An entity health check in Uruguay is an audit conducted by a third party to verify a company’s compliance with local corporate laws and regulations. As such, if you are doing business in Uruguay, examining entity compliance thorugh an entity health check can guarantee the longevity of your enterprise and maintain your good standing in the eyes of local authorities.
Bordering Argentina and Brazil, the nation of Uruguay is known as the “Switzerland of South America” because of its banking secrecy and adherence to the rul of law. A member of the Southern Common Market (Mercosur), along with Paraguay and its two neighbours, Uruguay’s economy has experienced consistent annual growth in GDP since 2003.
According to the 2020 World Investment Report, produced by the United Nations Conference on Trade and Development (UNCTAD), in 2019 the country saw foreign direct investment (FDI) inflows turn positive — at a total of $189 million (USD) — after three consecutive years of negative growth. Total stock of FDI was estimated at $28.3 billion (USD) — more than double that of ten years previous, and over thirteen times that registered two decades before.
In 2019, the South American country reported a gross national income (GNI) per capita of $16,230 (USD), one of the highest among Latin American nations. Uruguay also ranks third in the region in the Human Development Index, with an estimated 60 percent of its population considered “middle class.”
If you are thinking about setting up a business in Uruguay or have already established your company in the country, read on to understand the importance of an entity health check in Uruguay.
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What is an entity health check?
Corporate compliance is fundamental to the success of any business in any country in Latin America and the Caribbean. An entity health check in Uruguay involves an evaluation of a company’s legal, fiscal, and corporate status, to ensure full compliance with local norms.
Such a check covers multiple aspects of a company’s legal, financial, and operational status, including proper registrations with any relevant government bodies, accountancy and tax compliance, and adherence to best practices in the likes of human resources management.
To this end, an entity health check will inspect whether a company carrying out commercial operations in Uruguay is properly filing tax declarations, monthly reports, and accounting records, while adhereing to all relevant legislation.
Generally, an entity health check in Uruguay includes:
- Evaluation of finances, social security payments, and other fiscal obligations
- Examination and review of contracts signed with third parties
- Review of corporate and accounting books
- Review of monthly tax returns and tax statements
- Review of upcoming renewals of certificates and policies
- Preparation of financial statements
- Review of balance sheets submitted at the closure of the fiscal period
3 steps to carrying out an entity health check in Uruguay
Carrying out a successful entity health check in Uruguay involves the following 3 key steps:
1. Information collection
When carrying out an entity health check, a large amount of information will have to be gathered. This will include collecting data from your company’s operations, legal, accounting, and administrative departments.
Note that a best practice many Uruguayan companies are adopting is the creation of a compliance or audit department, in charge of centralizing important company information, which eases this first step.
2. Information validation
Once gathered, the information goes through a validation process. In this step, an entity health check agent will review all the data and documents obtained, cross-reference it against primary sources where necessary, and otherwise seek to prove the veracity of all records being audited.
3. Record Keeping
Records of all the documents and evaluations made during your entity health check in Uruguay will not only be valuable for presenting to tax authorities in case of an inspection, but also during future entity health checks. In some cases, keeping such records is a legal obligation, due to laws desiged to prevent money laundering.
Why you should get an entity health check in Uruguay
The main advantages of conducting an entity health check in Uruguay include:
Enables executives to know how the business is being managed: Through an entity health check, business executives will obtain the necessary information to evaluate how they are doing in terms of their legal compliance and the fulfillment of their objectives. As such, opportunities for improvement and greater efficiency could arise.
Reduce risks of penalties and negative reputation: Uruguayan authorities regularly carry out inspections in order to verify if companies comply with local legislation. Not complying with regulations can bring severe financial penalties, and affect the reputation of your company, as well as that of third parties, whether they are clients or suppliers.
Reduces transaction risks: An entity health check is a valuable tool to verify the status and sound financial standing of an organization before buying it or merging with it. It is similarly a good way to prove to potential clients that your organization complies with corporate laws in Uruguay.
Contact Biz Latin Hub about conducting an entity health check in Uruguay
At Biz Latin Hub, our team of multilingual professionals has broad experience in undertaking entity health checks with companies in different countries across Latin America and the Caribbean. With our full suite of market entry and back-office services, we can support you with the provision of tailored due diligence services, as well as company formation, legal representation, and accounting services.
Reach out to us now to receive personalized assistance.
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The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.