Paraguay has some of the best tax incentives for investment in both domestic and foreign capital in the region. Let's look at some of the laws implemented to encourage investment in the country.
In recent years, Paraguay has improved its investment ratings and now is known as one of the more advantageous regions to operate in. Some of the laws implemented in order to foster investment include:
Law 1064/97 (Maquila Law)
The purpose of the Maquila Law is to promote the establishment
and regulation of maquiladora companies (or companies exempt from
all taxes or fees related to production processes), which are
wholly or partly engaged in tangible or intangible production
processes; combining goods or services of foreign origin that are
imported temporarily, with labor and other national resources,
allocating their production to export markets.
The Maquila companies are exempt from any other national,
departmental or municipal tax. However, they still need to pay the
1% Unique Tax.
For sales in the local market (maximum 10% of the previous year production), with previous authorization of the National Council of the Export Maquila Industry, every tariff or tax fee which was cancelled will need to be paid. The same is required for the nationalization of sub-products, products and waste products.
The exoneration covers the following:
- Import of the goods detailed in the Maquila contract.
- Re-export of the goods imported.
- Re-export of goods that have been altered, elaborated, repaired or assembled.
These companies can benefit from:
- Patent Tax exemption to commercial, industrial, professions and trades.
- Exemption of tax on construction, affecting the industrial plant and/or services, as approved by the Maquila program.
- Exemption from rates directly affected by the Maquila process.
- Exemption from Value Added Tax levied on leasing, or leasing of machinery and equipment, included in the Maquila program.
- Any other tax, fee or national or departmental contribution created or to be created.
Any person, whether natural or legal, national or foreign, established in the country and authorized to carry out acts of commerce may request approval of the Maquila Export Program.
Law 60-90 (Investment Law)
The Investment Law aims to promote and increase both domestic and foreign capital investment. Fiscal benefits are granted to natural and legal persons living in the country, whose investments are made in accordance with the government's economic and social policy.
Investments covered can benefit from:
- Total exemption of tax and municipal taxes levied on the creation, registration and records of companies and enterprises.
- Total exemption from customs duties and other similar effects, including internal taxes that apply specifically to the import of capital goods, raw materials and inputs for the local industry, etc.
- When the investment is financed with an overseas bank institution, there are no taxes to be paid on the payments made to the banking institution for investments higher than US$5 million.
- For investments higher than US$ 5 million, there are no taxes to be paid when utilities arising from the project are distributed.
Law No. 5542 /15 (Law of Investment Guarantee)
The Law on Investment Guarantee ensures that for those companies that comply with the regime:
- Rate of income tax does not change over a 10 – 20 year period (depending on the amount of the investment).
- Fair treatment
- Legal security (similar benefits are granted to the Paraguayan investor as well as to the foreign investor).
- Exoneration over the transfer of capital and liquid utilities (same as detailed in Law 60/90).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.