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Comprehensive Guide to Setting Up a Subsidiary in Uruguay

Situated in Latin America, Uruguay is now the fastest-growing and most prosperous country on the South American continent. As of 2022, Ukraine’s GDP was $71.1 billion per annum, which placed it in the 53rd position globally in terms of GDP rankings. The service sector contributes to 69.7% of the GDP. Hence, services are the most profitable sector if you want to start a subsidiary in Uruguay

In this article, let’s learn about the importance of setting up a subsidiary in Uruguay, the checklist for incorporation of a foreign subsidiary in Uruguay, and many more! 

What are the Types of Subsidiaries in Uruguay? 

With its fast-growing economy, Uruguay is ahead of many other developing countries in setting up a business. Let’s find out what the different types of Subsidiaries one might need to know before setting up a subsidiary in Uruguay. 

Sociedad de Responsabilidad Limitada or Limited Liability Company (SRL):

This is similar to a corporation in Uruguay. However, it is formed without any hassle and seamlessly. It does not require much capital, and the process is very straightforward. The fundamental characteristics of SRL are: 

  • It only requires a minimum capital of UYU 20,531 and a maximum of UYU 923,403. 
  • An SRL can be established with at least two partners and can have up to 50 partners.
  • The partners only have the liability for their contributions to the company. 
  • Partners have the right to pay 50% of their contribution, while the remaining 50% can be paid for two years.

Sociedad Anonima or Corporation (SA)

This type of company requires a significant amount of capital paid by the partners. These capitals are later divided into stocks and can be freely transferred or sold if required. The primal characteristics of this kind of subsidiary system in Uruguay are: 

  • The partners have limited liability for their contribution and have no responsibility for managing the company. 
  • The corporation capital would be divided into Stocks. 
  • The minimum share capital amounts to UYU 18 million. 
  • The partners must pay 50% of the capital at the moment of incorporation and the rest in a maximum of 2 years. 

Empresa Unipersonal or Unipersonal company

This is the fastest form to incorporate a company. It was created to formalize small businesses and entrepreneurs. It can also be transformed into a corporation or LLC in the future. The primal characteristics of Unipersonal Company are: 

  • It only requires a single shareholder. 
  • There is no mandatory minimum capital requirement for incorporation. 
  • The shareholder is entitled to unlimited liability and reports the earnings via personal affidavits. 
  • The shareholder can either be an expatriate or of Uruguay. 

How to Set Up a Subsidiary in Uruguay? 

If one wants to expand, their business in Uruguay has the best way to set up a subsidiary. However, there are certain aspects one has to look forward to considering before they set it up in the country.

Here is a method of how one can set up a subsidiary system in Uruguay

  • Hold a meeting with the public notary when one talks about the names of the attendees with the company name, its registered office, activities done, and more. 
  • Registering with National Trade Register 
  • Publishing the registration in the official Gazette or other newspapers 
  • Submitting the documents through a one-stop business service 
  • Obtaining occupational injuries and illness insurance coverage from the State Insurance Bank
  • Process the entire setup with the Inspector of General Employment and Social Security.

These are the primal steps that need to be covered for setting up a subsidiary in Uruguay. Let’s check out the detailed method to set up a subsidiary. 

Step 1: Draft the incorporation contract 

If choosing LLC as a subsidiary in Uruguay, one has to draft an incorporation contract that all the shareholders would sign. 

Step 2: Make registration with the National Registry of Commerce 

A notarized certificate must be presented to the NRC or National Registry of Commerce with the business name, registered office address, commercial activities, and other miscellaneous activities. The process takes approximately 30 days to get approved. 

Step 3: Publish the incorporation statutes in the official Gazette

The entire summary of incorporation statutes would be published in both the Official Gazette or IMPO and in a leading national newspaper. The publication has to include the name of the company alongside should mention the name of the partners, capital, address, and commercial focus. 

Step 4: Register the entity before regulatory bodies

Following step 3, there will be a mandatory break of at least ten days before registering the entity with the relevant local regulatory authorities, including the General Tax Directorate (DGI) and the Ministry of Labor and Social Security (MTTS).

Step 5: Complete the process to register the subsidiary in Uruguay by reporting to the Central Bank of Uruguay 

The final step is to register the subsidiary in Uruguay by informing the Central Bank of Uruguay of the percentage of entities each shareholder has. This information has to be presented to them via an affidavit, and the Central Bank of Uruguay would inform them of the subsequent charges within 30 days. 

These systems are subject to change depending on the subsidiary one chooses. 

Benefits of Setting Up an Uruguay Subsidiary

Setting up a subsidiary in Uruguay comes with its perks and advantages. Setting up a subsidiary system in Uruguay is hassle-free, and due to its growing economy, the process has become more accessible. Here are some benefits one must consider for setting up a subsidiary in Uruguay. 

Rapid entry: One of the biggest benefits of setting up a subsidiary in Uruguay is entering the market significantly quickly without going through a full-fledged company formation procedure. A company forming procedure is tiresome and takes roughly four to six weeks. 

Limited liability: Another of the biggest advantages of setting up a subsidiary in Uruguay is a limited liability because the shareholders enjoy a degree of financial as well as operational freedom. 

Market familiarity: Once an individual sets up a subsidiary system in Uruguay, they have the advantage of knowing about the market thoroughly with a scope of possible deeper involvement without a significant advantage of company formation. 

Entity options: An individual can choose from different types of Subsidiaries from Uruguay and set up the one they deem perfect. A popular choice is preferably an LLC due to limited operations and capital profits restrictions.    

Documents to Prepare When Opening a Subsidiary in Uruguay

If an individual wants to open a subsidiary in Uruguay, there are some by-laws documentation according to the Uruguayan constitution. These documents must be reviewed by a public notary in Uruguay or a local law. The primary documents that are needed for setting up a subsidiary in Uruguay are: 

  • Company name
  • Power of Attorney and other legal representatives
  • Registered official address
  • Share capital information
  • Structure of management
  • Tax Identification Number
  • Work Permits for foreign employees
  • Profit-sharing and loss-bearing methods 
  • Extinction and liquidation detail plans
  • Business license from the appropriate Uruguayan government agency

What Business Forms Can Uruguay Subsidiaries Take? 

After the incorporation of a wholly owned subsidiary in Uruguay, foreign and local companies can set up a subsidiary in Uruguay through various business forms. They are: 

Limited Liability Company (LLC): This distinct legal entity restricts the stockholders’ liabilities to sum up their investments. The cost of setting up a subsidiary system in Uruguay is minimal.

Corporation (SA): This is a very complex legal entity that expatriates can opt for setting up a subsidiary in Uruguay. This also restricts the responsibility of the stockholders to value their contribution. It requires a minimum of two shareholders to open a corporation. 

Uruguay Subsidiary Laws 

According to Law Nr. 16.060, The Uruguayan Business Companies Act sets out specific rules and regulations for directors and shareholders of corporations who intend to establish a subsidiary system in Uruguay. They are: 

  • All individuals do not have to stay in Uruguay to work for their company. They can be an expatriate and operate externally. 
  • The individual needs to have a share capital of one share for the incorporation procedure. 
  • One can use their LLC or legally tax-exempt company if they do not have any staff or customers in the country. However, one must set up a corporate bank account in Uruguay to do commercial transactions that apply to tax laws. 

Post Incorporation Compliance 

After setting up a subsidiary company in Uruguay, one must follow some post-incorporation compliance laws and regulations. They are: 

  • The subsidiary must register with the Uruguayan tax authorities and obtain a tax identification number (RUT).
  • The subsidiary must register with the social security authorities and obtain a social security number.
  • The subsidiary might need to obtain additional licenses and permits from diverse government agencies, depending on the type of business.
  • The subsidiary must submit yearly tax returns to the relevant tax authorities and settle relevant taxes.
  • The subsidiary must maintain accurate accounting records under Uruguayan accounting standards.
  • Submitting the annual reports at the end of the financial year. 
  • The subsidiary must comply with all Uruguayan labor laws, including minimum wage requirements and employment regulations.

Taxes on Subsidiaries in Uruguay 

Uruguay has a comprehensive set up of tax on subsidiaries. Let’s find them out. 

Company Tax 

25% 

Value-added Tax (VAT) 

22%

The tax rate for foreign companies 

12% 

Other corporate tax 

18.1% – 23.1%

Tax Incentives for Businesses Setting Up a Subsidiary in Uruguay

Tax incentives are one of the biggest perks for businesses for setting up a subsidiary in Uruguay. The perks attract foreign nationals to settle down here and do business. Here are some examples of tax incentives in Uruguay. 

  • 40% of the income tax is reinvested in fixed assets. 
  • 20% of income was reinvested in construction and expansion. 
  • Exemption from NWT for chattel property engaged in production and data processing. 
  • Exemption from VAT and CIT paid on the importation of the goods. 
  • Refund of Value Added Tax (VAT) for items purchased locally. 

These exemptions follow the regulations prescribed in Uruguayan Investment Promotion Law – Decree 268/020. 

Other Important Considerations 

Opening a subsidiary in Uruguay consists of intensive planning and considerations. Here are some important considerations one must follow before setting up a subsidiary in Uruguay. 

Employment law: Abide by the minimum wage, working hours, employee benefits, and compensations. 

Intellectual property rights: Defend intellectual property rights to safeguard them from any infringement. 

Respecting culture and language: To defend the language and culture of the employees there to avoid any linguistic and cultural variations. 

How Can Multiplier’s Employer of Record Help You Hire & Expand in Uruguay? 

Establishing a local or international company involves significant investments of time and money. Establishing an online subsidiary in Uruguay requires professional guidance to ensure compliance with all applicable labor laws and local regulations.

Multiplier is a one-stop solution for providing an infrastructure to employ talent from outside the country. They also help immensely to test new markets and set up agile teams in different countries. Multiplier also helps to attract business and talent at a cheaper cost. 

Other than that, Multiplier is well-versed in employment contract generation, payroll, multi-currency payments, insurance and benefits, and many more.

Frequently Asked Questions

Setting up a subsidiary in Uruguay costs up to UYU 823 and can be completed online and in person.

The national amount of ICOSA tax is increased every year. According to 2022’s financial year, the ICOSA tax in Uruguay is around UYU 44,777.

It is not mandatory to appoint a company secretary in Uruguay. However, companies may choose to appoint a secretary voluntarily to assist with administrative tasks, such as maintaining company records and filing annual reports.

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