Smart Investments, Real Advantages: What the New Investment Promotion Regime in Uruguay Brings

Context

Uruguay’s investment promotion regime aims to foster productive development, with its main attraction being the significant tax benefits provided under Law No. 16,906 on Investment Promotion. These projects can transform the competitiveness of any business. From tax exemptions to facilities for incorporating new technology, this regime has become a strategic framework for those seeking to grow, innovate, and optimize their tax burden within a solid and transparent regulatory environment. Ultimately, investing under this regime is not only a business decision, but also a smart opportunity to enhance results.

Projects that access benefits are evaluated through a scoring matrix that weighs different indicators such as job creation, innovation, decentralization, exports, and improvements in productive processes. Based on the total score obtained in this matrix, the level of tax exemptions available to the company is determined. These benefits are not indefinite: investments seeking to be covered by the regime must be executed within a previously established period, and only those carried out within that timeframe qualify. This ensures that companies commit to their investments within a clear horizon and allows the State to direct incentives toward defined objectives.

Tax benefits

The new regime establishes a tax benefit scheme based on project performance. Companies that obtain at least one point in the matrix are entitled to a minimum 30% exemption from Corporate Income Tax (IRAE), which may reach up to 100% of the investment. In addition, Wealth Tax is exempted on movable assets for their entire useful life and on infrastructure for eight to ten years. VAT exemptions and refunds related to goods and services used in the project are also maintained.

The system strengthens incentives for micro and small enterprises by increasing the additional IRAE benefit by 15%, extending the utilization period by two years, and eliminating the previous investment cap. Medium-sized companies receive an additional 10% exemption and an extra year to use the benefit. For large investment projects (exceeding 180 million Indexed Units until 2027 and 300 million Indexed Units until 2028), when high thresholds are exceeded and strict employment and R&D requirements are met, a 100% IRAE exemption is granted within the maximum period, aiming to attract high-impact economic and technological initiatives.

Changes to the matrix and indicators

Under the new General Matrix, the relative weight assigned to each indicator—considered individually—is equal to or lower than under the previous regime. This reduces the overall weighting of the matrix from 150% to 130%. As a result, even when achieving the same base score, the IRAE benefit obtained under the new scheme is lower.

The new regime eliminates the simplified matrix, a tool that previously allowed smaller projects to access tax benefits through a faster evaluation process with fewer indicator requirements. Its removal means that all projects, regardless of size, must now be submitted and evaluated under the General Matrix.

Below is an overview of the main indicators in the matrix:

• Job creation
  The new regime extends the compliance period for the job creation indicator to five years (previously three) and introduces specific incentives for hiring individuals from groups facing greater labor market insertion challenges. Additional points are granted for each worker belonging to groups such as women, young people aged 15 to 29, persons with disabilities, or beneficiaries of social programs, up to a maximum cumulative cap. This increases future risks and the level of commitments assumed.
• Environmental sustainability
  In the area of sustainability and innovation, substantial changes are introduced. The former Clean Technologies indicator is replaced by Environmental Sustainability, expanding the range of eligible investments and maintaining the possibility of including, with proper justification, investments not expressly listed.
• Strategic indicator
  Former sector-based indicators are now referred to as strategic indicators, allowing projects to qualify under one or more of them depending on the company’s activity. In particular, the Research, Development and Innovation indicator is renamed I+ and structured into three distinct categories, each with specific criteria. Investors must choose only one category when submitting the project.
• Increase in exports
  The calculation methodology is modified to incorporate a formula that considers eligible investment, the initial situation, and the effective increase in exports.
• Innovation and technology
  The “Research, Development and Innovation” indicator (2020) evolves into “Technological Adaptation, Innovation, Research and Experimental Development (I+)” in 2025, with a more detailed technical evaluation, for example through ANII. Investors must select only one option.
• Decentralization
  Differential scoring based on the department where the investment is carried out is maintained, excluding the capital city from the differential benefit scheme and reducing the score assigned to Canelones.

Eligible investments

The new regime is more stringent in several respects. First, it increases the minimum value of eligible movable assets from 500 to 1,500 Indexed Units and requires unit-level traceability for each asset. Assets must be individually identifiable and directly linked to the project; otherwise, they are excluded. The investment schedule is also tightened: the maximum execution period is reduced to five years, and investments made prior to project submission are capped at 20%, requiring more precise planning from the outset.

At the same time, the range of eligible assets is expanded to include plant seedlings and costs related to the implementation of fruit trees and shrubs, bovine and ovine breeding stock, and electric vehicles for leasing and tourism services.

Tolerance margins and expansions

The tolerance margin for compliance with indicators is reduced to 10% of the total matrix score, implying stricter monitoring of assumed commitments. Regarding investment execution, the tolerance margin is reduced from 15% to 5%.

As for project expansions, permitted investment ranges are redefined, with a maximum of three expansions per project, not exceeding 50% of the original investment. Any investment that does not contribute to the original objective must be processed as a new project. The deadline to submit expansions also becomes more restrictive, as it must now be done within the project timeline or up to the second fiscal year following its approval.

Transition period to the new regime

Decree 329/2025 progressively replaces Decree 268/020, in force since 2020, establishing a regulatory framework aligned with the country’s current economic priorities. A transition period is provided until April 30, 2026, during which companies may choose to submit their projects under either the previous or the new regime. Given that the new regulatory framework is more demanding, opting for the previous regime during this transition period may prove highly beneficial.