The Uruguayan Free Trade Zones were created by law in 1923.<\/p>\n
Subsequently, in 1987, Law No. 15,921 modernized the Free Trade Zones regime in several aspects, for example, allowing them to be operated by private companies, determining that State monopolies will not apply in them, etc. In turn, this Law authorizes the development of all types of activities in the Free Trade Zones, not only industrial and commercial activities, but also services.<\/p>\n
There are currently several Free Trade Zones administered by private companies, some of which have excellent infrastructure, including telecommunications facilities.<\/p>\n
The Free Trade Zones are one of several instruments that Uruguay, supported by its liberal economic policy and human resources, has established to develop its traditional role as a service center for the region.<\/p>\n
The Uruguayan economic policy framework is totally adequate for the development of Free Trade Zones, since, for example, there is total freedom of entry and exit of foreign currency, as well as of currency exchange, being able to contract in any foreign currency and being the obligations enforceable in the stipulated currency.<\/p>\n
Cont\u00e1ctanos para m\u00e1s informaci\u00f3n<\/span><\/a><\/p>\n The New Tax System, which came into effect on July 1, 2007, did not introduce major changes to the Free Trade Zones regime. It even eliminated the income tax withholding that in certain cases Uruguayan companies (including Free Trade Zone companies) were obliged to withhold when distributing dividends to their partners or shareholders abroad.<\/p>\n The motives expressly stated by the Uruguayan State in the establishment of the Free Trade Zones have been to promote investments, expand exports, increase the use of national labor and encourage international economic integration.<\/p>\n It is basically a matter of attracting non-national resources and business, with the Uruguayan State offering significant benefits in exchange for their establishment and development in Uruguay, especially a total tax exemption.<\/p>\n Uruguay’s Free Trade Zones are an area of the national territory in which customs and tax regulations do not apply to free trade zone users. The rest of the regulations apply in the free trade zone as well as outside it. Tax exemption is an advantage of Uruguayan free trade zones compared to other free trade zones abroad.<\/p>\n Within this area, tax and customs regulations are different from those of the rest of the country in the following aspects:<\/p>\n Uruguayan Free Trade Zones are exempt from all national taxes, i.e. they are not subject to Income Tax, Wealth Tax, Value Added Tax or any other national tax created or to be created.<\/p>\n The only exception refers to Social Security Contributions (CESS). However, such contributions will not be applicable with respect to foreign personnel that waive the Uruguayan social security system (up to 25% of the company’s employees may be foreigners, and administrative authorization may be obtained to increase this percentage).<\/p>\n Likewise, both the entry of goods and services to the Free Trade Zone, as well as their exit abroad are exempt from all taxes.<\/p>\n If goods are transferred from Uruguayan non-free trade territory to the Free Trade Zone, this is treated as an export (not subject to specific taxation and exempted from VAT and Internal Specific Tax). Conversely, if goods are introduced from the Free Zone into non-free zone Uruguayan territory, import duties are applied. The rendering of services from Free Trade Zones to non-free trade Uruguayan territory is not allowed. However, there are some exceptions, such as call centers.<\/p>\n Other benefits<\/strong><\/p>\n Additionally, there are non-tax benefits for Free Trade Zone users, especially promotional public tariffs, and non-applicability of state monopolies.<\/p>\n In general, operations carried out by foreign companies with Free Trade Zone users do not generate taxes that must be withheld. In effect, services received from foreign companies are not subject to taxation and neither is the interest on loans made by them to Free Zone users.<\/p>\n However, we consider it convenient to point out that the aforementioned users must act as withholding agents for taxes due to third parties in the following cases:<\/p>\n Non-Resident Income Tax (IRNR12%):<\/strong> On salaries paid to foreign personnel who waived the Social Security System. All kinds of industrial, commercial or service activities may be developed in the free trade zones.<\/p>\n Some of them are listed in the Law, but not in a limiting manner, since it leaves it up to the Executive Power to authorize others that tend to fulfill the objectives (beneficial to the national economy or to the economic and social integration of the States).<\/p>\n As far as services are concerned, they can be rendered from the free trade zone to users of the different free trade zones and\/or abroad.<\/p>\n As an example, we can point out some of the activities that can be developed in the Free Trade Zone:<\/strong><\/p>\n Commercialization, storage, conditioning, classification, fractioning, mixing, assembling and disassembling of goods or raw materials of foreign or domestic origin. As an operational limitation, it should be noted that users may not provide services or carry out any activity in the non-French territory of Uruguay, except for certain exceptions detailed below:<\/p>\n In relation to the services included in paragraphs a) to f) that may be rendered to non-customs territory, they will receive the same tax treatment as the services rendered from abroad, both in relation to the supplier and in terms of their tax deductibility by the supplier.<\/p>\n Cont\u00e1ctanos para m\u00e1s informaci\u00f3n<\/span><\/a><\/p>\n The owners of the Free Zone user companies can be either individuals or legal entities. In the latter case, they may be organized according to any of the types of companies provided for in the legislation on Commercial Companies. The types of companies generally adopted are: Corporation, Limited Liability Company and Branch of Foreign Legal Entity.<\/p>\n As a rule, 75% of the personnel employed by Free Zone Users must be composed of Uruguayan citizens, but it is possible to request an exception to the Ministry of Economy and Finance to alter the above-mentioned proportions for a certain period of time. Failure to comply with any of these requirements triggers penalties that may result in the loss of all tax benefits.<\/p>\n Special Contributions to Social Security (CESS) Foreigners who obtain income from services rendered in a relationship of dependency with free zone users, who waive the benefits of the Uruguayan Social Security, may choose to be taxpayers of the Personal Income Tax (IRPF) – progressive rates between 10% and 25% – or of the Non-Resident Income Tax (IRNR) at the rate of 12%. It should be clarified that by renouncing Social Security benefits, they would not be entitled to the payment of CESS.<\/p>\n Said option may only be exercised with respect to those activities that are exclusively rendered in the free zone, and the services may not directly or indirectly form part of other services rendered.<\/p>\n It should be noted that the days worked by the dependent personnel abroad are not computed for the purpose of calculating the aforementioned tax.<\/p>\n Finally, we consider it convenient to warn that the foreign personnel hired by the companies covered by this regime cannot exceed 25% of the total number of dependent personnel.<\/p>\n The Free Trade Zone Area of the General Directorate of Commerce under the Ministry of Economy and Finance (hereinafter: “AZF”), grants the benefits derived from the establishment in the Free Trade Zone to the companies that obtain the quality of Users, whether direct or indirect.<\/p>\n Direct Users are those who, by means of contract with the operator of a Free Trade Zone, obtain from the latter the physical seat necessary to develop the activities that are authorized.<\/p>\n Indirect Users are those that contract with a Direct User to allow them to use or take advantage of their domicile and\/or facilities, which has the advantage of enabling an immediate start-up of activities and minimizing or avoiding investment.<\/p>\n In both cases, a fixed periodic fee must be paid in exchange for User status.<\/p>\n Both Direct and Indirect Users are subject to the following formalities:<\/p>\n Financial Statements<\/strong><\/p>\n Free Zone Users must submit to the General Tax Directorate their Financial Statements accompanied by an Audit Report in the event that the company’s assets exceed USD 690,000, or when its annual net operating income exceeds USD 2,300,000. In all other cases, the Financial Statements must be accompanied by a Limited Review Report.<\/p>\n Likewise, it is required to file an annual sworn statement of purchases and sales made during the fiscal year<\/strong>.<\/p>\n Disposal of participations in Free Trade Zone user companies<\/strong><\/p>\n Finally, we believe it is appropriate to include in this report the tax cost for the disposal of shares of companies located in Free Trade Zones.<\/p>\nObjectives<\/h2>\n
Waivers and other benefits<\/h2>\n
Exemptions<\/h3>\n
Free Trade Zone Users as Third Party Tax Withholding Agents<\/h2>\n
\nIRNR (12%):<\/strong> When making payments or credits to foreign subjects as a consequence of financial transactions. (e.g. derivatives, swaps, NDFs, etc.)
\nWealth Tax (1.5%):<\/strong> For debts with foreign countries as of 12\/31 of each year, except loans, price balances for imports and accounts payable for services received from abroad.
\nState Guarantee<\/strong>
\nAs provided by the Law, the State, under liability for damages, assures the User, during the term of its contract, the tax exemptions, benefits and rights granted by the Law.<\/p>\nAuthorized Activities<\/h2>\n
\nInstallation and operation of manufacturing establishments.<\/p>\n\n
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Nature of Free Trade Zone User Companies<\/h2>\n
Free Trade Zone User Companies Personnel<\/h2>\n
\nSee attached file “Special Social Security Contributions”.<\/p>\nTaxation of foreign dependent personnel<\/h2>\n
Qualification to operate in Free Trade Zone: Direct and Indirect Users<\/h2>\n
Formal Obligations<\/h2>\n