Uruguay’s Free Trade Zones (FTZs) are designated areas within the country that offer specific tax and duty exemptions, as well as freedoms in the movement of goods and assets. Over the past decade, FTZs have played a significant role in attracting investments totaling more than US$5.7 billion to Uruguay, making them a crucial contributor to the country’s economy. The legal framework for these zones has been supported by successive Uruguayan governments for more than 25 years.
FTZs support various activities in manufacturing, logistics, and warehousing that are deemed to be of national interest under FTZ law. Businesses operating in Uruguay’s 11 FTZs can engage in a wide range of commercial activities, benefiting from reduced or zero national tax rates, investment incentives, and exemption from customs duties. The management of these zones falls under the jurisdiction of the Free Trade Zone Area, which reports to the Ministry of Economy and Finance.
The industries operating within the FTZs include beverages, services, wood processing, printing, toy production, and pharmaceuticals. The zones are a mix of private and state ownership, with one government-owned zone in Nueva Palmira and ten privately-owned zones located in Montevideo, Florida, Rivera, Colonia, Nueva Helvecia, RÃo Negro, and several pulp-plants owned by UPM and Stora Enso-Arauco.
Companies operating within FTZs enjoy national tax exemptions, significantly reducing the cost of ongoing commercial activities. In order to benefit from these tax advantages, companies must adopt certain by-laws in their company constitution and form an agreement with the owner or operator of the FTZ. The agreement must be filed with the Free Trade Zones Area, and at least 75% of the payroll must consist of Uruguayan citizens.
While companies in FTZs are exempt from national taxes, they are still required to pay social security taxes. However, foreign staff members working in an FTZ-based company have the option to exclude themselves from the country’s social security system and instead pay a flat rate Non-Residents Income Tax. Customs duties exemptions apply to goods and services moving to and from FTZ areas, but import duties are imposed on goods moving from the zones into Uruguayan territory.
The FTZs in Uruguay promote free competition and do not have state-owned market monopolies operating within their boundaries. This encourages healthy competition in areas like gas supply and telecommunications. Commercial transactions within the FTZs are conducted without the involvement of Uruguay’s Central Bank or other economic authorities.
Uruguay offers highly competitive business and investment conditions for foreign companies with its free trade zones and favorable tax benefits. To ensure a smooth incorporation process and compliance with local regulations, it is recommended to partner with a local group like Biz Latin Hub, which provides customized business solutions in Uruguay and Latin America. It is essential to consult a professional for specific guidance and advice, as regulations and interpretations may change over time.
