Uruguay released statistics for the investments that obtained tax benefits in 2012. The figure was a record USD 3.38 B worth of investments, divided among 900 projects.

This number represents a 12% increase from the previous year, and comprises 25% of the overall private investment made in the country.

One of Uruguay´s key investment regulations consists of Investment Promotion Law # 16.909 (originally passed in 1998, and updated in 2007), which establishes that investments of any size are eligible for exemptions on Corporate Income Tax (up to 100% of the amount invested), Value Added Tax on goods purchased, and Asset Tax.

In order to obtain the benefits, the investor must file a plan before a committee within the Finance Ministry, known as COMAP, which studies the project and grants the tax breaks based on the impact on certain factors, mainly: the creation of new jobs, the generation of exports, the incorporation of new technology, and the use of clean energy technologies.

The benefit is open to local and foreign investors alike, and to ventures of any size and industry. In 2012, the breakdown of investments that were benefited, by industry, was: industrial production 30%, services 18%, tourism 10%, commerce 8%, and agricultural sector 6%.

Uruguay will improve its Free Zones (Zonas Francas) regulation in 2013, overhauling the legislation that has been in place since 1987. The three main changes will consist of lowering the percentage of national labor required (currently, 75% of the workforce employed by a company operating within a free zone must be Uruguayan); making it more attractive to develop new free zones in the country’s interior (outside Montevideo); and creating theme-based free zones.

Free Zones consist of 13 different areas within the country, all of them privately run, except one. Close to 1,700 companies of different sizes operate in Uruguay’s free zones, and the list includes global banks, financial services firms, auto industry companies, logistics firms, apparel companies, and manufacturers.

Three new Free Zones were authorized in 2011, including one exclusively dedicated to pharmaceutical industries (this free zone was promoted by a consortium of foreign pharmaceutical companies).

Business activity in Uruguay´s free zones make up 4% of the country’s GDP.

The benefit of setting up a company in a free zone lies in total tax exemption for that company (no import duties, Income Tax, Dividend Tax, Value Added Tax or Asset Tax). The only tax that is levied is social security payment on labor.