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Free Zone in Uruguay: an opportunity for the Argentine exporter
1 August, 2022
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Fuente: https://eleconomista-com-ar.cdn.ampproject.org/c/s/eleconomista.com.ar/negocios/zona-franca-uruguay-una-oportunidad-exportador-argentino-n55007/amp

Uruguay presents a great attraction for those Argentine companies that are affected by the economic measures adopted by the Government.

In the current context that Argentina faces, in relation to the impediments in terms of export of goods and/or services, it is important to analyze various alternatives to improve the opportunity cost of those companies dedicated to the export of goods and services "in and from " Argentina.

In this sense, Uruguay presents a great attraction for those Argentine companies that are affected by the economic measures adopted by the Government.

Given its advantages, we recommend evaluating the Free Zone Regime of the Eastern Republic of Uruguay as an alternative jurisdiction for the purpose of partially or totally relocating a legal export business that operates "in and from" Argentina.

Free zones are public or privately owned areas of Uruguayan territory, authorized by the Executive Power, in which it is possible to develop various types of industrial, commercial or service activities within a legal regime with significant advantages for the investor.

uruguay free zones
What are the Free Zones of Uruguay

Any type of activity can be carried out under this regime: commercial, industrial or services.

In accordance with its legal system, both legal and natural persons can operate in free zones. Legal entities can adopt any of the social types provided for by Uruguayan legislation, thus, the most frequent is to operate through corporations or through a branch of a foreign company.

Advantages of the Uruguayan free zone regime:

  • The activities of free zone users are exempt from all national taxes, created or to be created. In particular, it has the following tax benefits:
    • Goods imported and exported under this regime are exempt from customs duties, whether they are raw materials, products in process or finished.
    • Exemption from Income Tax on Economic Activities (IRAE), this implies an effective rate of 0% of IRAE for export sales of goods and services and for sales to other companies that operate under the free zone regime.
    • Tax exemption for dividends paid to shareholders; Foreign sales and purchases of goods and services are not subject to Value Added Tax (VAT), nor are sales and services provided to other users of the free zone regime.
    • Possibility of not contributing to social security in Uruguay by the foreign staff of the company that will operate under the free zone regime (up to 25% of the total employed, with possible special requests to increase the percentage for a given period).
    • Uruguay has 24 Agreements to Avoid Double Taxation and Tax Fraud in force, and the free zone regime is not exempt from the benefits resulting from such treaties.
  • Open exchange system.
  • Long contracting terms under the free zone regime.
  • Issuance of Certificates of Origin for those products made under the free zone regime.

Key aspects to take into consideration:

  • The currencies related to the income attributed to the entity under the Uruguayan free zone regime would not be subject to the Argentine exchange regime.
  • To achieve this, it is necessary to assign assets, functions and risks to the entity under the free zone regime, which is worth saying is already a requirement demanded by the Argentine International Tax Transparency Regime for the purpose of validly deferring in Argentina the tax on the income attributed to such entity that will eventually be taxable on the head of tax resident investors here once the distribution of dividends by said entity occurs.
  • It is worth noting that the geographical location of Uruguay facilitates the allocation of assets, functions and risks by investors who are tax residents in Argentina, which is a very valuable aspect in the field of international business.
  • Likewise, the tax resident investor here is obliged to comply with the tax control requirements potentially enforceable in Argentina by the Federal Administration of Public Revenues (Afip).

Finally, for the reasons indicated above, the Uruguayan free zone regime represents an excellent alternative for the Argentine investor for the purpose of operating a legal business of exporting personal property and/or services for the international market.