Uruguay Invest

Stewardship . Transparency . Independence

Investors

Key Issues for Investors

Click to view the presentation on rules for investors doing business in Uruguay, the country’s tax system, different tax breaks for new investments and the property acquisition process.

Uruguay’s Tax-Free Zones

Click to view the presentation on Uruguay’s tax-free zones (zonas francas), and the advantages for multinational companies to serve the region and beyond using this platform.

Farmland and Timber Investing in Uruguay

Click to view the presentation on Uruguay’s key farmland sector, which mainly attracts investors in cropland, beef production and timber production and pulp fiber.

Doing Business In Uruguay

Key Issues for Investors

Investor Friendly Country

  • Foreign investors and local ones: equal treatment
  • No limitations to ownership of property by foreigners
  • No restrictions to enter/exit the country

Business rules are Investor Friendly

  • No currency exchange controls or forced conversion
  • Foreign Currency can be used freely: Dollars, Euros, etc.
  • Free flow of capital
  • No capital/dividend repatriation issues

Stable Economy and Rules

  • Macroeconomic stability
  • Investor-grade

Solid Legal System

  • Strong reputation for respect of contracts & private property
  • Independent and reputable judiciary
  • Corruption is not an issue

Private Property rights protected

  • Constitutional right, enforced
  • No history of expropriations

Indexes (Latin America)

#1 in Educational Index (Latin Business Chronicle)

#2 in Economic Freedom (The Heritage Foundation)

#1 in Democracy Index (The Economist Intelligence Unit)

#1 in Quality of Life (Mercer)

#1 in Corruption Perception (Transparency International)

#1 in Rule of Law Index (World Justice Project)

Indexes (Latin America)

#1 in Educational Index (Latin Business Chronicle)

#2 in Economic Freedom (The Heritage Foundation)

#1 in Democracy Index (The Economist Intelligence Unit)

#1 in Quality of Life (Mercer)

#1 in Corruption Perception (Transparency International)

#1 in Rule of Law Index (World Justice Project)

Tax System for Businesses

Applicable taxes:

Corporate Income Tax: 25% of net income (plus Dividend Distribution Tax: 5.25%) or:

  • 12% of gross income, available for small businesses, or
  • 0-2% of gross sales: available for small farms

Corporate Asset Tax: 1.5% (or less)

  • Farmland: applicable only after 2,000 hectares, scaled *

Sale of goods and services: VAT of 22%

Import duties: variable

Reduced Taxation for Businesses

Companies operating in Uruguay have two reduced taxation systems available. Both are widely used:

  • Widespread tax exemption system available for new investments of any size: reduction in Income Tax, Asset Tax, VAT and import duties.
  • Set up in a Free Trade Zone (FTZ), where there is no taxation. FTZs are an option for companies selling products or services outside of Uruguay

Tax System for Individuals

Individuals working in Uruguay pay

  • Personal income tax on salary: 0 to 36%.
  • Tax on capital: dividends, capital gains, etc.: 12%

Foreign individuals who relocate and become tax residents (183 days in country in calendar year)

  • First five years plus year one became a tax resident: tax holiday.
  • Afterwards: two types of foreign income are taxed: dividends and interest. At 12%.
  • But there is no double taxation: Uruguay credits tax paid overseas on those dividends and interest.

No death / inheritance / estate tax

Tax System for Property Owners

  • Property Tax: 0.3 to 0.5% of market value (avg., urban properties). Farmland usually has lower rates.
    • In addition, a corporate asset tax of 1.5% is levied if owned by a corporate vehicle. Personal asset tax exists but seldom applies, due to non-taxable minimums, and tax phase-out in progress.
  • Rental income tax: 10.5% of gross rental
  • Capital gains tax:
    • 12% of the gain if owned by individual(s)
    • 12% of the gain if owned by a foreign corporate vehicle
    • 25% of the gain if owned by a local corporate vehicle

Tax Residency and Legal Residency

ax Residency is obtained:

  • If a person spends 183 days in-country in a calendar year
  • Or he/she has main business interest or family in the country
  • One also qualifies if he/she invests USD 1.8 M in real estate or USD 5.3 M in a company that has qualified for tax breaks

Legal Residency:

  • Friendly system, with simple requirements:
    • Birth certificate
    • Clean police record
    • Proof of income
  • Ability to work in the country with temporary/permanent permit
  • Fast-track automatic residency for South American nationals
  • Citizenship granted after three years (five years if single)

The Property Purchase Process

The three key questions to get started

  • Who can purchase property?
  • How can property be purchased?
  • What can one purchase?

Answers: 3 A’s

  • Anyone: There is no differential treatment, nor restrictions or impediments for foreign buyers of property.
  • Any way: individual(s), corporate vehicle (local/foreign).
  • Anything: No limitations (such as restrictions on borderline or beachfront property)

Structuring the Property Purchase

The purchase process requires the assistance by an “Escribano” (a conveyance attorney), appointed by the buyer.

The conveyance attorney’s role:

  • Analyzes the ownership history and other details to ensure the buyer obtains a clean title
  • Drafts the reservation and the purchase document
  • Escrow agent for the deposit on the property
  • Records the purchase at the Property Registry

Proof of Ownership: Public Registry recording

The Purchase Process: Steps

1) Buyer selects a property, and agrees on the price.

2) Buyer appoints a conveyance attorney who will draft the the reservation document (“Boleto de Reserva”):

  • Securing the purchase, by committing seller and buyer.
  • Setting a penalty if either party breaches the commitment.
  • Setting the amount that is deposited when signing the reservation (usually 10% of the price). The deposit stays with the buyer’s appointed conveyance attorney, not with seller or realtor.
  • Allowing for a 30-60 day window to verify the deeds, title search.
  • Setting the closing date: price is paid and property is transferred.

3) Title search and deed study is undertaken by the conveyance attorney.
4) The conveyance attorney drafts the purchase document (“Escritura de Compraventa”).
5) The purchase document is signed, the property is transferred, and the price is paid (*or the first installment, if it has more than one).
6) The deed is recorded in the Public Registry.

Property Transaction Costs

Buyer: 5% to 8.5%:

  • Real Estate Agent Fee (optional): 3% plus VAT (22%) = 3.66%
  • Conveyance Attorney Fee: 3% plus VAT (22%) = 3.66%
  • Deed Registration Stamp Duties (“Montepios”): 0.55%
  • Registry and Tax Certificates Stamp Duties: USD 700 avg.
  • Property Transfer Tax: of market value: 0.5% (avg.)

Seller: 0.5% to 4.1%

  • Real Estate Agent Fee (optional): 3% plus VAT (22%) = 3.66%
  • Property Transfer Tax: of market value: 0.5% (avg.)

Main Industries for Investors

Food commodities

Beef:
  • 5% of global beef exports
  • High quality, high sanitary status
  • 100% of the country’s herd has traceability
Grain/oilseeds:
  • 6th global exporter of soybeans
  • 4th global exporter of rice
Dairy:
  • 5th global exporter

Forestry / Timber

Unique conditions for growth of eucalyptus:
  • Growth cycles of 8-10 years
  • Widespread water availability
  • Stable soils
World’s largest pulp mills are in Uruguay
  • UPM (Finland), one plant operating; building second plant
  • Stora Enso (Sweden)
World’s highest FSC certification
  • 85% of forests are certified

Logistics & Free Trade Zones

Logistics and services hub for the region
  • Competitive ports
  • Adequate infrastructure
  • Favorable tax treatment
Free Trade Zones
  • 12 Free Trade Zones throughout the country
  • Qualified workforce
  • Business parks, office towers, storage facilities
  • No taxation within Free Trade Zones
  • Hub for hundreds of multinationals

Tourism

Uruguay receives 4 M tourists per year
  • Tourism industry: 7.5% of GDP
  • Main attractions: coastal cities, especially Punta del Este
  • Cruise ships: 275,000 visitors per year
Tourism-related investment
  • Real estate development in Punta del Este and other coastal cities is widespread
  • Hotel industry in permanent growth, with investments receiving significant tax breaks

Real Estate Development

Main markets for commercial development:
  • Montevideo
  • Punta del Este
Main markets for residential development:
  • Punta del Este
  • Montevideo
  • Colonia
  • Widespread development of condominiums, single homes, gated communities
  • High-end projects: Cipriani, Fendi, Venetian, Trump Tower

Tips and Suggestions for Investors

  • Tax breaks are widely available for investments of any size: determine the way to optimize exemptions.
  • Companies may set up operations in Free Trade Zones, plus other convenient alternatives with favorable tax treatment are also available: evaluate the options.
  • Location, facilities and services vary across the 12 Free Trade Zones: determine which one fits your needs.
  • Determine which type of corporate vehicle is most convenient and tax efficient, both in Uruguay and for the parent company’s jurisdiction.
  • When purchasing property, rely on advisors with global scope, who understand estate and tax rules in the buyer’s country of origin.
  • When purchasing property, consider the different ownership options, and their different tax treatment.
  • Consider the reduced taxation system for small farmland investments, and adopt the type of ownership structure that qualifies.
  • Evaluate obtaining tax and legal residency, and understand the benefits of each.

What We Can Do For You

Our firm is is a full-service Law and Tax firm, providing all the required services for investors under a one-stop-shop concept.

We are the only firm in Uruguay that is a fully integrated member of a leading global law firm.

Our partners are partners of one global firm, and we provide the support and scope of our worldwide partners in 160 locations in over 65 countries.

Our bilingual professionals assist foreign and local investors across all industries, with the highest standard of quality and integrity.

Uruguay’s Free Trade Zones

Free Trade Zones

Free Trade Zones (FTZs) are specific geographic areas with a special regulatory status: Companies operating within them face no taxation.

Uruguay has eleven FTZs in different parts of the country (near airports, ports, inland, or in Montevideo’s business district).

Operations which may be performed within FTZs include a broad range of services (such as financial, trading, IT, BPO, shared services) and logistics (storage, handling, and classification of goods) Uruguay’s Free Trade Zones.

Free Trade Zones (FTZs) are a strategic sector of Uruguay’s economy, representing between 5% and 7% of GDP in recent years.

FTZs were first established under legislation approved in 1987 and have grown to occupy an important part of Uruguay’s economy and labor market.

Hundreds of global and regional companies operate within Uruguay’s FTZs servicing customers worldwide.

Services Free Trade Zones

Services FTZs allow for companies operating from within to provide any type of services to:

  • clients located within the FTZ
  • clients located abroad
  • clients located in other FTZs
  • clients located in Uruguay (as longs as they are payers of local corporate income tax)

The Key Advantage of FTZs: No Taxes

When a company establishes itself in a FTZ, it faces no Uruguayan taxes, except social security taxes on its local employees (as any employer).

Tax exemptions are guaranteed for current or future taxes.

Thus, the company will not pay:

  • Import taxes or duties
  • Corporate Income Tax (IRAE)
  • Dividend distribution tax
  • Capital Tax (IP)
  • Value Added Tax (VAT) on goods or services

Requirements to operate within a FTZ

The only requirement that a company operating within a FTZ faces is that 75% of its workforce must be Uruguayan citizens. However, in services, a company may obtain a waiver and employ only 50% of local labor.

The company’s officers do not need to be local.

To operate within a FTZ a company must incorporate an SPV, and file its user/lease agreement and a business plan with the Finance Ministry.

Process to operate within a FTZ

Simple and clear process:

The Company chooses the FTZ which best fits its needs in terms of infrastructure, location, etc.
A fully-owned local vehicle is incorporated (a corporation or a limited liability company) or a branch of the foreign company is established
The company signs the user/lease agreement with the operator of the FTZ
A memorandum explaining the company’s intended activity and operations (the ”business plan”) is filed with the Finance Ministry. It is usually approved within 60 days

The Local Vehicle

When incorporating a local vehicle, it may be a Corporation or an LLC:

  • No minimum capital requirement
  • A sole officer / director is possible
  • A sole shareholder is possible in the case of Corporations
  • Officers / directors may be foreign nationals
  • Physical presence of officers / directors not required

Uruguay’s Advantage: a Stable Business Environment

  • Uruguay offers a business-friendly environment
  • Free inflow and outflow of capital and repatriation of profits
  • Open financial system, with no capital controls
  • Free exchange and use of foreign currency
  • Solid banking system

Andersen Tax & Legal

  • We are the first global law firm present in Uruguay
  • Full-Service Law and Tax Firm
  • Clients: mostly foreign companies and individuals
  • Staff:
    • Bilingual
    • Attorneys, Accountants, Tax Advisors, Notaries
  • Services:
    • Legal advice
    • Tax, Accounting Services
    • Company Incorporation
    • Property Conveyance
    • Legal and Tax Residency

Our Services in Free Trade Zones

Our firm has broad experience advising foreign companies on the set-up of operations within a FTZ, plus the ongoing support:

  • Helping select the appropriate FTZ
  • Incorporating the local vehicle
  • Drafting the “business plan” to be filed with the Finance Ministry
  • Drafting / reviewing user lease agreements
  • Providing the company’s annual maintenance, tax and accounting services
  • Legal residency / work permits for foreign nationals
  • Legal services in general

Farmland & Timberland Investing in Uruguay

Advantages of Investing in Farmland

  • Increasing global demand for food
  • Consistent long-term appreciation
  • Annual cash return
  • Non-volatile asset
  • Store of value

Investor-Friendly Country

  • Foreign and local investors treated equally
  • No limitations to ownership by foreign buyers
  • No currency exchange controls or forced conversion
  • Foreign currency can be used: Dollars, Euros, etc.
  • No restrictions or taxes when transferring money into, or out of the country (repatriation of capital)

Stability and Safety

  • Latin America’s safest country
  • Tops rankings in political and economic stability
  • Tops rankings in transparency and lack of corruption
  • No social turmoil: existence of middle class and Latin America’s lowest income gap
  • Solid legal system with strong reputation for respect of contracts and private property

Why Farmland in Uruguay?

Advantage # 1: Uruguay’s Suitability

  • Non-degraded soil
  • Even rainfall year-round
  • World’s largest aquifer beneath region
  • Temperate climate
  • Two crops per year (over long run: 1.7)
  • Competitive producer
  • No government intervention in the market
  • Developed land rental market

Uruguay: A Global Player

  • 6th exporter of soybeans
  • 5th exporter of dairy products
  • 4th exporter of rice
  • 5% of global beef exports … Plus, Uruguay is the only country in the world with 100% traceability of its herd

A country of 3 million feeding 40 million people

 

Plus: One of the World’s Best Places for Forestry

  • Fastest growth rate of eucalyptus, due to soil, climate and water availability: 8-10 year cycles
  • World’s highest FSC certification: 85% of forests
  • In 2006 UPM (Finland) and in 2010 Stora Enso (Sweden) built the world’s largest and newest pulp mills ….and in 2019 UPM launched a new one:

Global soil degradation, and where Uruguay stands

Escasez de agua a nivel global y la posición de Uruguay

Advantage #2: Turnkey, Easy Investment

  • Most investors choose to:

    • Outsource management of the operation to a farm management firm, which handles all aspects of the business (expertise is widespread and available); or
    • Lease out the land (there is a very liquid rental market available).

Advantage #3: Transparent Market for Land

  • The country is mapped, with soil types classified according to their productivity
  • Each type of soil is has a productivity index (“CONEAT” index)
  • The map is available online
  • Thus, land productivity is verifiable

The Online “CONEAT” Productivity Index

  • Type here
  • Plug in the property number(s)
  • The system will show the specific property’s:
    • location and water resources (rivers, creeks, lakes)
    • detailed soil map, with soil types in different colors, and the percentage of each soil type
    • description of each soil type
    • the productivity index of each soil type (“CONEAT” index)
    • the average “CONEAT” index for the whole property

The Online CONEAT System: Example

Advantages of the CONEAT System

  • It allows anyone to verify the productivity potential of a property in Uruguay
  • It provides a tool to determine uses for a specific farm
  • The CONEAT index of a property correlates with the price of the land. The market is thus very transparent: it is easy to compare properties and determine their fair value

Types of Land in Uruguay

  • Agriculture (soybeans, wheat, rice, etc.)
  • Cattle/sheep ranches, dairy farms
  • Forestry: eucalyptus, pine
  • Vineyards / olives / blueberries
  • Oceanside rural land for development
Uruguay’s Most Attractive Options

The Price of Land

Farming has favorable tax treatment in Uruguay:

Income tax:

  • Flat 25% income tax rate, levied on net income
  • For small farms, the rate is lower: farms with gross income below USD 250,000 per year have a capped tax amount of USD 5,125 (IMEBA system, which taxes sales –at 0 to 2%- instead of net income).
  • Certain timber operations qualify for tax breaks

Low property taxes: average is 0.2% *

Our Services

We are a full-service Law and Tax Firm, with a specialized division assisting overseas farmland investors, both institutional and individual.

Our Farmland investment advisory unit assists with:

  • Sourcing farmland according to client needs/preferences
  • Structuring purchases
  • Organizing corporate structures, setting up ongoing farm management

Our Legal and Tax Services include:

  • Conveyance / Legal Assistance in the Purchase Process
  • Tax and Accounting Support
  • International Taxation
  • Company Incorporation
  • Legal Services in general (contractual, corporate, labor).