Uruguay: A Centralized Service Center with Tax Savings Potential

By Daniel García and Eliana Sartori

Company A serves its Latin American customers from a regional center. Company B services its worldwide operations from a regional trading and financial center. Company C has a software development center for its Latin American region and Company D is setting up a call center for its US and European markets.
What do these four multinational companies have in common? They have each located their regional service centers in Uruguay.

This article provides an overview of certain key elements that make Uruguay an attractive place to centralize inter-company service operations.

Most multinational companies recognize the concentration of functions as a best practice business model for efficient regional operations management. While essentially a business-driven tool, the creation and operation of a regional service center may additionally yield significant tax and custom duty savings for multinational companies when properly structured from a tax perspective.

When President George H.W. Bush first proposed a hemispheric free trade area from Alaska to Tierra del Fuego in June 1990, the idea was greeted with considerable enthusiasm in Latin America and the Caribbean (LAC).

The hemispheric countries that had reservations kept them mostly to themselves. Now, 14 years later, the Free Trade Area of the Americas (FTAA) is on life support—not dead, but its survival uncertain. It is worth asking why this change took place.

First, some background. When the proposal was made, most LAC countries had only recently shifted away from an import-substitution trade model, which downplayed the importance of exports, to a policy of export-led growth.