Uruguayan Executive Power increases tax benefits granted to investment projects

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EY Global
19 Feb 2021
Subject Tax Alert
Categories Corporate Tax
Jurisdictions Uruguay

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The decree increases the tax benefits for investment projects by expanding access to the investment project regime and increasing the corporate income tax exemption.

In Decree No. 268/020, the Uruguayan Executive Power modified the methodology for evaluating investment projects to increase the applicable tax benefits.

The modifications include:

  1. Allowing the tobacco industry to access the investment project regime

  2. Allowing investments in movable assets to qualify for the regime, if the assets (by unit) amount to at least 500 Indexed Units (approx. US$60)

  3. Expanding the regime to investments conducted within the tax year in which the company filed the authorization for the project

  4. Changing how project scores are calculated 

  5. Establishing a value-added tax (VAT) refund provision for local purchases of moveable goods destined for the investment project (previously a VAT refund was only available for materials and services destined for civil works)

The decree also caps the corporate income tax (CIT) exemption for all companies at 90% of the CIT generated for each tax year, instead of 60% (for existing companies) or 80% (for new companies). For investment projects, the decree allows companies a minimum CIT exemption of 30% of the invested amount (previously 20%), with a maximum exemption of 100% of the invested amount. The minimum period for claiming the CIT exemption is increased from three to four tax years.

The decree was published in the Official Gazette and entered into force on 7 October 2020. CIT exemptions, however, may apply to investment projects submitted before the decree entered into force.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Uruguay, Montevideo
  • Martha Roca
  • María Inés Eibe
  • Nadine Bruck
Ernst & Young LLP (United States), Latin American Business Center, New York
  • Ana Mingramm
  • Enrique Perez Grovas
  • Pablo Wejcman
Ernst & Young Abogados, Latin American Business Center, Madrid
  • Jaime Vargas
Ernst & Young LLP (United Kingdom), Latin American Business Center, London
  • Lourdes Libreros
Ernst & Young Tax Co., Latin America Tax Desk, Japan & Asia Pacific
  • Raul Moreno, Tokyo
  • Luis Coronado, Singapore

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.