Latin America has become an increasingly significant market for multinational groups with substantial operations established across Brazil, Argentina and other key economies in the region.
When setting up the related business activities for such operations, it would make sense to have them centralized in a regional hub, including shared service centers, treasury functions, intra-group services, investment advisory and other financial-market activities.
The same applies to intangibles, to the extent that the related research and development costs are incurred within the regional hub. In practice, these functions often sit wherever the group happens to have developed them, rather than where a regional hub would operate most effectively.
One regional player that may be overlooked when considering strategic locations for locating centralized business activities is Uruguay.
With its social, economic and political stability, supported by strong institutions, a consolidated democracy, low levels of corruption, an independent judiciary and strong protections for private property and the rule of law, the country has been historically committed to promote foreign investments, offering a friendly regulatory environment and a broad set of tax incentives.
Among these tax benefits, the free zone regime stands out. With relevant tax exemptions, a long track record, and a location that makes regional coordination practical, this regime arises as a favorable option for the development of regionals hubs in Uruguay.
Many multinational groups have chosen Uruguay due to its free zone regime, particularly for shared service centers. But local advantages need to be weighed together with the international tax and transfer pricing implications before centralizing regional business activities in Uruguay.
Denton
