In a previous article we explained the basic operations and advantages of Uruguay's Tax-Free Zones (TFZs). Since then, Law No 19.566 of December 2017, modified the TFZ regime. In this article, we describe these changes and their likely impact.

The new law starts by highlighting that TFZs are of national importance in promoting investment, creating employment and generating favourable conditions for international commerce. So clearly the changes are not intended to affect the general scenario of Tax-Free Zones in Uruguay.

Modifications as of December 2017

The OECD has pressured Uruguay for several years to change its laws regarding bank secrecy and the provision of public information regarding the ownership of companies, amongst others.

While these requirements had already been met, the OECD continued to object to Uruguay's law on TZFs, as part of its Base Erosion and Profit Shifting (BEPS) programme, arguing that they provided a mechanism for unfair competition.

The Uruguayan government addressed these issues in the new law. At the same time, they made other changes to offset any negative effects from complying with the OECD requirements.

Analysis of changes:

1. Increased obligations –

i. Users must show that there is an actual substantial business activity. This provision is aimed at preventing the use of shell companies.

ii. New permits authorizing use within a TZF will be for a maximum of 15 years for industrial activities and 10 years for commercial or service activities. No clause entitling automatic renewal will be permitted.

This clause is subject to the provision that it only applies to TFZs within Uruguay's Capitol City Montevideo. Outside Montevideo, the Executive can grant licenses for longer periods.

iii. Current users who have a permit with no time limit will have one year to apply for a new permit in accordance with the new requirements.

iv. Users of TFZs must file a sworn declaration every two years with the government to show how they are complying with the business plan on the basis of which their permit was issued.

2. Increased opportunities and more flexibility –

i. Tax-Free Zones outside Montevideo are now allowed to carry out business activities outside the TFZ, always supposing that these activities are of a complementary nature to the primary business activity.

This means that for example administrative and accounting operations can be run from outside the TFZ. For many companies presently using a non-Montevideo TFZ, it could be markedly cheaper to carry out these activities outside the TFZ.

ii. Users of TFZs are now entitled to provide services of all kinds in Uruguay, on the condition the service is provided to a Uruguayan registered Company Tax (IRAE) payer. Previously TFZ companies could only provide services outside of Uruguay.

iii. Some specified services can be provided to any person in Uruguay, whether a registered taxpayer or not. These include call centres, distance learning services, and certain IT businesses.

iv. The requirement that 75% of the workforce be Uruguayan may now be reduced to 50% for the duration of the permit when the nature of the business requires it. This is in addition to the existing possibility of requesting a short-term reduction in the percentage of Uruguayans.

The law also states that a request can be made for a short-term reduction in the percentage of Uruguayan workers (to below 75% or 50% depending on the case) and that the application will be taken as granted if the Executive does not respond within 60 days.


The government needed to amend the legislation to comply with OECD requirements, but at the same time did not want to negatively affect the Tax-Free Zones, which continue to be successful in our country.

So, at the same time as making the OCED-required modifications, they added flexibility to the regime in other respects. It is to be hoped that the positive aspects of the new law for new investors will offset any possible negative ones.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.