Get to know the tax incentives offered by Uruguay

With 15 consecutive years of economic growth at an average annual rate of 4.3%, Uruguay is above the average for Latin America, being the second fastest growing country in the region.

This country is experiencing a very good moment, facing the longest period of growth in its history. It is currently the only country of Mercosur with an investment grade. Uruguay is the economy with the highest GDP per capita in the region and it has successfully weathered international crises and recessionary pressures in the region.

This growth, which is accompanied by the best levels of equity in Latin America, is without any doubt, the product of the impulse of internal consumption and exports of goods and services, and it also shows the recovery of investment, mainly driven by direct foreign investment that represented around 5% of GDP and 30% of private investment in the last decade.

This result has been achieved through an investment promotion regime that has greased the wheels for the installation in the country of foreign companies of very varied origins and sectors.

Indeed, Uruguay has positioned itself as a reliable and attractive destination for foreign investors and is one of the countries in Latin America with greater facilities for doing business.

This favorable environment is enhanced by various incentives and benefit regimes for investors, covering different types of activities, whether industrial, commercial or services that want to develop in the country. Investment promotion law, the free trade zones, the free port and airport regime, the industrial parks and the temporary admission regime, are only some examples.

Companies and corporations can set up companies in Uruguay without complying with prior requirements or obtaining special permits from the State, local counterparts are not required and the exchange market is free for the purchase and sale of foreign currency.

In addition, there is no discrimination in the treatment of national and foreign capital, and investment promotion incentives are available to both. There is also no limit to the endowment of foreign capital in companies and the financial market is completely free, as no prior authorization is required for the entry or exit of foreign exchange. Meanwhile, the tax system, which applies to the entire territory, does not tax income from foreign sources or assets located abroad.

This investment promotion regime is framed in Law N° 16.906, in which the promotion and protection of investments made by national and foreign investors in Uruguay is declared to be of national interest.

Benefits for companies whose investments are promoted by the Executive Branch include tax exemptions, such as Income Tax on Economic Activities (Impuesto a la Renta de las Actividades Económicas, IRAE).

The regime reduces significantly the effective corporate income tax rate of the companies that use it, while the legal corporate income tax rate is 25%, the average effective rate of the companies that used the benefit between 2008 and 2017 was 13.4%.

To learn more about the details of the taxes that are exempted for investing companies and the specific regimes that apply to each sector, download the Investor's Guide for free here. 

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