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A new free zone in Uruguay will be established for an investment of US $20 million

by | Sep 16, 2023

Uruguay’s government recently authorized installing a new free zone in the southwestern town of Colonia del Sacramento to produce, market, and export services. The project consists of an investment of 20 million dollars, will be in charge of Zona Franca del Plata, and will be the first dedicated to services located on the Uruguayan coast.

Zona Franca Plata will provide infrastructure for the new free zone in Uruguay

This past June, the Uruguayan Ministry of Economy and Finance (MEF) gave the go-ahead for a new free zone to take shape in the country. According to the proposal’s details, the primary condition is that Zona Franca del Plata must provide the infrastructure for installing the new facility.

The project’s final objective for the new free zone in Uruguay is to establish a space dedicated to companies that commercialize services and will consist of various stages. The first includes preparing the executive project and approval by the Municipality of Colonia and the Ministry of the Environment. Then, the project will be presented to the National Directorate of Free Zones. This process is estimated to last six months and should be completed by the beginning of 2024.

The project’s second stage for the new free zone in Uruguay provides for building and infrastructure construction. This should be completed within 18 months once the project has received approval from the corresponding organizations.

In total, it is estimated that the installation of the new service free zone will take two years. Given this timeframe, it should be operational by mid-2025 if no problems arise along the way. The investment in the installations starts at  US $15.3 million and will reach US  $20 million if pre-operational and on-the-ground expenses are also included.

According to Zona Franca del Plata, which must pay 8% of its yearly turnover as a fee to the State, the works began in the second half of the year. The forecast is that the new free zone in Uruguay will generate around 1,000 jobs once the facilities are operational. The main building that will be constructed will have five levels of offices and a business center of 118 thousand square feet of construction.

The reasons for the approval of the new free zone by the MEF

In the resolution that authorizes the proposal for the services free zone in Colonia del Sacramento, the MEF highlighted the convenience of continuing to promote the export of services through the installation of free zones. The establishment of this facility will encourage the capture of capital and the establishment of knowledge industry facilities required by top-level international companies with high technical and quality standards.

The MEF maintains that the Free Zone Law has established that promoting and developing free zones in the country is in the national interest. It has among its objectives promoting investments, diversifying the productive sector, generating employment, increasing the capabilities of the domestic workforce, and increasing the added value.

The new free zone in Uruguay is also planned to promote activities with high technological content and innovation and favor the country’s insertion into international trade in goods and services and global investment flows.

Free zones in Uruguay offer a multitude of benefits

Among the benefits of locating a business in the new free zone in Uruguay located in Colonia de Sacramento are:

Tax Incentives:

Exemption from certain national taxes and tariffs, such as income tax, value-added tax (VAT), and import duties on machinery and equipment used exclusively within the zone.

Reduced or zero-rated VAT on goods and services sold within the zone.

Reduced corporate income tax rates or tax exemptions for qualifying activities.

Customs Benefits:

Simplified customs procedures and faster clearance for imports and exports.

The ability to import and re-export goods without customs duties or taxes when conducting qualifying activities.

Regulatory Flexibility:

Streamlined administrative processes for permits and licenses.

Reduced bureaucratic hurdles and more flexible labor regulations in some cases.

Infrastructure and Services:

Access to modern infrastructure and facilities within the free zone, including office space and logistics services.

High-quality telecommunications and internet connectivity.

Foreign Exchange Benefits:

The freedom to hold and transact in foreign currencies.

No restrictions on the repatriation of profits and capital.

Intellectual Property Protection:

Strong intellectual property protection and enforcement.

Access to Markets:

Proximity to major international airports and ports, facilitating trade with global markets.

Skilled Workforce:

Access to a skilled and educated workforce, as Uruguay has a strong emphasis on education.

Strategic Location:

Uruguay’s geographic location between South America’s major markets, Brazil and Argentina, can be advantageous for businesses involved in regional trade.

Political and Economic Stability:

Uruguay is known for its political stability, low corruption levels, and favorable business environment.

Incentives for Specific Sectors:

Some free zones may offer sector-specific incentives tailored to technology, finance, logistics, and agribusiness industries.

Although these are some benefits of locating in a free zone in Uruguay, it’s essential to conduct thorough due diligence and consult with local authorities or a legal expert to understand the specific requirements and benefits associated with a particular free zone.

Contact LATAM FDI to discuss your foreign direct investment plans in Latin America.

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