The Uruguayan free trade zone regime in the era of the global minimum tax
Jorge Borrás
Uruguay
by Jorge Borrás
The free trade zone regime in Uruguay, established in 1987 by Law No. 15.921, has been a fundamental element in attracting foreign investment and promoting the country's economic development.
Under this regime, those who set up in these special zones to carry out commercial, industrial, or service activities enjoy broad tax exemptions. They are exempt from all current or future taxes, and by law, the State commits, under liability for damages, not to alter this treatment for those with a valid contract in the free trade zone.
Designations may be as a direct user (companies with a direct contract with the operator of the free zone), or an indirect user (companies that contract spaces with an indirect user)
The regime has contributed to promoting investment, creating jobs, and increasing exports of physical goods and services.
Free trade zones for services have experienced significant development in recent years. Near the Port of Montevideo, there are several free trade zones that facilitate commercial, industrial, and service activities, taking advantage of their proximity to the country's main port.The Port of Montevideo is a key hub for foreign trade between Paraguay and Bolivia, two landlocked countries. Today, the Port of Montevideo is one of the main ports of entry and exit for goods. The Free Transit Law and Mercosur treaties ensure and facilitate access to warehouses, free trade zones, and port services.
According to the latest census by the Ministry of Economy and Finance, published in 2024, these areas contributed 6.6% of GDP and 35% of total goods exports. Over nearly four decades, the regime has provided stability and confidence to investors – both local and especially foreign – favouring the inflow of investments and generating positive externalities for the national economy.
Despite modifications introduced in 2017 to comply with base erosion and profit shifting (BEPS) recommendations, the regime maintained its essence, ensuring that investment was not affected.
However, the implementation of the global minimum tax (GMT) of 15%, promoted by the OECD/G20 Inclusive Framework, raises questions about the future of this regime. Although Uruguay has not yet enacted domestic legislation in this regard, it faces the challenge of reconciling the benefits granted and the commitments made to companies established in free trade zones with this new international tax scenario.
The path will not be easy, as Uruguay must strive to maintain its reputation and the attractiveness of the system, but not taking action would imply foregoing revenue in favour of other jurisdictions that have already implemented Pillar 2 rules.
While it is clear the country will have to address the issue, the impact – at least in the near future – will be limited. No general changes to this regime are foreseen.
It should be remembered that the GMT applies to multinational groups with annual revenues exceeding EUR 750 million. Consequently, these minimum effective tax rules, which will undoubtedly affect multinational subsidiaries in the free trade zone, will have a very limited scope at this stage.
In conclusion, although the GMT will require the adoption of legislative measures, the free trade zone regime is expected to continue offering significant tax benefits, consolidating itself as a central element in Uruguay 's investment attraction strategy.
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Jorge Borrás is a Certified Public Accountant and holds a master's degree in Tax Law and Techniques from the University of Montevideo. He is a professor at the Catholic University of Uruguay in the subject of tax techniques. He is a member of the Association of Accountants, Economists, and Administrators of Uruguay, and a member of the Uruguayan Institute of Tax Studies. Contact Jorge.
