Uruguay Investment Law (16,906): COMAP, IRAE and VAT Exemptions
Uruguay has one of the most solid and transparent investment promotion frameworks in Latin America. The Uruguayan Investment Law — mainly Law No. 16,906 — sets up a regime of significant tax exemptions for investment projects that meet certain requirements, with the aim of encouraging capital formation, job creation and technological development in the country. The regime applies to both domestic and foreign companies on equal terms.
In this guide we explain what the Uruguayan investment law is, how the COMAP regime works, which exemptions are available, which sectors are eligible and how to access the benefits step by step.
What Is the Uruguayan Investment Law?
The Uruguayan Investment Law is the legal framework governing the tax benefits granted to investment projects carried out in the country. Its core rule is Law No. 16,906 of 1998, which declared the promotion and protection of investments made in Uruguay, by both domestic and foreign investors, to be of national interest.
The law provides that companies investing in fixed assets and meeting the parameters set by the regulations can access tax exemptions of different sizes, proportional to the project’s impact on indicators such as jobs created, export growth, geographic decentralisation, technology and environmental impact.
The regime is not automatic: a project must be submitted to the competent body and formally approved before the benefits start to apply.
The Regulatory Decrees: How the Regime Works in Practice
Law 16,906 is put into practice through regulatory decrees that set the concrete parameters for accessing the exemptions. The first regulations date from 1998 and have been replaced over time; the current regime is mainly governed by Decree 143/018 and its amendments, which updated the indicators, scores and exemption percentages.
The regulations govern, among other things:
- The indicators used to assess investment projects (employment, exports, decentralisation, technology, environment and others).
- The scoring system that determines the IRAE exemption percentage each project can access.
- The fixed assets eligible for the tax benefits.
- The procedure for submitting and approving projects before COMAP.
- The time limits for using the benefits and post-approval monitoring obligations.
In practice, the regulatory decree in force is the technical manual every investor needs to know to structure an investment project correctly under this regime.
What Is COMAP and What Does It Do?
COMAP (Investment Law Application Commission) is the inter-ministerial body responsible for assessing, approving and monitoring investment projects submitted under Law No. 16,906. It includes representatives of the Ministry of Economy and Finance (MEF), the Ministry of Industry, Energy and Mining (MIEM), the Planning and Budget Office (OPP) and other sector bodies depending on the project.
Any company wishing to access the investment law’s tax exemptions must submit its project to COMAP and obtain an approval resolution. Without it, the benefits cannot be applied in tax returns.
IRAE Exemption under the Uruguayan Investment Law
The main exemption granted by the investment law is the IRAE (Corporate Income Tax) exemption. It allows the company to deduct from the IRAE payable a percentage of the amount invested in eligible fixed assets.
The IRAE exemption percentage is not fixed: it depends on the score the project obtains on the indicators assessed by COMAP. The higher the score — that is, the greater the project’s positive impact on employment, exports, decentralisation, technology and environment — the higher the exemption percentage.
In general terms, the exemption ranges from 20% to 100% of the eligible investment, depending on the score. In the best scenarios, the company can deduct from IRAE an amount equal to its entire investment in promoted fixed assets — although in each year the exemption usually cannot exceed a cap (generally 90%) of the IRAE payable.
VAT Exemption under the Uruguayan Investment Law
In addition to the IRAE exemption, the investment law also provides for the VAT exemption on imports of fixed assets that are part of the approved project. This benefit is very relevant for projects requiring imported machinery, tech equipment or industrial installations.
The VAT benefit under the investment law applies to:
- Imports of movable fixed assets included in the approved project.
- In some cases, the local purchase of promoted movable fixed assets (through VAT refunds).
- The construction or extension of buildings used for the promoted activity, under certain conditions.
This exemption gives the investor an immediate financial advantage: they do not have to pay out VAT at the time of import and can put those funds into the project itself.
Eligible Sectors under the Uruguayan Investment Law
The Uruguayan investment law has a broad scope in terms of eligible sectors. In general, all companies carrying out industrial, agro-industrial, commercial or service activities can access the regime, provided the project involves investment in fixed assets and meets the minimum assessment parameters.
The sectors that use the investment law most in Uruguay include:
- Manufacturing: plastics, food and beverages, paper, textiles, chemicals, metalworking, among others.
- Agro-industry and farming: meatpacking plants, mills, dairy farms, wineries, processing plants.
- Technology and software: tech development companies, data centres, IT services.
- Renewable energy: wind, solar, biomass and other clean energy projects.
- Tourism: hotels, resorts and related services.
- Logistics and transport: warehouses, distribution centres, transport fleets.
- Construction for rental: promoted housing projects under Law No. 18,795.
- Commerce and services: to the extent the project involves investment in eligible fixed assets.
Some sectors have complementary special regimes (such as Free Zones or Industrial Parks) that can be combined with or compared against the general investment law benefits.
Project Requirements for Submission to COMAP
The project requirements for accessing the Uruguayan investment law include both formal and substantive conditions:
- The company must be an IRAE taxpayer or be in a position to become one when making the investment.
- The investment must be in eligible fixed assets: machinery, equipment, industrial vehicles, buildings, IT and telecommunications equipment, among others defined by the regulations.
- The project should be of a size that justifies submission; the regulations set different procedures by investment amount.
- A business plan must be submitted describing the activity, the investment schedule, the projected indicators (employment, exports, etc.) and the economic rationale of the project.
- The company must be up to date with its tax obligations with DGI and its social security obligations with BPS at the time of submission.
- The investment must be made within the period approved by COMAP.
How to Submit a Project to COMAP in Uruguay
The process to submit a project to COMAP in Uruguay follows these steps:
- Preparing the project: with the support of an accountant or specialist adviser, the project description, details of the fixed assets to be acquired, the investment schedule and the projected indicators (employment, exports, etc.) are prepared.
- Estimating the score: before submitting, the adviser usually estimates the score the project will obtain under the regulatory indicators, to forecast the expected exemption percentage.
- Submission: the project is filed through COMAP’s channels and assessed by the relevant ministry for the sector (MIEM for industry, MGAP for agriculture, the Ministry of Tourism for tourism, etc.).
- Assessment by COMAP: the body analyses the project, may request further information and prepares a recommendation with the proposed exemption percentage.
- Executive resolution: final approval is given by a resolution of the Executive Branch setting the benefits granted and the conditions of the approved project.
- Execution and monitoring: the company must make the investment within the approved period and report on compliance with the committed indicators. Non-compliance can mean losing the benefits.
Time Limits for Exemptions under the Uruguayan Investment Law
The time limits for exemptions under the Uruguayan investment law vary by type of benefit and project:
- IRAE exemption: the amount exempted is a percentage of the approved eligible investment. The company can apply it in the tax years following the investment until the tax credit granted is used up, within the maximum period set in the approval resolution (which depends on the score and the project).
- VAT exemption on imports: applied at the time the promoted goods are imported, provided the import takes place within the approved execution period.
- Investment execution period: set in the approval, and extendable in duly justified cases.
Properly planning the investment schedule and the use of the tax credit is essential to make the most of the benefits within the approved periods.
The Uruguayan Investment Law for Foreigners
Uruguay’s investment law applies equally to foreign and domestic investors. There is no discrimination by nationality or origin of capital. A foreign-owned company incorporated in Uruguay, or a branch of a foreign company operating in the country, can access the same benefits as any local company.
This equal treatment is expressly guaranteed by Law No. 16,906 itself, whose general provisions state that foreign investors enjoy the same rights and are subject to the same obligations as domestic investors.
For foreigners investing in Uruguay through a company, the investment law can be combined with other favourable regimes, such as the tax benefits for new residents (the tax holiday on foreign-source income, subject to its conditions) or the options for obtaining residence through investment, creating a comprehensive structure that is very attractive from a tax and immigration point of view.
Conclusion
The Uruguayan Investment Law is a powerful tool that is underused by many companies that could benefit from its tax exemptions. Through the COMAP regime and its regulatory decrees, Uruguay offers IRAE and VAT exemptions proportional to the project’s real impact on the economy, within a transparent, predictable framework that applies equally to nationals and foreigners.
Structuring a project correctly for submission to COMAP, estimating the expected score and planning the investment schedule require specialised accounting and legal advice. Good structuring can mean very significant IRAE savings over several consecutive years.
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