The Uruguayan government recently approved an increase in the tax benefits granted through the Investment Law (Law 16.906). Under this law, taxpayers could qualify for significant tax exemptions by submitting an investment project that is declared by the executive powers to be in the national interest.

Companies investing in Uruguay in the future can expect a number of tax breaks. These include, for example, new regulations for corporation tax or tax concessions in property tax, VAT and customs duties.

Corporate Income Tax Exemption

1. The tax exemption amount is limited to a percentage of the investment that is committed to being undertaken. This percentage varies according to a score that is assigned to the project based on an indicator matrix (such as job creation, increase in exports, decentralisation, and clean technologies). In addition, depending on the investment project’s sector of activity, businesses can select a sector indicator, explain the Ecovis consultants.
   The increase in tax benefits means that all investment projects executed between 1 April 2020 and 31 March 2021 can be counted as 150% of the amount invested. Furthermore, the percentage assigned by the indicator matrix will be increased by 20%. For example, if an investment of USD 1,000,000 obtained an exemption score of 30%, with the increase in the tax benefits the project can exempt up to 36% of USD 1,500,000.
   These increases to 150% and 20% only apply to projects that have effectively executed at least 75% of the total investment by 31 December 2021.
2. The tax exemption amount is limited to the effective investment carried out, as opposed to what was committed. The planned investment amount could vary and be less than was initially intended. For example, if the approved committed investment was USD 1,500,000 but the amount effectively executed ended up as USD 1,490,000, the tax benefit applies to USD 1,490,000 and not to USD 1,500,000.
3. The tax exemption in each financial year cannot exceed 60% of the tax calculated prior to the exemption. For new businesses, this can be increased to up to 80%. This means that all businesses must pay at least 20 to 40% of the corporate income tax determined for the fiscal year.

Entitled Investments

The entitled investments include those which undertake the construction of immovable property and the acquisition of movable assets required for the operation of the promoted activity, say the Ecovis experts, who can support companies in the development and evaluation of investments.

Duration

Businesses have a minimum term of three fiscal years to account for the tax exemption.

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