The Decree provides tax incentives for certain engineering projects. Entities that invest in the civil engineering projects covered by the Decree may qualify for exemptions from the corporate income tax and the net wealth tax.

Through Decree No. 329/016, issued on October 13, 2016, Uruguay has issued regulations to implement Law No. 16,906 (Investment Promotion and Protection Law), which provides tax incentives for certain civil engineering projects of large economic dimension that are intended to provide permanent or temporary housing.  The Decree is effective October 24, 2016 (i.e., the day it was published in the Official Gazette).

The Decree defines "projects of large economic dimension" as those with a value that exceeds 123 million indexed units (approx. US$ 15,744,000). Additionally, at least 20% of a project's area must be intended for common use. The Decree requires these construction projects to be registered with the Social Security Authority as of October 24, 2016.

The Decree also requires entities that invest in projects of large economic dimension to file an application with the details on the amount and timing of the investments with the Application Commission. If the application is approved, the Executive Power will issue a resolution establishing the tax benefits and the period for which the resolution is effective. Only investments completed before December 31, 2019, for projects submitted before December 31, 2017, will be entitled to the tax incentives.

The Decree exempts those entities from customs duties and, in general, all taxes on imports, including value added tax, for equipment, machinery and materials intended to be used in the project. The goods, however, must be non-competitive with the Uruguayan industry. The entity that has had the project approved must be the same entity that imports the goods for the project.

The Decree also exempts income derived from the projects of large economic dimension from the corporate income tax, as long as the total committed investment is made before December 31, 2019. The exemption will depend on the amount invested and will be between 20% and 30% of the eligible executed investment. The exempted amount may not exceed 60% of the tax due during the exemption period.  If the investment is not fully completed within the established period, but over 50% of the construction progress has been performed, the exemption percentages will be proportional to the percentage of progress.

The exemption will apply for a period of up to 10 years, which will begin the first year in which the entity has taxable income. If an entity, however, has losses for the initial four fiscal years, the mentioned 10-year period will be counted from the fifth fiscal year (regardless of the existence of losses in that fifth year).

Additionally, the Decree will exempt these entities from the net wealth tax for the properties included in the projects of large economic dimension for an eight-year period if the project is set in Montevideo. For all other areas, the exemption will apply for 10 years.

———————————————