A few days ago Carlos Picos Consultora presented a new investment project for an international firm that is coming to invest in Uruguay in process improvements for public and private banking.
It is a very important benefit that has been widely applied by national and foreign investors. As an example, between January and August 2022, 464 projects worth USD651 million dollars were presented.
What are the benefits and why is it so important to know them when making investments in Uruguay?
The presentation of investment projects can be an interesting option for national and foreign investors whose intention is to establish an activity in Uruguay in accordance with the provisions of Law 16,906 and achieve tax benefits, between 30% and 100% exoneration in the total investment, the use of which will vary between 4 and 25 years.
Law 16,906 called “Investment Law” and Decrees 143/018 and 268/020 grant tax benefits to those companies that pay Income Tax (IRAE) that make investments in Uruguayan territory.
The regulation seeks to increase the impact on development and generate a positive effect on the added value of the economy.
The promotional declaration may fall on a specific sectoral activity, understood as such, the set of undertakings leading to produce, market or provide, as appropriate, certain goods or services. Certain objectives are established that are scored with a score from 0 to 10 according to the following chart. Optimizations were introduced in the weightings of the indicators of the objectives matrix in order to stimulate the growth of investment, giving emphasis to the generation of employment.
|EMPLOYMENT GENERATION||50%||0 A 10|
|DECENTRALIZATION||15%||0 A 10|
|INCREASE IN EXPORTS||20%||0 A 10|
|CLEAN TECHNOLOGIES||20%||0 A 10|
|20%||0 A 10|
|SECTOR INDICATOR||25%||0 A 10|
The following investments are allowed:
- Movable tangible assets intended directly for the activity of the
Business. They must have a minimum total value of UI 500 (five hundred Indexed Units) for the concept acquired. Movable property destined for the house and some types of non-utility vehicles are excluded.
- Investments in civil works, as well as fixed improvements in real estate. If the improvements are made in leased properties, it is required that when submitting the application there is a lease term of at least 3 years.
- In the case of investments in afforestation, investments made in seedlings and the costs of implanting multi-year fruit trees and shrubs are included.
What taxes are exempted in an approved Investment project?
- Exemption from Income Tax on Economic Activities (IRAE)
- Exemption from Wealth Tax (IP)
- Refund of Value Added Tax (VAT)
- Exemption from fees and taxes on the importation of goods
The company may benefit from tax exemptions on the investments actually made, from the fiscal year in which the project is presented, as long as the company has generated net tax income.
From the promulgation of Decree No. 268/020 the benefits were extended.
- The minimum exemption was increased from 20% to 30% of the eligible investment.
- The option of being evaluated by a simplified matrix through the employment generation indicator was incorporated.
- The minimum exemption term was extended from 3 to 4 years.
- The number of hours to be considered a job position was reduced (from 40 to 30 hours per week).
- The weighting of the Employment Generation and Increase in Exports indicators was increased.
- The exempted IRAE can reach 90% (ninety percent) of the tax to be paid.
- Small businesses may receive an additional 10% (ten percent) benefit from IRAE.
How long does the process take?
From the presentation of the project there is an initial term of 90 business days for the authorities to issue the resolution establishing the declaration of promoted project. The period may be suspended to request more information from the company. Said suspension may not exceed 90 (ninety) business days.
Once the term has expired, the recommendation for the Executive Branch to grant the benefits will be understood as carried out.
How is fulfillment processed?
The comptroller of the effective execution of the projects and the fulfillment of the commitments assumed by the beneficiaries will be carried out. Said control may be carried out at any time during the process of execution and operation of the project. If, during the monitoring of the project, non-compliance with the obligations assumed by the beneficiaries is verified, the exempted taxes will be re-liquidated.
At Carlos Picos Consultora we can help you evaluate your investment project and manage its presentation and monitoring. Contact our specialists.