Last updated: 23:09 / Tuesday, 23 January 2018
Approved by the Deputies

Keys to The Free Trade Zone Reform in Uruguay

Keys to The Free Trade Zone Reform in Uruguay

A bill reforming the bylaws of Uruguay’s Free Trade Zone, where a good part of its financial industry is established, was approved almost unanimously by the Chamber of Deputies. Before the Bill’s final approval, its text must pass through the Senate, but parliamentary sources consider that it will pass that stage without major modifications.

Funds Society had access to the bill, which clarifies some of the most controversial issues of the proposed change, which, according to the Uruguayan government, was necessary in order to meet OECD criteria.

Greater Requirements and More Formalities

As set forth, companies must submit documentation within a year on the fulfillment of several objectives: the employment of Uruguayan labor, the development of investments and exports, and incentives to international economic integration. If these requirements are not met, contracts could be rescinded in June 2021.

"Free trade zone users, either direct or indirect, with contracts in progress that have no established term, or whose term exceeds the one referred to in the previous article, or which have been automatically granted extensions, must present documentation and updated information about the company and its current business plan, that allows evaluation of its economic and financial viability and its contribution to the fulfillment of the objectives established in Article 1 of this law, within a period of one year from the regulation of the law, for approval by the Free Trade Zones area of the General Directorate of Commerce," says the bill.

The Requirement of 75% of Uruguayan Personnel is Maintained

This was another of the reform’s burning issues, since some companies had pointed out the difficulty encountered in certain sectors when trying to maintain the quota of Uruguayan personnel.

The bill stipulates that, "in carrying out their activities, free trade zone users must employ a minimum of 75% (seventy five percent) of personnel constituted by Uruguayan citizens, natural or legal, in order to be able to maintain their quality as such and the benefits and rights that this law accords them.”

However, in the case of activities within the services sector, the percentage may be reduced to 50% with prior authorization: "The request to the Executive Branch to reduce the percentages of nationals in the activity must be answered within sixty days from the date of submission of the request. Failure to reply within that period, shall deem the application as approved."

Respect for Existing Contracts

The reform bill confirms that existing contracts will not be touched in order to adapt them to the new demands that will be mandatory for new companies wishing to establish themselves in those areas with a special tax regime.

"During the validity of the respective contracts, users of free trade zones will maintain all their benefits, tax exemptions and rights in the agreed terms, prior to this law’s date of effect, within the framework of the Free Trade Zones regime as established in Law. No 15.921, of December 17, 1987, and the provisions of this law shall not apply to them when said provisions imply limitations on such benefits, exemptions or rights, that were not applicable under said free trade zone regime prior to the effective date of the same", says the text explicitly.

For more information we attach the text, in Spanish, of the law in PDF format.