Incentives

Investment Incentives

A number of incentives are available to facilitate investments in Montevideo, a city that offers a stable and favorable environment for investment including equal treatment for foreign and local investors, a free exchange market and capital repatriation, and no local counterpart required.

Other key incentives worthy of mention are the Investment Law, the Free Trade Zones, the free port and airport regime, temporary admission, convenient conditions for hiring and training personnel and sectoral benefits.

 

Investment Promotion Law

This Law offers a favorable framework for investment, ensuring equal treatment for foreign and local investors, availability of a free exchange market and the possibility of capital repatriation, without requiring a local counterpart.

  • IRAE exemption for an amount between 30% and 100% of the investment for a minimum period of 4 years and a maximum of 25 years, depending on the amount of the investment and the project's evaluation score.
  • Exemption from Net Worth Tax on civil works (8 years) and movable fixed assets for their entire useful life.
  • VAT refund on the purchase of materials and services for civil works and movable assets destined for the investment project.
  • Exemption from duties or taxes on the importation of movable fixed assets and civil engineering materials deemed non-competitive with the national industry.

 

Free Trade Zones

In Uruguay, these areas are regulated by Law (Law No. 15,921) and their users can be exempt from all taxes, existing or to be created, with the exception of Social Security contributions. Commercial, industrial and/or service activities are allowed.

Montevideo is home to three of the main free trade zones in the country:

Main benefits:

  • 100% exemption from Corporate Income Tax (IRAE) and any other existing or future national taxes (does not include contributions to Social Security).
  • Exemption from VAT on purchases and sales of goods and services to and from abroad.
  • Dividends distributed among shareholders residing abroad are also tax exempt in Uruguay.
  • Service companies can hire up to 50% foreign staff.
  • Foreign staff can opt to contribute to social security in Uruguay or in their country of origin.
  • Companies are exempt from IRAE for their processing of foreign goods declared in transit or kept within the Free Zone when they are not destined for the national customs territory. The same applies when sales destined for the national territory do not exceed 5% of the total sales of goods in transit or maintained within the Free Zone. Goods traded through the Free Zones with the rest of the world are exempt from customs taxes.

 

Free Port

Since the approval of the Law of Ports No. 16,246 in 1992 and its subsequent regulations, the port of Montevideo has been the first terminal on the Atlantic coast of South America operating under a “Free Port” regime.

The Customs Code (CAROU, by its acronym in Spanish) establishes that any merchandise that enters the ports may remain for a maximum of 5 years (extendable). It also expands the operations that can be conducted in the Free Port modality, offering the possibility of using multimodal systems:

  • Storage warehouse: merchandise can only be subjected to operations aimed at ensuring its recognition, conservation, splitting into lots or volumes, and any other operation that does not alter its value or modify its nature/state.
  • Commercial warehousing: the merchandise can be subjected to operations aimed at facilitating its commercialization or increasing its value, without modifying its nature or state.
  • Repair and maintenance warehousing: the merchandise can be the object of repair and maintenance services, without changing its nature.
  • Temporary warehouse for exhibitions or other similar activities: foreign merchandise entered can be used for exhibitions, shows, fairs or other similar activities, with prior authorization from the National Customs Directorate.
  • Logistics warehouse: the merchandise can be the object of operations to modify its state or nature, as long as they do not affect its origin. These operations can include assembly; mixing; placement or replacement of parts, pieces or accessories; hardware configuration; software installation; packaging, assembling, labelling or other processes as long as they are used for the commercialization of merchandise that will exit the warehouse; and other similar operations that may be authorized by the Executive Branch.

By operating in a free port, companies can benefit from:

  • Free movement of goods without the need for authorizations or formal procedures
  • Exemption from all duties, tariffs and surcharges applicable to imports
  • Warehoused merchandise is not included in the taxable base of Net Worth Tax or Income Tax
  • The movement of goods and the provision of services carried out in port customs facilities are exempt from VAT.
  • Goods do not change their country of origin, whether they are re-exported in the same conditions as they were imported, or they have been subject to customization operations that do not alter the nature of the product or its original nature.

 

Temporary Admission

This regime is part of Law 18,184 and its regulatory decree 505/09. It provides for the possibility of introducing merchandise of foreign origin, tax-free, to be re-exported within a certain period of time (18 months, extendable for another 18 months).

The merchandise can be re-exported in the state in which it was introduced or after undergoing a transformation, elaboration, repair or value addition.

Temporary Admission also enables Stock Replacement and Drawback mechanisms. Stock Replacement consists of the replacement of goods imported under the general regime, by importing similar goods, free of taxes and duties, when they have been used as material for the transformation, in the country, of exported products. The Drawback Regime allows requesting the refund of taxes and levies paid for the importation under the general regime of all those goods that by definition can be imported for temporary admission and which were used in the country in the manufacture of products destined for export.

 

Customs Warehouses

Customs warehouses are regulated by Law 19,276 of the CAROU and by Decree 216/006.

Under this customs regime, merchandise enters and remains in a privately managed space, while being exempt from taxes for its subsequent inclusion in another customs regime, re-shipment or re-export.

Merchandise of foreign origin thus warehoused is considered in transit and can be unloaded and re-loaded at any time, free of import or export duties, as well as any other national tax. The term for permanence of the merchandise within the warehouse is 24 months, non-extendable.

The CAROU enables the following types of warehouses:

  • Storage warehouse: merchandise can only be subjected to operations aimed at ensuring its recognition, conservation, splitting, and any other operation that does not alter its value or modify its nature/state.
  • Commercial warehouse: the merchandise can be subjected to operations aimed at facilitating its commercialization or increasing its value, without modifying its nature or state.
  • Industrial warehouse: merchandise may be subjected to operations intended to modify its nature or state, including the industrialization of raw materials and semi-finished products, assembly and any other similar operation.
  • Temporary warehousing for exhibitions or other similar activities: foreign merchandise entered may be used for exhibitions, shows, fairs or other similar activities, with prior authorization from the National Customs Directorate.
  • Logistics warehouse: the merchandise can be subjected to operations to modify its state or nature, as long as they do not modify its origin. These operations can include assembly; mixing; placement or replacement of parts, pieces or accessories; hardware configuration; software installation; packaging, assembling, labelling or other processes as long as they are used for the commercialization of merchandise that will exit the warehouse; and other similar operations that may be authorized by the Executive Branch.

The institutions charged with Customs Warehouse approval are the National Customs Directorate (DNA) and the Ministry of Economy and Finance (MEF). Permits are non-transferable and granted for 5 years and may be renewed. A minimum operation bond is required, which is set by the MEF and varies according to the type of warehouse and the square meters allowed. 

 

Industrial and Science-Technology Parks

The development of Industrial Parks (PI) and Science-Technology Parks (PCT) is promoted by Law No. 19,784 (August 23, 2019) and its corresponding Regulatory Decree No. 79/020 . Park users may be companies that conduct industrial and service activities, as well as others in the following sectors: ICT, bio and nanotechnology, creative industries, and industrial recovery of waste and use of by-products. The use by start-ups and business incubators, as well as training and research institutions, is also especially promoted.

PI and PCT developers setting up business in Montevideo will enjoy the following benefits, among others:

  • Exemption of 50% of the computable investment and a 6-year term to apply it in the case of PI.
  • This exemption may be increased by an additional 20% of the computable investment and its term extended by 3 more years for its application, if the following conditions are simultaneously met in the approved PI:
    • At least three users establish their businesses in the following categories: entrepreneurs and business incubators; education and training institutions; research or innovation institutions; other institutions related to the generation of applied knowledge.
    • Not all these users are in the same category.
  • Exemption of 75% and 10 years for the PCT developer.
  • Additional increase of 15% of the computable investment and 2-year extension of term for its application in the case of Specialized Parks.
  • Exemption from fees and taxes, including VAT, on the importation of fixed assets intended for the developer's operations, as well as fixed assets and materials intended for the developer's civil works, provided they are not deemed competitive with the national industry.

 

Sector Incentives

Software

IT companies can be exempt from a percentage of IRAE. The decree makes a distinction between products and services (Decree No. 150/2007, Section 163 bis).

Exemption for IT products

It applies to any products whose intellectual property is registered in the National Library and may vary depending on the following ratio:

Direct costs of software development * 1.3 / Total direct costs of software development

The numerator refers to the direct costs of development and services with unrelated parties, whether they are residents or not, or with resident related parties. The value of the denominator is the same without considering the 30% increase, plus the expenses and costs of intellectual property rights and the services sub-contracted with non‑resident related parties.

Exemption for IT services

This exemption refers to all fiscal years, provided that: a) the company employs full-time, highly qualified and adequately remunerated human resources in a suitable number; and b) the amount of expenses and direct costs in the country exceeds 50% of the total expenses and direct costs of software development.

Audiovisual Industry

Cash Rebate

This is a refund scheme associated with expenses incurred in international productions (feature films, short films, video clips, animations, documentaries, television series and new formats for distribution on digital platforms) and international audiovisual advertising filmed in Uruguay, as well as for national productions.

Zero VAT

This incentive is regulated by Decree 220/998, which exempts the payment of the Value Added Tax (VAT) of 22% associated with production expenses of audiovisual projects filmed in Uruguay for use abroad. The list of services covered by this exemption is extensive: rental of equipment, locations, furniture and props, hiring of technicians, insurance, transportation, catering, hotel costs and set construction, among others.

High Rise Building Construction

The Municipality's initiative called Montevideo más cerca: más altura de la edificación en avenidas (Montevideo up closer: greater building height on avenues) seeks to promote private investment and foster the creation of job opportunities, through the application of sustainable urban development policies.

The investment incentives are granted through the exemption of the compensatory price, which can be requested until June/2023 via the web: https://montevideo.gub.uy/montevideo-mas-cerca