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Uruguay is South America's only low-tax, offshore jurisdiction. Much in the same way as countries such as Holland, Uruguay offers off-shore corporations to serve various needs: as low-tax holding companies, as a way to protect assets and income or as vehicles for sophisticated securitization operations, to name a few examples which are covered below.
Uruguay's offshore corporations, regulated by Law 11,073 of 1948, have a beneficial tax treatment and provide anonymity for their shareholders, elements that allow for an efficient protection of assets and income.
Known as "SAFIs", for the Spanish acronym for "Financial Investment Corporations", these off-shore corporations:
Can be incorporated / obtained instantaneously
Require minimal integration of capital
Guarantee anonymity for shareholders
Have a very favorable tax treatment
Are considered a very reliable vehicle internationally
Can operate freely
The range of permitted activities of the SAFI offshore corporations
SAFIs' corporate purpose is broad. The law allows them to "invest in securities, bonds, shares, notes, debentures, treasury notes or bills, any type of property or good, including real estate".
The investment / ownership can be done directly or indirectly, for its own purpose or on behalf of a third party.
The only restriction (and this defines their off-shore nature) is that the majority (more than 50%) of the investment / ownership must be outside of Uruguay. Thus, for example, a SAFI may be utilized to own shares of various companies, but these companies cannot be Uruguayan companies (at least more than 50% must be shares of non-Uruguayan companies).
It is important to notice, however, that to benefit from the favorable tax treatment that characterizes offshore corporations, all of the investment / ownership must be in goods outside of Uruguay, and this is usually the case for using SAFIs.
An important issue is that SAFIs can freely open bank accounts, in foreign currency, in any bank within Uruguay.
Finally, SAFIs may seek and obtain authorization to operate as offshore banks and may provide services within Uruguay.
Off-shore corporations' preferential tax treatment
The main advantage offered by SAFIs is the special tax treatment they are granted.
Unlike regular corporations incorporated in Uruguay, SAFIs have no income tax of any kind, or any tax on any of the goods it owns.
The only tax a SAFI must pay is an annual tax of 0.3% of its net worth. For all practical purposes, this tax can be reduced even more according to the SAFI's chosen capital structure (according to the amount of debt, the tax can be reduced).
A SAFIs' type and amount of required capital
A SAFI's equity is represented in the form of bearer shares (although nominative shares can be issued if the owner wishes so).
The SAFI need not have more than one shareholder. The shareholder may be one or many persons or companies.
Since SAFIs have the form of a share-corporation, liability is limited, and thus not extensible to shareholders beyond the capital invested in the company.
SAFIs have an "authorized capital" stated in their by-laws, of which the law requires that only 5% be integrated.
SAFIs' capital and accounting may be in any currency.
Legal obligations of a SAFI
A SAFI's obligations are minimal and simple. The corporation must:
Have accounting books of the company
Prepare annual financial statements of the company (not of its shareholders)
Pay the annual tax, once a year
Hold an annual shareholders' meeting to approve the financial statements
The presence of the SAFI's owners (shareholders) is not required for any of these activities.
Examples of a SAFI's activities
Uruguay's SAFIs may be used for any offshore activity. Examples of the use of SAFIs are:
As an investment vehicle
A SAFI may simply be used to own property, intangible goods or shares of other companies in any country. It may be used to perform contracts of any kind, including the handling of bank accounts.
As a holding company
Multinationals may elect to use a SAFI as a holding company. The parent company may receive its dividends and financing-related payments tax-free and without exchange restrictions in a SAFI, and redirect its investments from there.
As a trade intermediary
As a provider of loans and investments
A SAFI can be used to give loans to third parties, or to channel capital increases in other companies.
As a Special Purpose Vehicle (SPV) to securitize assets in a third country
A SAFI is the ideal vehicle to use as an SPV owning the assets that may result in a securitization operation of any type, in any country in the region.
As an owner of patents and copyrights
An offshore company owning patents and copyrights may make it easier to justify the transfer of royalties for their use.
As an asset-protection vehicle
Offshore companies are commonly used to protect assets from eventual legal claims from commercial or other parties.
To engage in leasing agreements
An offshore company that owns and leases out capital goods avoids the payment of taxes on the leasing-related income.
To hire personnel abroad
To provide professional services
An offshore corporation may be the sole owner of the rights of services that a client may want to offer to third parties.
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