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Uruguay

The Asiaciti Trust Latin America office opened in Montevideo, Uruguay in June 2001.  Asiaciti Trust Latin America SA is the Group’s representative office for the Latin American region, and Asiaciti Trust Uruguay SA provides services to international clients in respect of corporations formed in Uruguay. The focus of the Montevideo based representative office is to present and market the Group’s services within Latin America, and to serve as a “hub” from which to serve the needs of our Latin American clientele.

LATIN AMERICAN PRIVATE CLIENT PLANNING

Since early 1997 a number of Latin American countries have adopted “CFC” or “black-list “ legislation the effect of which is to severely limit the opportunities for legitimate international tax and estate planning. Consequently in Mexico, Venezuela, Argentina, Brazil, and elsewhere in the region, private client tax and estate planning has become more complex, and requires sophisticated planning techniques. Nevertheless the economic, political, and social instability that exists in a number of countries in Latin America creates an urgent need for wealthy families and individuals to establish international wealth preservation structures. Failure to protect family wealth exposes both the assets and family members to an extreme level of risk.

Following the introduction of the “black-list” legislation and recent changes in the offshore environment, the selection of the correct offshore jurisdiction is the most critical issue in the creation of an effective offshore structure for wealth preservation planning.

At Asiaciti Trust we are able to provide international wealth preservation and tax planning  structures to our Latin American clientele using entities such as trusts and offshore corporations in  economically and politically stable countries that are not “black list” jurisdictions.

URUGUAY AN ONSHORE BASE FOR OFFSHORE BUSINESS

Uruguay is strategically located as the gateway to the MERCOSUR economic and trade block which encompasses more than 225 million consumers, a GDP in excess of US$1,200 billion and has one of the highest per capita income on the South American continent. The combination of the MERCOSUR agreement and the Uruguayan legislation attracts foreign investors to use Uruguay as a base for their international business operations.

Uruguay has a territorial tax system and resident entities are can benefit from low taxes on foreign source income. Corporate income tax on domestic source income is currently 25%. Consequently Uruguayan domestic or resident companies (the "SA") can be utilised for tax effective international investment and trading activities.

DOMESTIC OR RESIDENT COMPANIES (SA)

The resident company (SA) is a juridical form regulated by the Commercial Companies Law (16.060 of September 4th, 1989) and enjoys certain features that make it suitable for a foreign investor. Resident companies (SA) are not blacklisted in several European countries including Italy and Spain, as well not being black listed in most Latin American countries.

A resident company (SA) can be used for international trading activities. Should a resident company (SA) conduct trading activities outside of Uruguay, that do not involve the shipment of goods into Uruguay nor the provision of services in Uruguay, the tax authorities will attribute only 3% of the difference between the selling price and the purchase price of the goods or services as Uruguayan source income.

As a result, the resident company will pay 25% income tax on the 3% amount. Effectively the resident company (SA) will pay 0.75% income tax on the gross profit derived from the sale of goods or provision of services outside Uruguay.

Secondly a resident company (SA) may be utilized to hold foreign investments. Foreign source dividends received by a resident company (SA) are not liable to income tax in Uruguay. Furthermore, dividends paid from the resident company to its non-resident shareholders are not subject to Uruguayan withholding tax unless the country, in which the recipient is resident, taxes such dividends and allows a credit for the Uruguayan withholding tax.

Resident companies (SA) also provide the following benefits:

• The anonymity of the shareholder as the share capital is divided into shares representing tradable titles to the ownership of the company, either nominative or issued to bearer in which latter case the name of its owner is not disclosed.
• Limited responsibility of the shareholder with respect to third parties, as the shareholder is only liable up to the amount of capital paid-in.
• Unlimited possibilities of use, makes it possible for engaging in almost any trade, within certain limitations that require previous approval form the appropriate authorities.

IMPLICATIONS OF TAX REFORM OF JULY, 2007

In the past, SAFIS were set up in accordance with company law 11.073. Upon the introduction in July 1st of a comprehensive tax reform in Uruguay, SAFIS can no longer be incorporated. It is important to mention that SAFIS incorporated before July 1st, 2007 will still enjoy the benefits of the offshore low tax company regime until 31st of December, 2010. Beginning January 1st 2011, SAFIS that are still in activity must be transformed to resident companies (SA) or Free Trade Companies (SAZF) and comply accordingly with the relevant company law and tax regime.

FREE TRADE ZONE COMPANIES (SAZF)

The Uruguayan Free Trade Zone companies known as SAZF are a good substitute to SAFIS which will seize to exist at the end of 2010. According to Uruguay Company law all existing SAFIS will either have to become resident companies or free trade zone companies.

Uruguayan Free Trade Zone Law

The Uruguayan free trade zone law was passed in 1987. The legislation provides special tax and custom exemptions to companies established in the free trade zone.

Some important and most relevant features are:

• Low Tax rate.
• The Free Trade Legislation confers extensive guarantees to investors. This law No. 15,912 section 25 foresees that in the case the tax benefits established are adversely modified, the State will be responsible for the compensation for damages suffered by tenants with an approved contract.
• National custom exemptions for goods imported into the Free Trade Zones.
• Industrialization of goods is permitted.
• There are no time limits for the permanence of goods inside the Free Trade Zones.
• It is possible to issue warrants and storage certificates for goods warehoused in the free trade zone.
• Possibility of carrying out financial and service activities destined to worldwide markets.

SAZF are particularly interesting vehicles for international trade of goods. Also in cases that clients wish to obtain more substance in the structure, the free trade zone offers shared office services inside the Free Trade Zone, which include the use of business center, including conference room and a shared phone operator.

Asiaciti Trust Latin America has ready made “shelf” companies in stock and these are available to the client in a time frame of 48 hrs. Our office can also assist client in opening a local bank account for the company.

Should you wish to receive our fee schedule and further information please do not hesitate to contact our office in Uruguay.

For further information, please send email to