Uruguay: Logistics Hub Free Airport(*)

Transcription

1 Ref.117/15 April 2015 Uruguay: Logistics Hub Free Airport(*)

2 *This information has been prepared for TCU S.A. for informational purposes only. Proper implementation may require additional technical advice in relation to the specific circumstances of the user and should not be used as a substitute for consultation with professional advisors. PwC assumes no liability to any user of this information. It must not be used for any purposes other than for which it was created and it must be kept confidential.

3 Contents 1. Why Uruguay? 4 2. Uruguay: advantages as a logistics hub 7 3. Operating types Permitted activities Operational and customs aspects Tax benefits: For entities established in Uruguay For foreign entities (no presence in Uruguay) Uruguay: economic performance 17

4 1. Why Uruguay? Uruguay s location, infrastructure and natural conditions facilitate complete and easy access to the largest economies of the region. A tradition of respect for political, social and economic freedom, as well as solid institutions, ensure a stable framework for business. 4 Uruguay: Logistics Hub 2015

5 What do international rankings say? According to the 2014 Legatum Prosperity Index, Uruguay is the best place to live in Latin America. It is ranked 30th, ahead of Chile, Argentina and Brazil. The ranking is based on several factors including wealth, economic growth and quality of life. The study includes 142 countries and represents 96% of the world s population and 99% of global GDP. Uruguay ranks as one of the safest countries in Latin America (along with Chile and Costa Rica), according to the March 2014 Latin Security Index, which measures security for multinational executives. The index is developed by FTI Consulting for the Latin Business Chronicle. The 2014 Global Peace Index, which ranks 162 countries in terms of security in society, the extent of conflict and the degree of militarization, places Uruguay at the top in South America and 29th globally. Uruguay maintains a high level of human development, ranking among the top three in the region in 2014 and above average for Latin America and the Caribbean and 50th worldwide, according to the United Nations index that annually measures the quality of life in different countries. According to the Mercer 2015 Quality of Living City Rankings that surveys 230 global cities (with New York as the base city for comparisons), Montevideo ranks 78th overall and is the number one city in South America. Investment promotion Foreign and domestic investors receive equal treatment. Investment promotion and protection has been a consistent state policy in Uruguay. Investors have access to a series of tax benefits if conditions established by the Investment Law and regulatory decrees are met. Uruguay offers Free Port and Free Airport systems that offer the ability for merchandise handling with value-adding operations. Benefits of these systems include operational, customs and tax advantages. Uruguay also promotes Free Zones and industrial parks with systems that offer a suitable framework to structure manufacturing, commercial and service activity investments focused on international markets. Financial market and free repatriation of funds Uruguay s financial system is comprised of banks, loan institutions and representative offices of foreign banks. All of the aforementioned require authorization by the Central Bank of Uruguay to operate. Uruguay s banking system is noted for unrestricted currency exchange, fund transfers and profit repatriation. Requirements of the Uruguayan Companies Act must be met in order to repatriate capital and profits Uruguay: Logistics Hub 5

6 A solid economy with strong freedoms While Uruguay s economy is heavily rooted in raw material production (e.g., meat, grains, wool, wood and cellulose pulp), other strategic industry sectors have developed as a result of the country s high human capital standards. Service industries related to tourism, information technology, finance, logistics, transportation, construction, call centers and shared service centers, among others, have shown significant growth over the last few years. According to the 2015 Index of Economic Freedom published by the Heritage Foundation and The Wall Street Journal, Uruguay s economy ranks 2nd in Latin America after Chile and 43rd overall with a score of An independent and efficient judiciary branch provides strong property rights protection and upholds the rule of law. The perceived level of corruption has declined, thus enhancing the prospects for long-term economic development. The Economic Freedom score is obtained through the average score of the following ten components: property rights, freedom from corruption, business freedom, labor freedom, monetary freedom, government spending, fiscal freedom, trade freedom, investment freedom and financial freedom. Meanwhile, Uruguay ranks 5th in South America in the October 2014 Economic Climate Index (ECI), which is published by the Brazilian Institute of Economics at the Getulio Vargas Foundation and the Institute of Economic Research at the University of Munich. High literacy and school enrolment As public education in Uruguay is free and mandatory, expenditures in education are a major component of social spending by the government. According to 2014 Ministry of Education statistics, the percentage of Uruguayans with no education is one of the lowest in the region at 1.6%. Public education quality and coverage have shown progress over the last few years as reflected in one of the highest literacy rates in the region. Enrollment levels also compare well with regional countries. Uruguay was the first country to implement the One Laptop per Child initiative. Created to provide computers to all children in all public schools in the country, Uruguay became the first country in which 100% of students have internet access. MERCOSUR member Along with Argentina, Brazil, Paraguay and Venezuela, Uruguay is a full member of MERCOSUR, the Southern Common Market. Imports of goods from any of these countries are generally free from customs tariffs, except for goods found in exception systems. Bolivia, Chile, Colombia, Ecuador and Peru are associate members of MERCOSUR. 6 Uruguay: Logistics Hub 2015

7 2. Uruguay: advantages as a logistics hub Uruguay s success as a regional logistics hub stems from its strategic geographic location, modern regulatory system and strong economy. With an area of approximately 176,000 km 2 and a population of 3.4 million, Uruguay is located on South America s Atlantic coast, bordering Brazil to the northeast and Argentina to the west. A strategic location in Mercosur and in South America s southern cone enables Uruguay to be a natural logistics hub that offers an integrated and complementary platform to the regional network with access to a market of over 250 million people. Uruguay has a highly attractive legal and tax framework, including Free Zones, Free Ports, Free Airports and Customs Warehouses aimed at improving corporate supply chains while offering an optimal structure for the establishment of regional distribution centers Uruguay: Logistics Hub 7

8 Frankfurt 11,403 Km París 10,973 Km Madrid 9,958 Km Miami 7,212 Km Bogotá Panamá Km 5,469 Km Uruguay Regional distribution center residents, which represents 75% of MERCOSUR S GDP, just 2 hours by plane Lima 3,300 Km Santa Cruz de la Sierra 2,013 Km San Pablo Asunción 1,564 Km Rio de Janeiro 1,836 Km 1,080 Km Porto Alegre Santiago de Chile 713 Km 1,341 Km Buenos Aires 205 Km Montevideo Direct flights

9 3. Operating types 10 Uruguay: Logistics Hub 2015

10 Ref. Operating types Free Airport (FA) 3.1 Is it necessary to have a local entity to operate? No. Both residents and non-residents may operate. 3.2 If establishing an entity in Uruguay: What type of local entities are permitted (SRL, SA)? No restrictions on corporate type Is there any particular corporate type that provides advantages for operations? No Are there additional formal requirements to establish a local entity and to start operations? No Timeframe to start operations Immediately, no prior authorization is required Uruguay: Logistics Hub 11

11 4. Permitted activities Ref. Permitted activities Free Airport (FA) 4 Which activities are permitted? a) Those that add value to goods without changing its origin, modifying its appearance or facilitating availability or destination of the goods. In addition, goods can be modified in terms of status or nature, without modifying its origin. These modifications include: assembly; mixtures; installation or replacement of parts and accessories; hardware configuration; software installation; production of packing, packaging, labelling and other products used for trading merchandise that will depart the FA; and other similar operations as deemed by the Executive Branch. b) Services related to goods. In addition to conventional loading, unloading, stevedoring and merchandise movement activities, also included are transport, transshipment, reshipment, transit, removal, arrangement, deposit, storage, repackaging, relabeling, classifying, grouping, ungrouping, consolidating, deconsolidating, handling and fractioning. 12 Uruguay: Logistics Hub 2015

12 5. Operational and customs aspects Ref. Transit / Storage of goods Free Airport (FA) 5.1 Is there a time limit for holding / storage of goods? No 5.2 Are there any particular requirements for transit / storage of goods coming from abroad? No 5.3 What happens with Mercosur origin goods that physically go through Uruguay and have Mercosur as the final destination? They maintain Mercosur origin. Extension of origin certificate validity for the term in which they are stored. Possibility of dividing the merchandise while maintaining origin (derived certificates) Uruguay: Logistics Hub 13

13 Ref. Transit/Storage of goods Free Airport (FA) 5.4 How are operations classified from a customs and tax perspective? From To Abroad By air FA = Simplified entry Other means of transport FA = Transit FA By air Abroad = Transshipment / reshipment Other means of transport Abroad = Transit National Custom Territory FA = Export FA National Custom Territory = Import 5.5 If goods enter by air: What customs procedures are required upon entry? None What customs procedures are required upon departure? Departure by air: Simplified Message. No customs broker is required and package/weight must be declared. Departure by other means: Transit DUA / Import DUA. Customs broker required. Value, customs classification, weight, packages, supplier, addressee and origin must be declared, among others Is there a minimum period of time between entry and departure of goods? No It is possible to perform multimodal operations? Yes 14 Uruguay: Logistics Hub 2015 Uruguay Logistics Hub 14

14 6. Tax benefits Ref. Tax benefits Free Airport (FA) 6.1 For entities established in Uruguay: IRAE (corporate income tax) Exempt, if goods for sale, in transit or stored in FA are from foreign origin and do not originate from nor have the national customs territory as a destination. Exemption also applies to income derived from goods sold, in transit or stored in FA, that have the national customs territory as the destination, provided these operations do not exceed 5% of total sales in the fiscal year. If exceeded, the exemption only applies to transactions of goods that do not have national customs territory as the destination. Activity must be carried out entirely from the FA or abroad, and the exemption applies only to the sale of goods (in transit or stored in FA) IP (net wealth tax) Assets in Uruguay at the end of the fiscal year levied at 1.5% IVA (VAT) and taxes on entry of foreign goods Not applicable 2015 Uruguay: Logistics Hub 15

15 Ref. Tax benefits Free Airport (FA) 6.1 For entities established in Uruguay: Withholding tax agent on income paid (or credited) abroad Non Residents Income Tax (IRNR) Dividends: 0% if paid out of income not subject to IRAE. 7% if dividends arise from income subject to IRAE. Interest from loans: 0% if assets of the local entity earning income not subject to IRAE >90% of total assets. Other cases: 12%. Technical services: 0% if the local entity does not obtain income subject to IRAE. 0.6% if income subject to IRAE does not exceed 10% of total income. Other cases: 12%. Royalties: 0% if earned in rights used outside Uruguay. Other cases: 12% What minimum formal obligations do local entities have with the Uruguayan tax authority? Filing of: Annual Corporate Income Tax (IRAE) and Net Wealth Tax (IP) return, together with public accountant report (Limited Review or Audit Report, depending on the category of the company - CEDE or No CEDE - as determined by the Uruguayan tax authority). Value Added Tax (IVA) return (monthly or annually depending on the category of the company - CEDE or No CEDE - as per the Uruguayan tax authority). 6.2 For foreign entities (no presence in Uruguay): IRNR Exempt, if goods for sale, in transit or stored in FA are from foreign origin and do not originate from nor have the national customs territory as a destination. Exemption also applies to income derived from goods sold, in transit or stored in FA, that have the national customs territory as the destination, provided these operations do not exceed 5% of total sales in the fiscal year. Activity must be carried out entirely from the FA or abroad, and the exemption applies only to the sale of goods (in transit or stored in FA) IP Exempt IVA and taxes on entry of foreign goods Not applicable 16 Uruguay: Logistics Hub 2015

16 7. Uruguay: economic performance 2015 Uruguay: Logistics Hub 17

17 Growth in 2014: Uruguay outperforms region The Uruguayan economy completed 12 years of uninterrupted growth in 2014 in what has become the longest expansion phase with the highest growth rates in the country s history. Economic expansion and labor market growth were the main positives for Uruguay in The latest available official data shows expected growth of 3.5%, which is below 2013 s performance. However, this performance is not poor considering the deterioration in the external environment that Uruguay has had to face and the economic stagnation of the country s main trading partners in the region. Uruguay was able to achieve growth again in Another noteworthy aspect is that economic growth was accompanied by an increase in employment. Average unemployment for the year is expected to be 6.5%. GDP Real change 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% Unemployment rate 7.4% 7.3% 7.2% 7.2% 7.0% 6.8% 6.6% 6.4% 6.3% 6.2% 6.0% 5.8% 6.6% 6.5% 6.5% * * Source: BCU Central Bank of Uruguay and in-house estimates* Source:INE National Statistics Institute and in-house estimates* Performance varied across industry sectors. However, the transport, storage and communications sector, which is associated to logistics activities, was up 6.7% as of September Good prospects for 2015 Government officials, executives and analysts agree: Uruguay has a foundation to continue growth, but at a slower pace. The Uruguayan economy is expected to grow 2.5% in 2015, which is higher than the expected average for Latin America and would be essentially sustained by a forecasted increase in consumption. 18 Uruguay: Logistics Hub 2015

18 Record foreign investment and more plans to invest A PwC survey carried out in November 2014 of executives from large companies in various industries in Uruguay shows favorable expectations. In general they expect weaker growth, but none expect declines in economic activity. Most survey participants do not expect negative results at their own companies in the coming two years and plan to make investments. This was one of the most revealing aspects of the study: nine out of ten executives at companies whose customers are in the domestic market have plans to invest in the coming two years as do eight out of ten at companies in the export sector. Investment is a key aspect for growth. This favorable business environment is seen in the country s main investment statistics (Uruguayan public debt is considered investment grade). In the 12-month period ending September 2014, foreign direct investment (FDI) totaled USD 3,000 million (about 5.4% of GDP). Over the last decade, FDI inflows to Uruguay increased by a factor of nine, and growth is expected to continue since new investments are currently underway. Uruguay is one of the top 3 countries in attracting FDI in Latin America, as measured in terms of GDP. Foreign direct investment USD millions * Source: BCU Central Bank of Uruguay and in-house estimates* 2015 Uruguay: Logistics Hub 19

19 Contact Daniel García Diego Tognazzolo Augusto Cibils Montevideo Cerrito 461, 1st floor Montevideo, Uruguay T: F: WTC Free Zone Dr. Luis Bonavita 1294, 1st floor, office Montevideo, Uruguay T: Zonamerica Business & Technology Park Ruta 8, km Building M1, offices H/I/J Montevideo, Uruguay T: F: Punta del Este Avda. Córdoba y Tailandia Maldonado, Uruguay T: F: Int PricewaterhouseCoopers Ltda., PricewaterhouseCoopers, PricewaterhouseCoopers Professional Services Ltda. and PricewaterhouseCoopers Software Ltda. All rights reserved. PwC refers to the Uruguayan member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details.