The following is a guest post from Bergstein Law in Uruguay

Free Trade Zones (“FTZs”) play a key role in the attraction of foreign investment to Uruguay.  It is estimated that over last decade total accumulated investments in the FTZs amounted to more than USD$5.7 billion, thus becoming one of the main drivers of the Uruguayan economy.

All sorts of activities can be conducted in the FTZs: manufacturing, trade, warehouse, logistics, and services and across all industry sectors of multinationals, including but not limited to soft beverages (PepsiCo), pulp-mills (UPM), asset-managers (Julius Baer), advisory services (the big four included), printing manufacturers (Lexmark), toy industry (Sony) and pharmaceuticals.

Free Trade Zones are specifically delimited areas of the Uruguayan territory in which operations of all types can be conducted at zero tax. FTZsare governed by a legal regime which has been in place for more than 25 years and serve as distribution, trading, logistics, financial and services hub in the region.  Following are definitions:

  1. Free Trade Zones are areas isolated from the rest of the Uruguayan territory where economic activity is encouraged through several benefits and incentives established by law. As explained below, for custom purposes Free Trade Zones are deemed excluded of the Uruguayan customs territory (products coming in from abroad and exported from the Free Trade Zones abroad, are subject to no import/export taxation), and Free Trade Zone operators benefit from a broad tax exemption of all national taxes.
  2. Free Trade Zones allow their operators to engage in all types of commercial, industrial and services activities, including marketing, deposit, storage, assembly, disassembly, handling; installation and operation of manufacturing premises; provision of financial and professional services; banking activities; etc. The legal regime is aimed to promote, develop and encourage investment, exports, employment and international economic integration. All of such objectives have been declared (by law) to be of national interest.
  3. Free Trade Zones may be government-run or private. As of today, there is a single State-owned Free Trade Zone, located in the city of Nueva Palmira. All of the other Free Trade Zones are privately-owned, located in the cities of Colonia, Montevideo, Florida, Rivera, Río Negro, Nueva Helvecia and Libertad (in addition to the pulp-plants owned by Finnish UPM and by Stora Enso–Arauco respectively, which are by themselves Free Trade Zones). All Free Trade Zones are monitored by the Free Zone Area, which reports to the General Trade Bureau of the Ministry of Economy and Finance.

Free Trade Zones Benefits

  1. Tax Exemptions over Free Zone Operators (“Operators” or “Usuarios”). Free Trade Zone Operators are exempted from all national taxes, with the scope set forth below.

Operators are those companies — foreign or national — that have acquired the right to operate in the Free Trade Zones enjoying the tax exemptions indicated below. For such purpose, companies must adopt special by-laws and are required to enter into an agreement with a free zone owner (so-called “Explotador”) or with a free zone direct Operator (so-called “Usuario Directo”). The agreement entered into with a free zone direct Operator (or with a free zone owner, as the case may be) must be filed with the Free Trade Zones Area.   In order to maintain their status (and consequently their tax benefits), payroll of Operators must be comprised by Uruguayan citizens in a percentage which may not be less than 75%.

Operators are allowed to perform services to foreign companies, public bodies or individuals located abroad, and to entities located in the Free Trade Zones. Whether their activities are conducted in the Free Trade Zones or abroad, Operators are exempted from any national taxes.  Operators are precluded from conducting their ordinary course of business in the rest of the Uruguayan territory.

“Shelf” corporations, with no prior activity and ready to operate immediately, are usually available for such end.

Free Trade Zone Operators are exempted from all national tax created or to be created, other than social security taxes. Except that foreign personnel who work in a Free Trade Zone may waive the coverage of Uruguay’s social security, in which case such foreign personnel may apply to be excluded from the Uruguayan social security system. In such a case, the employer and employee are exempted from their obligations to comply with the social security taxes.

Operators’ tax exemption encompasses all current and future national taxes, including: (i) Corporate Income Tax (so-called “Impuesto a las Actividades Económicas” or “IRAE”, at the rate of 25%), (ii) Net Equity Tax (so-called “Impuesto al Patrimonio” or “IP”, at the rate of 1.5), (iii) Value Added Tax (so-called “Impuesto al Valor Agregado” or “IVA” at the rate of 22%), (iv) Specific Internal Tax or Excise Tax (so-called “Impuesto Específico Interno” or “IMESI”, at several rates), and (v) Tax on Control of Corporations (so-called “Impuesto de Control a las Sociedades Anónimas” or “ICOSA”, at a fixed sum of approximately US$ 500 per year).

Foreign personnel who work in the Free Trade Zone and have opted to waive or resign to the Uruguayan social security system, may choose to pay the Non Residents Income Tax (“Impuesto a la Renta de los No Residentes” or “IRNR”) at the rate of 12%, as opposed to the personal income tax (IRPF, with rates ranging between 10% and 30%). In this scenario the foreign personnel will pay its taxes in the flat percentage of 12% over any income generated upon or stemming from his/her employment relationship.

Dividend distribution by a Free Trade Zone Operator in favor of a foreign-based shareholders, is also tax exempted.

  1. Customs Duties Exemptions

Goods and services coming in and out of the Free Trade Zones remain tax exempted (regardless whether the entity bringing in those goods/services into the Free Trade Zones is or not an Operator), with the scope established next:

Services and products   — independently of the origin of the goods —    introduced into the Free Trade Zones, are exempted of any custom tax and from any tax generated in connection with any tax which may be assessed by virtue of or in connection with the importation of the goods/products into the Free Trade Zones. This exemption is “objective”, in the sense that it applies without taking into consideration if the purchaser or owner benefits from a Free Trade Zone Operator status. Identical exemption for exports is granted where products and services performed in the Free Zone are exported to entities domiciled in third countries.

Transfer of goods within the Free Trade Zone, and some particular services, are exempted from Value Added Tax (IVA).

Introduction of products from the Free Zones into the rest of the Uruguayan territory, is deemed to be an import transaction subject to import duties.

Introduction of goods from the rest of the Uruguayan territory into the Free Zones, is deemed to be an export transaction.  As such, the same is not subject to VAT (nor to IMESI), and the exporter recovers any inbound VAT associated or related to the goods sold to the Free Zones.

  1. Other Benefits

State-owned monopolies are not in force in the Free Zones. Therefore, telecommunications services and gas supply (among others) are subject to free competition.

Also, the introduction and trade of foreign currency, gold, precious metals, and public values, is completely free.

Payment and collection of commercial transactions does not require the intervention of any economic authority, including the Central Bank of Uruguay.

Like in the rest of the Uruguayan territory, there is no exchange control, inflow and outflow of foreign currency is free, and there is no foreign investment registry.

During the term of the respective Operator agreement, the Uruguayan State assumes liability for the maintenance of the tax exemptions and other benefits referred above.


Entities established in the Free Trade Zone may not fulfill their normal course of business in the rest of the Uruguayan territory, out of the Free Trade Zones. There are a few exceptions related to the following services: international call center, mail box, distance education, issuance of electronic signature certificate, technology advice related to computers and telecom, technological training, etc.

For more information, please contact the authors:

Jonás Bergstein

Domingo Pereira

Sebastián Guido


Bergstein Abogados