What are Free Trade Zones?

Free Trade Zones are part of a set of policies aiming at the promotion of investments in Uruguay. 

Free zones are certain areas of the Uruguayan territory determined by the Uruguayan Government which enjoy a regime of significant tax exemptions, franchises, benefits, and special rights.

What activities may be developed within Free Trade Zones?

Any of the following activities may be developed in Free Trade Zones:

• Industrial activities in all their phases.
• Commercial activities to sell and purchase goods or products entering the free zone where the activity is carried out, or a different free zone, and being their origin and destination abroad, or the national territory.
• Logistics activities.
• Education and scientific research activities.
• Services provided from the free zone, even if inside the same free trade zone:

i) to users or developers of other free zones,

ii) to third countries,

iii) to the rest of the Uruguayan territory to companies paying Income Tax.

What are the benefits of Free Trade Zones?

Foreign investments are no different from domestic investments, so they do not require special procedures or requirements.

Activities carried out by free zone users are exempted from all existing and future national taxes, including the following benefits:

• Exemption from Income Tax on Economic Activities (IRAE).
• Exemption from Net Worth Tax (IP), and any other domestic tax.
• Exemption from taxes on the distribution of dividends.
• Foreign sales and purchases of goods and services are not taxed by Value-Added Tax (VAT), nor are sales and services within free trade zones.
• Goods exchanged between free trade zones and the rest of the world are exempted from customs duties.
• Possibility of exempting social security contributions in Uruguay for foreign staff (up to 25% of total employees).

Activities between Free Trade Zones and Uruguay

The services provided to the rest of the Uruguayan territory receive the same tax treatment as the services provided from abroad.

Sales from the rest of the country to the respective free zones are considered exports from Uruguay, and sales from free zones to the rest of the Uruguayan territory are considered imports, subject to the corresponding customs duties and domestic taxes.

Who may be installed in Free Trade Zones?

Companies authorized to carry out activities in free zones may be individuals or legal entities of any corporate type. Users’ sole purpose must be among the activities provided under the Law.
At least 75% of the company’s employees must be Uruguayan citizens and, in the case of the provision of services, the minimum percentage may be 50%, subject to prior authorization.

Free Trade Zones and the Mercosur

Sales from free trade zones to Mercosur are governed by Decision No. 33 dated July 15, 2015 of Mercosur’s Common Market Council (CMC). All goods originating in a Member State of Mercosur (or a third country with equal rules of origin, according to Mercosur) will maintain their origin status when traveling through a free zone.

In this regard, within the premises, operations may be carried out only to ensure the marketing, preservation, fractioning, or other operations with similar purposes, without altering the product’s tariff classification or the verified origin status, otherwise they will lose their Mercosur origin.

Additionally, Uruguay has Agreements on the Promotion and Reciprocal Protection of Investments (APPRI) with 30 countries, so many foreign companies are also covered by these agreements.