Sovereign Trust (Uruguay) Limited

 

About Uruguay

Uruguay lies on the Atlantic coast of South America bordered to the north by Brazil and to the south by Argentina. It has a land area of approximately 175,000km2 and a population of around 3.5 million who are largely of Spanish origin but there are significant sectors of the population who are of French, German, Italian and English background and an increasing, but notable, Japanese community.

Uruguay is a republic presided over by an executive of twelve democratically elected ministers and a President and a legislative branch of government composed of the Senate and the House of Representatives. Uruguay has established itself as a regional bastion of democratic stability and this coupled with attractive tax breaks and lack of exchange control has led to the country often being referred to as "the Switzerland of South America".

The legal system is based on civil written law passed by the parliament with a written constitution being the ultimate source of law. Justice is exercised by judges and the courts of Justice with the ultimate court of appeal being the Supreme Court of Justice.

Communications are good with regular direct flights from the capital - Montevideo - to most American and European countries and to North America. Telecommunication services are expensive but modern and efficient.

In April 1991 Uruguay, Argentina, Brazil and Paraguay signed a treaty for the creation of Mercosur, the purpose of which was to create economic integration in a similar way to the European Union. The treaty came into effect in January 1995 and provides that goods originating in Mercosur member countries can be circulated at zero tariff apart from certain specified products which will retain tariff protection under the year 2001. Chile and Bolivia joined in 1996. Goods emanating from non Mercosur countries are subject to a common external tariff which was increased by 3% in 1997. Uruguay is the administrative centre of the Mercosur customs union and has ambitions to become a "mini-Brussels" for the grouping. Uruguay has become an important entry point to Mercosur for non members. Uruguay has a slightly unusual system of taxation. Individuals are not subject to tax but corporations would normally pay tax at a rate of 30%. However tax exemptions are granted to certain types of Uruguayan companies making Uruguay an important base for tax planning.

Time

Uruguay is three hours behind Greenwich Mean Time (GMT).

 

Office Profile

• Established in 1999.
• Its primary function is to advise in developing businesses in the Mercosur and the rest of the World, specifically in Incorporation and domiciliation of Uruguayan Companies, Free Trade Zones, Free Ports, International Trade, Customs Warehouse and Bank Services.
• Languages spoken include English, Spanish, Italian and Portuguese.
  

 

Financial Investments Companies (Sociedad Anónima Financiera de Inversión - SAFI)

The Uruguayan SAFI is a type of Uruguayan offshore company which is exempt from all forms of taxation on profit. SAFIs do pay an annual licence fee to the government. This is calculated with reference to the assets and liabilities and referred to below.

SAFIs cannot trade or own real estate within Uruguay but otherwise are subject to few restrictions on their activities and little in the way of bureaucracy. Because of their ease of use and the fact that Uruguay is not immediately perceived as a tax haven jurisdiction, SAFIs can be extremely useful vehicles through which to conduct trading and investment activities around the world.

Free Zones Companies (Sociedad Anónima Usuaria de Zona Franca - SAZF)

Uruguay has created free trade zones in a number of different locations within Uruguay. Presently free trade zones have been established in Colonia, Florida, Nueva Helvecia, Nueva Palmira, Rio Negro, Rivera, San José and Montevideo. Some of these areas are in private ownership, others are owned by the government. In certain cases, ownership rests with the government but all operations are run by private enterprise.
Companies established with the free zone are exempt from all forms of taxation except that there is a 30% withholding tax on dividends paid to non residents. 75% of the employees of a SAZF must be Uruguayan (although this percentage may be reduced upon special application) and social security contributions must be made on behalf of these employees. Other than this the SAZF is subject to few restrictions.

The free zones were created in 1988 but international companies were initially slow to recognise their advantage. Now multi-national companies are relocating to the free zones in increasing numbers and companies based there include PepsiCo, Merrill Lynch and Banco Frances.

Uruguayan companies have the following characteristics:

1. Taxation
   As stated, the SAFI is not subject to tax on corporate profits but does pay an annual tax or licence fee equal to 0.3% of the taxable base. The taxable base is calculated by taking the amount of the shareholder equity and adding to it a figure equal to all liabilities minus twice the shareholder equity. This somewhat complicated calculation normally results in only a nominal figure or zero becoming payable. SAZFs pay no tax other than the above referred to 30% withholding tax on dividends paid to non residents and the social security contributions.
2. Shareholders
   Companies need have only one shareholder and shares can be issued in bearer or registered form. There is no requirement to file the details of shareholders on any public record.
3. Directors
   A minimum of one director is required and corporate directors are permitted. There is no requirement to file the details of directors on any public record.
4. Annual Reporting
   Full accounts, in the prescribed format, must be prepared, audited and presented to the tax authorities within 4 months of the financial year end selected by the company.
5. Time-Scale
   Incorporation takes between 3 and 4 months but ready made companies are available for immediate purchase.
6. Restrictions on Name and Activity
   There are few restrictions on name and activity. All company names must end with the words "Sociedad Anonima" or its abbreviation "SA". The company name cannot contain any words indicating that the company is undertaking banking or insurance business without obtaining the requisite licence. names which are considered undesirable or offensive or implying government patronage would also be disallowed. However, words which in other jurisdictions would not be allowed without further procedure such as trust, and investment services are not restricted nor is the company restricted from undertaking the indicated activities.
7. Local Requirements
   As a matter of local company law the company MUST maintain a registered office address within Uruguay and MUST also appoint a Uruguay resident as registered agent. We would generally provide these services as part of the domiciliary service fee. Accounting materials must be kept at the registered office but are not open to public inspection.
8. Secrecy
   Law 15.332, Article 25 issued on 17th September 1982 imposes a strict duty of secrecy on banks to keep details of their account holder and their transactions confidential. Breaching these confidentiality provisions carries a maximum penalty of a 3 year prison sentence. There is no general legislation which governs other areas of confidentiality but professionals recognise and adhere to international standards of client confidentiality.