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  • Service: Tax
  • Type: Regulatory update
  • Date: 10/8/2013

Uruguay 

Taxes and Incentives
Uruguay Taxes and incentives for renewable energy KPMG Global Energy & Natural Resources.

Support schemes

Investments and other subsidies


General Investment Regime


Investment Law 16.906 declares the national interest of the promotion and protection of domestic and foreign investment and, through Decree 2/012, establishes the following benefits for the investments carried out in the country:


  • Corporate Income Tax (CIT) exemption equivalent to a percentage of the investment in fixed assets (machinery, equipment and civil works).43 The referred percentage varies between 20 percent and 100 percent of eligible investment and it is determined by the score the project receives for its impact in terms of:
    • employment
    • decentralization
    • exports
    • clean production
    • industrial indicator.
  • Capital Tax exemption for the fixed assets included in the investment:
    • civil works: Eight years for civil works in Montevideo and 10 years in the rest of the national territory
    • machinery and equipment for the useful life
  • Fiscal credit for VATs included in civil works.
  • Exemption from all taxes and duties levied on the import of machinery and equipment that is not competitive with national industry.

Particular Investment Regime for renewable energy


Within the frame of Law 16.906, Decree 354/009 establishes particular benefits for the generation of electricity from non-traditional renewable sources (defined as the native renewable sources such as wind, solar thermal, photovoltaic (PV), geothermal, tidal and wave energy, as well as the energy produced from the use of different types of biomass).


The main benefit consists of CIT exemptions equivalent to:


  • 90 percent of net fiscal income generated by the promoted activity for all fiscal years up to 31 December 2017.
  • 60 percent of net fiscal income generated by the promoted activity for all fiscal years from 1 January 2018 to 31 December 2020.
  • 40 percent of net fiscal income generated by the promoted activity for all fiscal years from 1 January 2021 to 31 December 2023.

Other benefits:


  • The law declares of national interest the national production of machines and equipment necessary for the production of these renewable energies and also applies to this activity the CIT exemption described in the Particular Investment Regime for renewable energy. As a condition for the application of this exemption, at least 35 percent of their cost must correspond to Uruguayan inputs.
  • Purchase of the wind turbine and its accessories are exempt from VAT.

Promotion of solar thermal energy


In 2009, Law 18.585 declared of national interest the investigation, fabrication, implementation and development of solar thermal energy. The law, along with Decree 451/011, established the exemption of VAT, Internal Excise Tax (IMESI), duties and custom taxes applicable to:


  • National and imported (non competitive with the national industry) goods and services necessary to fabricate solar collectors in Uruguay.
  • Sale of solar collectors fabricated in Uruguay.
  • Import of solar collectors non competitive with the national industry.

In 2012, the Government launched a Solar Program focused on developing solar thermal energy for residential users. The new program provides loans, financial discounts and payment facilities for those who install solar thermal technology in their houses.


Quota obligation

Law 18.585 also introduced the obligation of incorporating solar thermal technology in sport clubs, hospitals, hotels and heated swimming-pool, under certain circumstances. According to this law, at least 50 percent of the energy required to heat the water should come from solar thermal energy. If this requirement is not fulfilled, the permit for the construction works is denied.


New public buildings (that is, state owned) are also obliged to incorporate this source of energy.


As from June 2012, the Ministry of Industry is entitled to request to all new industrial and agro-industrial developments to perform a technical study on the feasibility of incorporating solar thermal technology to the project.


Additional information

Uruguay is recognized as a country with excellent conditions for the development of renewable energy, attracting the attention of national and international investors. The government – with the support of the opposition parties – has set forth the goal of becoming a model country in this area. The authorities intend that, by the year 2015, at least 50 percent of the primary energy matrix of the country will come from renewable sources.


Wind


Although the focus is placed on all types of renewable energy, the most popular these days is wind power. The initial goal of reaching 300 MW of wind generation by 2015 is expected to be fully achieved, as well as the 2016 goal of 1200 MW, assuming all the awarded wind farm projects are implemented. Investment in this area has reached USD2 billion.


Biomass


In 2010 the government set the goal of incorporating 200 MW from biomass sources to the primary energy matrix by 2015. Accordingly, the Uruguayan energy utility (Usinas y Trasmisiones Eléctricas or UTE) promoted one tender during 2011, in which the total amount offered by the private companies has already exceeded the 350 MW.


Uruguay has several natural resources that can be used as primary elements for the generation of biomass energy:


  • extensive forests providing wood for energy generation
  • industrial forestry residues (saw mill residues, black liquor, etc)
  • rice husks
  • residues from sugar cane, sweet sorghum and other cereals
  • excellent conditions for elephant grass
  • a guaranteed supply of biomass from livestock and agriculture.

Solar Photovoltaic (PV)


At the moment, the only ongoing project is a solar PV farm of 480 kilowatts-peak (kWp) and 10.000 m2 of PV modules, located in the north of the country. The farm is owned by UTE and was financed by the International Cooperation Agency of Japan under the scope of the “Cool Earth Program” of the Japanese government.


In May 2013 the Government launched a tender call for the purchase of solar PV energy. The tender contemplates projects of three different ranges: i) 500 kW to 1 MW, ii) 1 MW to 5 MW and iii) 5 MW to 50 MW.


For ranges i) and ii), the bidders have to offer a price and the total amount to be awarded cannot exceed 6 MW. On the other hand, for range iii), bidders will have to adhere to a pre-established price of USD91.5/MWh, and the total amount to be awarded cannot exceed 200 MW.

 

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