Last February 2023, the Economic and Financial Affairs Council  (Ecofin) of the European Union ("EU") removed Uruguay from Annex II, a chapter comprised of countries that fail to comply with at least one of the European Union tax standards, but have still made commitments to introduce necessary reforms to statutes.

Ecofin concluded that Uruguay has complied with all commitments made with the European Union, having demonstrated its willingness to cooperate on issues of good tax governance. The changes introduced, both at a legal and regulatory level, are aimed to strengthen the source principle for business income, to guarantee tax certainty, and to avoid the potential imposition of defensive measures by the EU.

The adjustment in the rating communicated by Ecofin strengthens the image of Uruguay on the international stage and reinforces its attractiveness for European investors. In recent years, Uruguay has become an attractive destination for the installation of foreign companies in their expansion process, thanks to political, economic and social stability; the existence of benefits or incentives for investors; easy access to competitive and qualified human resources; and its good quality of life.

It is worth noting that the European Union has been -and is- an international strategic partner for Uruguay. According to the EU Report published in September 2022:

• In 2021, Uruguay's exports to the EU totaled USD 1,574 million, representing 15% of its total exports and placing it third in the ranking of export destinations for Uruguay.
• The EU is the first investment region in Uruguay (representing 36% of the stock of Foreign Direct Investment in 2020) and followed by the countries of South America.
• European investments (mainly with Spanish and Finnish capital) have played a key role in the development of strategic economic sectors in Uruguay, highlighting agribusiness, trade, renewable energy and information technology.

In this context, the Strategic Association Agreement between Mercosur and the European Union (which is highly advanced) will consolidate Uruguay's attractiveness as a cutting-edge investment destination, while promoting trade and investment between both regions, boosting innovation, encouraging greater integration of production chains, and promoting sustainable development.