provisions of Decree Nº 59/998.
- Exemption of the Value Added Tax (VAT) on imports and return of VAT included in the local purchases of these goods.
- Exemption of the Internal Specific Tax (IMESI) applied to the import of the goods previously mentioned.
In addition, the Executive Power has the authority to grant fiscal incentives to intangible assets such as: brands, patents, industrial models, privileges, copyrights, goodwill value, trade names and concessions granted for prospection, crops, extraction or operation of natural resources, other assets, procedures, inventions or creations that incorporate technological innovation and involve technology transfer:
- The exemption of the Net Worth Tax (IP) to betterment of fixed assets, intangible assets and other assets. These assets are considered as taxable assets for the purpose of deduction of liabilities.
- An accelerated depreciation regime for the purposes of the Economic Activities Income Tax (IRAE) and Net Worth Tax (IP) for personal property to be directly used in the production cycle, equipment for the electronic processing of data and to intangible assets already mentioned.
- The reduction of up to three points in the fee of the employer contributions for special social security contributions; for companies in the manufacturing industry.
INCENTIVES CONCERNING SPECIFIC INVESTMENTS
BENEFICIARIES
The companies in any sector of activity that are passive subjects of Economic Activities Income Tax (IRAE) and that present an investment project promoted by the Executive Power will have the possibility to access additional benefits.
PROJECT CLASSIFICATION
The investments included in the following definition would qualify as eligible investments:
- Personal property to be directly used in the activity of the company (excluding non-utilitarian vehicles and personal property to be used as dwelling).
- Construction of real estate or fixed improvements in own properties or those of third parties whose contract has a minimum remaining term of 5 years (excluding those to be used as dwelling).
- Seedlings and costs for planting pluri-annual fruit trees and bushes.
- Electric passenger vehicles to be used directly in the activity of the company, whose motorization is exclusively electric.
In turn, past investments made in the fiscal year of the company in which the project is submitted and those made in the six months prior to the date of submission of the request are considered eligible, provided that they do not exceed the twenty percent (20%) of the eligible investment and are necessary for the fulfillment of the investment objective.
BENEFITS
The benefits offered to the companies whose investment is promoted by the Executive Power (PE) are detailed below.
- Net Worth Tax (IP):
- Personal property of fixed assets: exemption of the Net Worth Tax on personal property of fixed assets that cannot be exempted under other benefits. The term of the exemption is for the entire useful life of these goods.
- Civil works: exemption of the Net Worth Tax on civil works up to 8 years if the project is located in Montevideo and ten years if it is located in the interior of the country.
- Income Tax on Economic Activities (IRAE):
IRAE exemption for a maximum amount and term that will result from applying a matrix with indicators.
The exemption shall not exceed 100% of the sum effectively invested in the assets detailed in the project, nor may it exceed 60% of the tax to be paid in each of the fiscal years comprised in the declaration for promotion (for a new company, the percentage is 80%).
The granting of the IRAE exemption benefit is subject to the score obtained in the matrix with indicators prepared by the Committee for the Implementation of the Investment Law (COMAP) based on information provided by the investor. The indicators that make up the matrix for these projects are:
- Creation of jobs.
- Increased exports.
- Use of clean technologies.
- Increase in research and development and innovation.
- Sectoral Indicator.
As an additional benefit, micro and small companies with investments of up to 3,500,000 (three million five hundred thousand) Indexed Units (UI) are granted with an additional 20% (twenty percent) benefit of IRAE.
Additionally, users of industrial and science-technology parks are granted an increase of 15% (fifteen percent) on the amount of the exempted IRAE.
- VAT:
Return of the VAT under exporters regime for the local acquisition of materials and services for civil works.
- Fees or taxes on imports:
Exemption of fees or taxes on imports, including VAT, on personal property for fixed assets and materials for civil works, which do not have exemptions under the benefits of other regimes, and are declared non-competitive for the national industry.
INDICATORS MATRIX [1]
| Objectives | Weighting | Score |
| Creation of jobs | 40% | 0 to 10 |
| Decentralization | 15% | 0 to 10 |
| Increased exports | 10% | 0 to 10 |
| Clean technologies | 20% | 0 to 10 |
| Investment in research and development | 25% | 0 to 10 |
| Sectoral Indicator | 20% | 0 to 10 |
STRUCTURE [2]
- COMAP: Committee for the Implementation of the Investment Law.
- UNASEP: Unit for the Support to the Private Sector.
DOWNLOAD FILES
DECREE Nº 143/018 – REGULATION OF THE INVESTMENT AND INDUSTRIAL PROMOTION LAW – 22/MAY/2018
DECREE Nº 59/998 – TAX EXEMPTIONS FOR THE AGRIBUSINESS SECTOR – 04/MAR/1998
LAW 16.906 – INVESTMENT LAW | INDUSTRIAL PROMOTION – 07/JAN/1988
STARTUP COSTS – INSTITUTO URUGUAY XXI
FORMALITIES TO PRESENT THE PROJECTS
INVESTOR’S GUIDE – INSTITUTO URUGUAY XXI
[1] Source: National Institute for Logistics (INALOG).
[2] Source: INALOG.