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New promotional regime for real estate investments

17/09/2020

Decree No. 138 of 2020 recently published introduces a new promotional regime for real estate investments, under Law No. 16.906 of 1998, Investment Law.

Promoted activities

  • Construction of office buildings, for sale or rental.
  • Construction of residential buildings, for sale or rental.
  • Urban development projects (private initiative), of suburban or rural area, including:
  • infrastructure development and subdivision,
  • subdivision and construction of housing units over this land.

Conditions for applying to benefits

Projects without registration before the publication of this Decree:

  • projects with an investment of USD 6,5 million or more, in civil works and equipment of common areas, registered as of this Decree,
  • common areas should be at least 10% of the project,
  • promoted investment should be executed in a period of up to 60 months, since the approval of the building permit, maximum 30th April of 2025.

Projects previously registered (initiated or not):

  • projects with pending investments for at least USD 6,5 million (civil works and equipment of common areas),
  • common areas should be at least 10% of the project,
  • promoted investment should be executed in a period of up to 48 months, since the submission of the project among COMAP, maximum 30th April of 2025.

Investment projects should be submitted before the 31st of December of 2021 in COMAP.

Fiscal benefits

  • Income Tax exemption,considering:  

The maximum period for using this exemption is 10 years, counted since the first year with positive taxable income (up to 4 fiscal years since the promotional declaration).

In every fiscal year, the exemption must not exceed:

  • 90% of Income Tax,
  • total investment to date of presentation of Income Tax affidavit,
  • maximum exemption considering project’s investment range.

In case investment is not accomplished in the maximum granted period (60 or 48 moths, maximum 30/04/2025), when the percentage of completion is at least 50% Income Tax exemptions would be apportioned considering execution progress.

  • Net Worth Tax exemption for the project promoter:
  • land and improvements: 8 years for projects in Montevideo and 10 years in outside de capital city,
  • equipment of common areas: for all its useful life.
  • Value Added Tax refund: associated to civil Works and equipment of common areas.
  • Exemption of customs duties and other taxes:on importsof equipment, machines and materials for civil works and equipment of common areas, to be imported directly by the promoted company. Provided they are not competitive with the national industry.

Verónica Rodríguez, Auren Uruguay