I. Key Features to Consider
The main factors that make Uruguay and Uruguayan corporations attractive when planning offshore, regional, or international business operations include: full freedom for the movement of funds and foreign exchange; a sound financial system with strong banking secrecy; and the existence of corporations with bearer shares, which allow shareholders to remain anonymous.
II. Corporations
There are three types of corporations that allow for different kinds of operations outside Uruguay, offering significant tax benefits.
1. Investment Finance Corporation (SAFI)
SAFIs, typically known as offshore companies, must carry out — directly or indirectly, on their own behalf or on behalf of third parties — investments abroad in securities, bonds, shares, certificates, debentures, promissory notes, and movable or real property.
SAFIs pay a single tax of 0.3% annually on their capital and reserves, and are exempt from all other taxes on income, net worth, etc.
The Tax Reform Law prohibited the incorporation of new SAFIs as of July 1, 2007, and further established that existing SAFIs would retain this special tax regime until December 31, 2010.
2. Free Trade Zone Corporation (SAZF)
Free trade zones are areas of free trade and industrialization, supervised and controlled by Uruguayan authorities and managed by the State and/or private operators who provide the facilities.
Free trade zone corporations are designed exclusively to carry out the activities inherent to a free trade zone user. A free trade zone user is one who acquires the right to carry out the activities mentioned above, enjoying full exemption from national taxes (income, net worth, value added, etc.) on the activities carried out by the user companies, as well as full exemption from import-export duties on goods entering and leaving the free trade zone.
The main operations carried out through this type of company include the establishment of distribution centers and warehouses, call centers, shared services, financial and professional services, and software development. The high quality and low cost of the Uruguayan workforce make it possible to carry out these activities very efficiently.
3. Local Corporation
A local corporation is one used to carry out activities within Uruguay, but it may also be used for activities abroad, since under the principle of territoriality, to the extent it does not generate income or hold assets in Uruguay, it will be exempt from paying taxes in Uruguay. Compared to the SAFI, the local corporation has the advantage of not being classified as an offshore company.
4. General Features of the Corporations Described Above
In practice, it is common — and entirely possible — to acquire a company that has already been incorporated and authorized but has had no prior activity, allowing the company to begin operations almost immediately.
Once incorporated, the shares representing the company’s capital may belong entirely to a single shareholder. Shareholders may be individuals or legal entities, Uruguayan or foreign, resident or non-resident in Uruguay. Shares may be bearer or registered and must have a stated par value. Shareholders may act through a power of attorney.
The Board of Directors may be composed, as established in the bylaws, of one or more individuals or legal entities, who may be Uruguayan or foreign, resident or non-resident in Uruguay. The Board may meet within the country or abroad, as often as deemed appropriate, and must meet whenever required by the bylaws.*
Companies must hold at least one Annual Ordinary Shareholders’ Meeting to approve the balance sheet, decide on the allocation of profits, and appoint directors — unless the bylaws provide for longer director terms. Shareholders’ meetings must be held within the country.
5. Potential Uses of Uruguayan Corporations
Uruguayan corporations are useful for multinational companies carrying out trading operations, in which a corporation acts as an intermediary in international purchase-and-sale transactions between third countries. Goods are shipped directly from the country of origin to their final destination, without the need to pass through Uruguay.
They can be used to collect and make payments abroad arising from various sources such as services rendered, consulting fees, or commissions, in order to concentrate earnings in the corporation and reduce the taxes payable.
They allow for the centralization of treasury functions, gaining efficiency in fund management by pooling and allocating resources according to the overall needs of a region or business group.
They can hold ownership of a trademark or patent licensed to different companies, concentrating royalty income in the corporation in order to reduce the tax payable on it.
They can be used to make various types of investments, whether in real estate abroad or movable assets such as venture capital, securities from different countries, shares, etc.
To avoid the application of inheritance laws, bearer shares in a corporation allow it to own property, such as real estate, and transfer it freely. Since there is no hereditary transfer involved, inheritance tax is avoided. A similar effect can be achieved in the event of dissolution of a marital estate.
Bearer shares also make it possible to maintain anonymity regarding the ownership of certain assets, so that foreign tax authorities have no knowledge of who owns them. This can reduce income and net worth tax for individuals or companies. This is possible due to the banking and professional secrecy that exists in our country, together with the availability of bearer shares in corporations.
* Our firm can provide directors for the execution of certain transactions.
