On January 31 1998, the Promotion of Investments Law became effective with the aim of promoting domestic and inward investment. The equality of inward investment with domestic investments is now guaranteed by the government which takes responsibility for damages and ensures the free transfer of capital and profits (free convertibility is permitted by law).
Capital assets (such as personal property directly assigned to the productive cycle and equipment for electronic data processing) are exempt from the payment of capital taxes (impuesto al patimonio), being the executive power empowered to fix other exemptions on other goods.
The import of personal property directly assigned to the productive cycle and equipment for electronic data processing is also exempt from the payment of value added tax (VAT; impuesto al valor agregado) and internal specific tax (impuesto específico interno), as well as the refund of VAT included in the purchase price of the goods sold within Uruguay.
Regarding industry and commerce income tax (impuesto a la renta de industria y comercio), income tax on land-and-cattle products (impuesto a las Rentas Agropecuarias) and capital tax (impuesto al patrimonio), a system of accelerated depreciation is set out for certain goods.
Finally, the executive is empowered to cut by three percentage points the contributions made by manufacturing employers to the Social Security System.
Incentives on specific investments
The executive can grant benefits to those promoting the production of goods and services.
To qualify for these benefits, investments should:
- incorporate technical progress;
- improve exports;
- generate employment either directly or indirectly;
- provide productive integration;
- promote small and medium-sized undertakings; and
- contribute to geographical decentralization.
The benefits may include the exemption from:
- either all or part of all taxes;
- up to 60% of employer's contributions to the Social Security System;
- all taxes which may levy the company's income, as well as distribution; and
- tolls, port charges and additional taxes.
Furthermore, a system of productive specialization is created so that those companies which restructure to take advantage of Mercosur will be authorized to import certain goods exempt from customs duties (impuesto aduanero unico). These goods must have originated in mercosur member states and should be of the same nature and have the same destination as those goods whose commercial production is being discontinued or reduced.
Repayments resulting from leasing contracts will be exempt from VAT provided they fulfill the following conditions:
- the term of duration of the contract is no less than three years;
- the assets are not vehicles other than utility cars, nor private property intended for the household; and
- the user is a passive subject of income tax on industry and commerce, income tax on land-and-cattle products or taxes on the alienation of land-and-cattle assets.
The executive is empowered to provide tax exemption whenever the taxes may burden any corporate mergers, demergers or restructurings which would enable the expansion or the strengthening of the companies.
Mortgage taxes which levied tax on mortgages created to guarantee loans between individuals are abolished.
As regards labour credits, the term for filing a claim originated from labour relationships is cut from two years to one year after the labour relationship has ceased. Once the term has expired, no claims may be filed.
The term for employees claiming labour credits or payments has also been cut from 10 years to two years after the judicial claim is filed.
As for securities, all collateral or personal guarantees attached to securities will be transferred by law without the need to register.
Finally, any controversy arising from the interpretation of the application of this law may be submitted by the party to the relevant court or to the Court of Arbitration. This will not apply if the foreign investor belongs to a country with which Uruguay has signed a treaty anticipating the controversy and providing the solution.
Eduardo Ferrari Devoto and Juan Oreggia Carrau
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