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Damalion Uruguay desk

Doing business in Uruguay

If you are thinking to invest, Uruguay is the best place. The stable socio-political and economic environment is a harbinger of commercial activities. It is a democratic country with a presidential system. It has an almost a 3.4million population, which is considerable human capital. The location of Uruguay in South America on the brink of the Atlantic Ocean increases its significance of Uruguay. Its economy is based on the agriculture sector, industry, service, information technology, and natural resources. Tourism, logistics, and construction sectors also play considerable roles in the economy. The indicators of health, education, and human development have improved a lot. Furthermore, the stable financial market enables Uruguay to introduce dynamic reforms in society and the state. Uruguay has given particular concentration to the tax system to build a strong economy.

The vibrant legal system of Uruguay is a guard of the whole socio-political and economic system. It has also laid the framework for the protection of local and foreign investors.  To overcome the need for energy, it has placed a particular focus on non-renewable sources. It’s not only a source of self-sufficiency but also produces clean as well as climate-friendly energy. Uruguay is a peaceful country and believes in regional and global integration to tap new markets for economic betterment. There, Uruguay is a very important country in South America, and its strategic location, as well as resources, makes it a pivotal state in the comity of nations.

Interesting Facts about Uruguay:

  • The meaning of Uruguay is ‘’river of painted birds’’
  • Restaurants don’t use salts
  • Uruguay anthem is the longest
  • Uruguay arranged the first football world cup
  • 97% of electricity is produced through renewable resources
  • 95% of people reside in urban centers

Progressive Education System

Uruguay has an outstanding education sector. It is free for all at the primary level. According to Education Ministry, the enrollment rate is 99%. However, only 72% attend the secondary level. The quality of education is very high. Learning outputs, problem-solving skills, and creativity have also remained great. It is also pertinent to know, that according to the International Student Assessment Test, Uruguay’s education system stands third in Latin America. Uruguay was the first country to launch the One Laptop Initiative for every child, while, each student has 100% access to the internet. This plan is known as Ceibal. It has earned massive appreciation, worldwide. These are why Uruguay’s education system plays an enormous role in transforming business and creating opportunities in the field of information technology.

World Recognized Health Care System

The health care system of Uruguay is world-class. It provides privacy as well as public health units. According to World Health Organization, Uruguay has adopted international practices. Private hospitals are run by Private doctors and investors or private people. However, public health care is being run and regulated by the government. Those who cannot afford private health care, they visit public hospitals, which have all the necessary facilities.  Apart from that, the government has introduced an insurance scheme that is known as Mutualista. It is a very dynamic system in which people can enjoy the facilities of private hospitals. Mutualista is a very attractive scheme to provide affordable health care. It ensures discounts and incentives for medical examinations and medicines. The globally recognized system plays a vital role in providing the best facilities for locals and ex-pats as a result, it is a huge benefit to work and do business in Uruguay.

Agriculture Sector and its Role in Economy

Agriculture is also a very important sector of the economy. it is considered 10% of the Gross Domestic Product. Crops and livestock are the primary components of agriculture. Major crops found in Uruguay are wheat, barley, maize, soy, and apple. In livestock beef and meat are the major products.  Foreign investors have invested a huge chunk in livestock and forestry. As a result, growth is being witnessed in the agriculture sector. Agriculture provides numerous opportunities and facilities to bring more investment to businesses.

Vibrant industrial and Service Sectors

The industrial sector is considered vibrant in Uruguay. Major industries are agro-industry, textile, food, clothing, and chemicals. These industries are also the source of major employment. Agro-industry is the major export-led industry. Uruguay has launched industrial parks to promote the industry. As a result, investment in the industrial sector has grown up to 5% of the Gross Domestic Product. Uruguay has introduced a legal framework to protect industrial parks such as The Investment Promotion and Protection Law. These parks reduce costs and enhanced tax regimes are good sources of to bring investment in the industrial sector.

Energy Generation and Consumption

Energy is vital for the economic development of any country. Uruguay is dependent on imported gas and fuels to accomplish its daily needs. However, with the rising prices of import-led energy, Uruguay has decided to shift from import-led energy to renewable energy. For this purpose, it has launched wind, solar, and regasification plants to overcome its energy needs. As per estimation, Uruguay has become self-sufficient in the energy sector. It gets 97% energy from renewable sources. This is a commendable achievement. Energy self-sufficiency has huge importance in attracting business and investment from the global world.

Mining and extraction sector

Mining and extraction is not major sector. However, it is enough to fulfill domestic needs. Uruguay extracts gold, iron ore, gemstone, gypsum, and steel. Furthermore, Uruguay is focusing on clay and ceramics to make this sector more dynamic. As a result, it provides good potential for new investment.

Real estate, New Opportunities

Real estate is an impressive sector in Uruguay. It has immense potential and offers great opportunities to invest in it. In Uruguay, a local, as well as a foreigner, can buy properties. However, there are certain conditions such as Tax registration and compliance with local laws to buy a property. Furthermore, Uruguay offers city apartments, beaches, farmland, and resorts. Therefore, Uruguay reflects a major boom in real estate because it offers excellent opportunities.

Tourist Attraction

Uruguay is the source of major tourist attractions.  Uruguay has famous tourist places such as Santa Teresa, Montevideo, La Carolina La Pedrera, etc. tourism also plays an outstanding role in the economy. it generates foreign exchange reserves and builds the domestic economy. it is the reason that this segment of the economy has also massive potential.

Information Technology: A Digital revolution

Uruguay has great potential in information technology.  In recent years, Uruguay has witnessed a boom in this sector. Uruguay is producing great developers and software engineers. In South America, it is the largest producer of software and the exporter. Uruguay is receiving also immense investment in information technology sectors. According to Chamber of Information Technology, in GDP, the share of information technology has grown to 2.5%. Information technology is being utilized in many sectors such as construction, logistics, and transportation as well as finance. According to ICT, Uruguay is the leading country in providing internet to its masses of the world. Therefore, investment in Uruguay is a viable option as it ensures quality information technology.

Infrastructure and Development

Uruguay has a modern infrastructure. It has developed huge buildings, outstanding roads, excellent internet, and basic amenities.  To build infrastructure, Uruguay’s government and the private sector are working together to build efficient and reliable infrastructure. According to World Bank, Uruguay has adopted an egalitarian concept to build its infrastructure. Uruguay is working on inclusive development to ensure equal development in every part. Therefore, Uruguay is the best destination to do business, as it follows the great principle of equality.

Advantages of investment in Uruguay

  • Inclusive opportunities and equal development
  • Ensure internet facility to 100% population
  • Great potential in agro-industry
  • Tax holidays for new investors
  • Open investment regime under investment law
  • Free zones for investment

Financial system and its Role in Promoting Doing business

The financial system of Uruguay consists of state banks, private banks, and financial institutions. The purpose of state banks and financial institutions is to regulate the banks and financial markets. Banco Republica is the state bank of Uruguay that conducts the businesses of other banks and regulates the state economy. Furthermore, state banks manage the exchange rate and remittances and provide a conducive environment for foreign individuals.

Uruguay’s system maintains banking secrecy, for individuals, companies, and foreigners.

Tax System of Uruguay

Uruguay’s tax system is very holistic and encompasses the concept of a resident-based system. Uruguay has adopted many forms of taxes such as income, corporate, withholding, and wealth tax. It has also adopted the system of value-added tax system along with excise tax. The general rate of annual income tax is 0%-36%.  However, non-resident tax varied from 7%-25% under the Uruguay Tax act. Corporate tax is fixed for residents and non-residents at the rate of 25%. Meanwhile, withholding tax is imposed on the source and its rate is 12%. Presently, the value-added tax (VAT) rate is 22%.

Uruguay has taken several measures to incentivize investment tax. These measures are the

Free Zone Law

Free zones are tax exempted areas where investment can be utilized in several areas such as warehouses, storage, logistics, and also including services in the domain of software as well as call centers. The operation of all industries is free from any tax. Zero tax regimes governed the free zones.

Investment Law 16906

Investment law is to promote and protection of domestic and ex-pats investment. It also assists in tax exemption. This law is regulated by the Bureau of Investor Assistance. Under investment law, an investor gets exemption from Value Added Tax and Corporate income tax. It also gives a 40% reduction in corporate income tax while importing machinery for the agro-industry.

Investment agreements have also been signed with many regional and global countries to bring investment. These countries encompass Europe, Asia, and the American continent.

Protection of Intellectual Property for Doing Business

Protection of intellectual property means safeguarding original work or ideas. In the modern world, the protection of intellectual property has become sine quo-non. For this purpose, Uruguay has enacted different laws such as the Intellectual property Law. This law protects copyrights, trademarks and patent rights. Under copyrights, the law prohibits the use of the original work of another person. Trademark law ensures registration of the name in the National Industrial Property Bureau. Similarly, patent rights protect the designs, maps, and inventions of another person, business entity, or industry. The purpose of these laws is to promote amicably doing business and to promote an investment culture.

Immigrant Law to Accelerate Doing Business

Uruguay has a very open and friendly policy for immigrants. First of all, it welcomes all foreign immigrants. There are no stringent conditions, but a simple procedure to live and invest in the country. Uruguay has also permitted permanent residency.

Permanent Residency Procedure

To get residency an individual has two choices, in case of marriage, a 3-year stay. However, otherwise, a person becomes a resident in 5 years. But the period of residency counting starts from the date of filing for residency. This process is called the Legal Resident Program and an application is pointed to the immigration authority. Application is filed with documents like a birth certificate, marriage certificate, proof of income, and a police record.

Legal Safeguards in Doing Business in Uruguay

Uruguay is a democratic country and follows the principle of separation of power. Judiciary is an independent branch constituted under the 1967 constitution. Uruguay has adopted civil law. Uruguay has different courts such as civil courts, commercial courts, and banking courts along with appellate and supreme courts to strengthen rule of law. Law protects doing business in Uruguay by enforcing contracts, protecting investors’ rights, and regulating the business environment. Uruguay has also enforced a liberal investment regime of the Organization of Economic Development Cooperation to protect local and foreign investors. Civil courts work as guardians to remove conflicts.

Lucrative investment Options

Uruguay attracts investment in numerous fields but certain industries are considered lucrative for doing business.

These sectors are :

  • Agro-industry,
  • Information technology,
  • Real estate,
  • Foods
  • Textiles
  • Tourism

Foreign investors can invest in any currency. Shareholders can be foreign partners, locals, or residents as well as non-residents. Uruguay has introduced the rule of equality which concludes that equal benefits for local and ex-pat investors. Fair Competition Law has been enacted to ensure fair practices.

The procedure of Setting up a company

An individual or business entity can start a business without prior permission. However, permission is required in the following cases:

  • Environmental impacts
  • For insurance and banking credits
  • To take general concessions
  • Conflict of interest with state entities

Business Registration Process

Uruguay has very fast business registration framework. Following steps will elaborate this plan.

Step 1:  Approval will be taken from Nation Audit Office of the bylaws.

Step 2: After the permission of National Audit Office, National Trade Register will keep record of bylaws.

Step 3: By laws of a company will be published in newspaper or The Official Gazette.

Step 4: Registration of company is also necessary in The National Tax Administration to get unique tax identification number.

Step 5: To hire workers or employees, it is necessary to enlist company in Ministry of Work and Social Security, The Social Security Administration as well as State Insurance Bank.

Uruguay Companies Law Act

The purpose of company law is to regulate corporates and businesses. The critical legal entities are corporations and limited partnerships. Foreign investors may start a consortium of companies.

Corporation

Corporations can be set up in 65 days. There are no restrictions on corporations. Bylaws can be formulated to regulate the working of a corporation. Under the company law act, two types of corporations can be formed that are open and closed.

There are two kinds of companies:

  • Open corporations

Open corporations are those that use public funds or have stock listed on the Montevideo Stock Exchange.

  • Closed corporations

Closed corporations have a limited number of stockholders and do not have publicly traded stock.

To establish a business in Uruguay, you’ll need at least two founding members, who can be Uruguayans or foreigners. A board of directors, which may include local or foreign members headquartered in or outside of Uruguay, is normally in charge of management. The corporation has a big benefit in that it has no constraints on what it can accomplish, with the exception of banking and insurance operations.

Limited Partnership

Limited liability partnership is a method used in small and medium-sized enterprises. There can be 2-50 partners, locals, and foreigners. Administration of partnership can be done by single or nominative partners. However, the partnership can be maintained through deed.

Consortium of companies

Different companies can form associations to work together. It can be operated among local and foreign entities, local and local, or foreign and foreign companies. For example, the Sacyr Led consortium is working on a rail project in Uruguay.

Branch of Foreign Corporation

A foreign company is allowed to establish its branch in Uruguay. However, to establish a branch, it must obey the bylaws, company law, and rules and regulations timely issued by the government. Furthermore, a branch has to comply with the business of the head office.

There are numerous international brands and companies which are doing business in Uruguay. These foreign companies are Abbot, Globant, Roche, Itau, etc.

Uruguay is an attractive place for investment. The legal reforms and socio-economic environment are the major factors that facilitate doing business in Uruguay. Social capital and human development are the pillars of economic activities.  Agriculture, tourism, industries, and service sectors are lucrative areas where the return on investment is very high.  Efficient financial administration and legal safeguards promote equal opportunities for investment for locals and foreigners.

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