Tourism Sector — Benefits — Tax Treatment and Proceedings
- Uruguay
- 05/21/2003
- Estudio Bergstein
The Executive Branch approved on 7 May 2003 a Decree aimed at encouraging and promoting investments in the Tourism Sector in Uruguay (“the Decree”). The procedures and benefits considered by this Decree are applicable to Tourism Projects approved as per the provisions of Law No. 16,906 of January 7, 1998 and Hotels, Apart-Hotels, Bed & Breakfasts (“Hosterías”), Motels, and Tourism Farms built or to be built in the future.
Eligible projects must be aimed at lodging, congress, sports, recreational, entertainment and health services that are part of a single complex unit dedicated to tourists.
Benefits under the Decree shall apply up to May 31, 2004.
Such benefits can be summarized as follows:
(a) Credit for the Value Added Tax included in the local acquisition of goods and services destined to the building, improvement or enlargement (infrastructure and civil work) of the Tourism Project.
The Ministry of Tourism – with the conformity of the Ministry of Economy – will review and approve the corresponding acquisition invoices.
(b) Value Added Tax exemption to the import of goods destined to the building, improvement or enlargement (infrastructure and civil work) of the Tourism Project.
(c) For Income Tax purposes only, investments in the building, improvement or enlargement of the Tourism Project – if they are made in compliance with the Decree– might be subject to accelerated depreciation in the term of 15 years, and in the case of investments in equipments, the term will be five years.
(d) For Net Equity Tax (“Impuesto al Patrimonio”) purposes, investments in the infrastructure and civil work undertaken in the context of the building, improvement or enlargement of a Tourism Project and, in accordance with the terms established in the respective administrative resolution declaring the project “promoted”, will be deemed as an exempted asset as from the closing of the financial year (“ejercicio”) when the works started and during the subsequent 10 fiscal years. Exemptions will also apply to the real estate properties where the buildings are constructed. Investments in fixed asset goods destined to the equipment of the Tourism Project will be deemed to be exempted assets as from the closing of the financial year (“ejercicio”) when the goods was incorporated and during the subsequent 4 fiscal years.
(e) Credit for the Value Added Tax included in the local acquisition of fixed asset goods destined to the equipment and equipment renewal of the Tourism Project.
(f) Value Added Tax exemption on the import of fixed asset goods destined to the equipment or re-equipment of the Tourism Project.
(g) 50% exemption on all taxes, taxing the materials and goods for the building, improvement or enlargement and to the fixed asset goods destined to the equipment of the Tourism Project.
Applications for the above benefits must be submitted with so-called Application Commission, enclosing, among others, the investment project, the list of assets to be acquired under the Project, and the schedule for their acquisition.
Application must be filed along with a performance bond — effected with Banco de la República Oriental del Uruguay — in an amount equivalent to 0.5% of the amount of the investment, which bond will be reimbursed once 10% of the Tourism Project is completed.
Works must commence within 180 days counted as from the notice of the corresponding declaration, in accordance with the schedule previously submitted.
Tourism Projects may not be amended without the prior authorization of the Executive Branch.
Infringement to the above rules shall cause termination of the tax benefits, involving the application of exempted taxes, penalties and interest.
The Ministry of Tourism and the Ministry of Economy have the controlling authority to monitor full compliance with arising obligations.
