In the wake of Trump’s aggressive and unpredictable trade policies, which is expected to raise the price of imported supplies, some American businesses have been exploring alternative markets. Uruguay is one such operational base that is compelling for a few reasons, such as its impressive stability, business-friendly environment, as well as it increasingly educated talent pool, particularly programmers.
For American companies relying on their trade with Mexico, Uruguay is a particularly appealing option to avoid tariffs. But, with the World Bank prescribing an 89.6% score for ease of starting a business in Uruguay, just how easy is the transition?
Legal entity options in Uruguay
American investors have a few business structures to choose from when entering Uruguay. The most common choices include the Limited Liability Company (SAU), which requires at least 2 shareholders and 1 director (and has no nationality or residency requirements); the Public Limited Company (SA), which is the most similar to a U.S. corporation; and finally, the Simplified Stock Company (SAS), the newest and most flexible option.
Though, operations are not targeting the local market, the Free Trade Zone Company has some compelling tax advantages. The only other alternative is to create a Branch Office which allows foreign companies to create a presence without creating a separate legal entity. SAU and the Free Trade Zone options are the two most common for American entrepreneurs.
The legal process step-by-step
Setting up a company in Uruguay can take as little as a week. The first step is typically to select and verify the company name with the National Audit Office (AIN) – this is when you’ll find out if it’s available. Then, company bylaws should be prepared and notarized with the help of a local lawyer in Uruguay.
The bylaws then require approval from the AIN, which typically has a small fee of around $20. Once approved, the company will then register with the National Trade Registry (RNC) for a fee of around $70. An extract of the company’s incorporation must be published in the Official Gazette, costing about $30.
After publication, the company should then get a unique taxpayer number (RUT) from the National Tax Administration (DGI). If hiring employees, registration with the Social Security Administration (BPS) and Ministry of Labor (MTSS) will also be a prerequisite. The Ultimate Beneficial Owner will have to be registered with the Central Bank of Uruguay.
As we can see, there are still quite a few different bodies to deal with. Further admin is still required too, with documentation for identification (all founders/directors), company structure details, proof of address, and so on.
Uruguay’s growing infrastructure
There is a sense of optimism in Uruguay, and it’s that feeling of a nation that is on a stampede since the pandemic. It’s partly induced by a move to remote work and a realization that overseas, Uruguay talent is more affordable yet with strong English skills.
The country is small enough, too, to benefit from modern infrastructure development. There have been large investments in telecommunications, renewables, as well as transportation. The target of 50% renewable energy generation for the electricity grid by this year has helped companies perform well on their corporate governance and ESG commitments. Internationally, it’s important to have a low carbon footprint, and Uruguay is a fine environment for those efforts.
Free-trade zones
In direct contrast to the POTUS’ impending tariffs, Uruguay’s free-trade zones appear all the more attractive. Within these, companies can operate with exemptions from national taxes, making it reminiscent of the United Arab Emirates approach to Free Zones. These are used by export-orientated businesses that will benefit from Uruguay’s bilateral agreements, particularly with Chile and Australia.
Although Trump’s tariff proposals may not have been implemented yet, a 25% tariff on Mexico could be devastating for an American company. Uruguay has tariff-free trading with Mexico on 98% of goods, as well as close market access to Brazil and Argentina, which have a population edging near the US. Trade deals exist with almost all of South America.
For those wondering what’s in it for Uruguay, given the lack of tax revenue, it was estimated that free-trade zones contributed to over 6% of GDP in 2021, with investments skyrocketing to over a billion. English is now widely spoken among professionals and the well-educated, and the network effect is strong because of the close proximity to adjacent growing industries.
Is it worth the move?
Whether the transition is worth it will be down to the individual company and market. The process is relatively affordable and straightforward, and the country allows 100% foreign ownership in local firms. It’s also worth considering that with hundreds of thriving IT companies, there is also access to an affordable but talented workforce and many agencies to collaborate with – the likes of Microsoft have already established a presence there.
