PARAGUAY LAW AND PRACTICE Contributed by: Manuel Arias, Carla Sosa, Martin Carlevaro, Milena Sljivich, Alexander Berkemeyer and Antonio Villa Berkemeyer, BKM - Berkemeyer
1. Legal System and Regulatory Framework 1.1 Legal System
• single tax of 1% on the value added in Paraguay or the export invoice, whichever is greater; • exemption from other national, departmental and municipal taxes, with the right to a refund of export VAT; • maintained modalities of pure, idle capacity, sub- maquila and shelter; • the right to a refund of the “VAT tax credit” is rec - ognised for exporters, ensuring liquidity for compa - nies operating under the regime, with limitations for “ maquila of services”; • sales permitted in the domestic market of up to 10% of the volume exported, through nationalisa - tion and the payment of taxes; and • benefits are granted for up to 20 years, with pos - sible renewals. New regime of tax incentives for national and foreign investment – Law No 7548/2025 This law replaces and modernises previous invest - ment incentive laws (eg, Law 60/90), consolidating and updating tax incentives for domestic and foreign investors. The main benefits include: • exemption from Import Tax for capital goods and inputs intended for production; • exemption from VAT for the sale, importation and first transfer of capital goods between beneficiaries of this Law; • external financing – non-resident income tax (INR) exemption on interest/commissions if investment is at least USD13 million for the financing term; • dividends/profits – exemption from tax on divi - dends and profits (IDU) for ten years for invest - ments of at least USD13 million (conditions apply for non-residents and proportional increases); • tourism/entertainment – exemption from Import Tax and VAT for capital goods in projects worth at least USD20 million; • a general term of 20 years for benefits, with partial renewals possible based on new investments; • the possibility of constituting a guarantee trust with tax-benefitted capital assets to finance current investment projects; • strict monitoring mechanisms and staggered revo - cation for non-compliance; and
Paraguay operates under a civil law system, where the Constitution is the supreme law. The country is a sovereign, democratic and unitary state with a presi - dential system of government. The Constitution was enacted in 1992 and establishes a tripartite system of government composed of the legislative, executive and judicial branches. The judicial branch is hierarchi - cal, with the Supreme Court at the top, followed by courts of appeal, courts of first instance and other specialised courts. Paraguayan law is codified, and judges apply the law as written and interpreted, rather than relying on precedent, as in common law systems. 1.2 Regulatory Framework for FDI Foreign investment in Paraguay does not generally require specific review or approval from national authorities. Paraguay has some of the greatest tax benefits in the Latin America region for national and foreign invest - ments, granting different incentives to promote the production of goods and services, seeking to attract investors in order to enhance infrastructure and cre - ate new job opportunities to address the country’s current deficit. In recent years, Paraguay has enacted several new laws that significantly update and expand the regulatory environment for FDI, offering innovative legal tools and robust incentives to both domestic and foreign investors. Recent Legislative Developments: New Laws Affecting Investments New Maquila Regime – Law No 7547/2025 Under this regime, a maquiladora uses its installed capacity and processes to provide services to another foreign company, incorporating national added value under a maquila contract, often using ICT or other remote means. The main benefits for production and export are as follows, offering tax advantages and legal certainty: • temporary importation without taxation of inputs, equipment and machinery for the production pro - cess;
420 CHAMBERS.COM
Powered by FlippingBook