Supply imports for export industries are included in a system that permits tariff-free importing. With this system, manufacturers can enter, tariff-free, raw materials, supplies, parts and intermediate products used to manufacture products to be later exported. Also covered under this system are products that are consumed in the production process without being incorporated in the finished exported product, as well as containers and packing material.
To operate under this system, prior authorization must be obtained and final products must be exported within a period of 18 months.
Since the early 19th century, Montevideo has been known as a port city. Its residents have had a strong vocation to port activities and have built an infrastructure to make the port a distribution center for the country and the region.
Port law number 16,246 (May 1992) and its later regulations have enabled Montevideo to become South America's first Atlantic coast termianl to operate under the Free Port system. This system is also applied to the Fray Bentos, Nueva Palmira, Colonia, Sauce and La Paloma commercial ports.
The Free Port system offers the free circulation of merchandise in ports and port terminals throughout the country without the need for authorizations or formal paperwork. During its stay in the customs port area, merchandise is exempt from all import taxes and fees.
To receive these benefits, activities that are performed in the ports must be warehousing, repackaging, re-labeling, classification, grouping, ungrouping, consolidation, manipulation or fractioning (that does not modify the nature of the merchandise). In addition, there are no limits for the length of stay of merchandise in the port, nor for the volume of stored goods. The destination of merchandise that enters the ports may be changed freely. In no case is merchandise subject to restrictions, limitations, permits or prior reports.
In addition to the aforementioned customs benefits, goods may circulate and services may be rendered to them in the customs area free of value added tax (IVA). Likewise, merchandise stored in the free port system is not included in the IP equity tax calculation.
In addition to port areas, the law has authorized the creation of "extra-port terminals." These terminals offer increased space and more agile foreign trade operations.
The Free Port system is one of the pillars Uruguay features as a logistics platform in Mercosur and as a distribution center for in-transit merchandise.
Free Zone promotion and development aiming at fomenting investment, exports, employment and international economic integration have been declared by law to be of national interest.
Free Zones may be government-run or private. In both cases, they must be authorized and monitored by the Free Zone Area at the General Trade Bureau of the Ministry of Economy. Currently, Free Zones exist in the cities of Colonia, Nueva Palmira, Montevideo, Florida, Rivera, Río Negro, Nueva Helvecia and Libertad.
Free Zones are ideal for the following activities:
- Sales, storage, preparation, classification, fractioning, mixing, assembly and disassembly of merchandise or raw materials of international or domestic origin.
- Installation and operation of factories.
- Rendering of all types of services, both within the Free Zone as well as to other countries.
- Free Zone users may also render the following services to domestic non-free zone areas of the country: e-mail, distance education, electronic signature certificate issuance and international call centers (except in cases where the only or main destination is national territory).
- Likewise, logistics support services and IT consulting and training services may be carried out from a Free Zone to non-free zone territory (although in this case, activities are subject to the general tax system).
A significant difference between Uruguayan Free Zones and their foreign counterparts is that in Uruguay, Free Zones are not only customs enclaves, but also grant users broad national tax exemptions. Free Zone users enjoy the following tax benefits (when 75% of personnel are Uruguayan citizens):
- Exemption from all current and future national taxes, including the Economic Activities Income Tax (IRAE).
- Dividend payments by the Free Zone user to shareholders domiciled abroad are not subject to tax retentions in Uruguay.
- Entry and departure of goods and services are exempt from all taxes and any other equivalent instrument.
The aforementioned exemptions do not cover social security contributions, except for foreign personnel, who may opt to not contribute to the Uruguayan social security system.
Another attraction of the Free Zone system is the exemption from IRAE for the following income obtained by non-resident entities, even when they are not considered Free Zone users:
- Income from activities carried out on foreign merchandise in transit or stored at the Free Zones when the merchandise is not from or for national customs territory.
- Income from aforementioned merchandise when destined for national customs territory, as long as said operations do not exceed 5% of the total amount of sales in the period for in-transit or stored merchandise.
From a customs standpoint, goods entered into Free Zones from the national territory are considered exports, and the departure of goods from Free Zones abroad is completely tax free.
The introduction of goods from a Free Zone to non-free zone national territory is considered importing and is subject to corresponding tariffs. Meanwhile, merchandise from Uruguayan Free Zones that enters Mercosur member countries are subject to the common external tariff that is in effect for goods from countries outside Mercosur.
It should also be noted that the State's commercial and industrial monopolies are not in effect in Free Zones.
Contact Information for the Tax Free Zones: Aguada Park | Colonia Free Zone | Colonia Suiza Free Zone | Floridasur Free Zone | Libertad Free Zone | Nueva Palmira Free Zone | Río Negro Free Zone | Rivera Free Zone | WTC Free Zone | Zonamerica
Source: http://www.zfrancas.gub.uy/espanol/zfuruguay/index.html (in Spanish)
This system, regulated by articles 19 through 34 of the Central Bank of Uruguay's Compilation of Operations Regulations, includes the possibility of pre-financing (acquisition or production of merchandise for traditional or non-traditional export) and post-financing (placement of merchandise abroad until collection time) of export goods through an automatic system.
All exports are eligible, with the exception of certain agriculture-livestock raw materials, including raw wool, live cattle, dried and salted leather, wet-blue, etc.
To establish financing, the exporter must work through a commercial bank, requesting financing in U.S. dollars for the export from the Central Bank of Uruguay, who automatically authorizes the request. At the same time, the exporter must make a deposit in the Central Bank, which debits 30% or 10% of the financing (at the option of the exporter) from the checking account of the exporter.
The financing term cannot exceed 180, 270 or 360 days (at the option of the exporter) and interest paid by the Central Bank will be established on the total amount of financing. The interest rate is determined based on a fixed component depending on the term and the percentage debited from the exporter's account, plus a variable component determined by the six-month LIBOR rate at the close of the last day of the month prior to the financing date.
Financing may be cancelled under one of the following situations:
- Within 30 calendar days of having received the money from the export operation. The deposit made at the Central Bank is returned (10% or 30%), plus accumulated interest on the total amount of financing.
- At the maturity of the term selected by the exporter, in the case the funds from the export have not been received. The deposit made at the Central Bank is returned (10% or 30%), plus accumulated interest on the total amount of financing.
There is a tax return system in place where the exporter can recover internal taxes that make up part of the cost of the exported product. The amount to be returned is determined by the Executive Branch and is normally a percentage of the amount exported.
