PARAGUAY Law and Practice Contributed by: Mauro Mascareño, Carlos Vargas and Rodrigo Gómez Sánchez, Mascareño Vargas – Asesores
1. Market Trends 1.1 Technology M&A Market
2. Establishing a New Company, Early-Stage Financing and Venture Capital Financing of a New Technology Company 2.1 Establishing a New Company Start-ups in Paraguay are usually registered locally to benefit from the low corporate income tax (CIT), with a 10% annual rate, and the sim- plified tax regime. The process of registering a company in Paraguay is quite efficient, typically taking only two to eight weeks depending on the type of entity used (simplified stock corporation ( empresa por acciones simplificada EAS), stock corporation ( sociedad anónima SA) or limited liability company ( sociedad de responsabilidad limitada SRL)) and whether the investor is pre- sent in the country or represented by a proxy when signing the deed. It is common for compa- nies to acquire shelf companies, especially SAs, which can be incorporated and ready to operate within one to two weeks. The entire acquisition process can be completed electronically. Except for certain fintech companies (eg, elec- tronic wallets), there is no initial or minimum capital requirement in Paraguay. This flexibility, based on local practices, allows start-ups to enter the market easily, with the only recommen- dation being to have sufficient capital to carry out their activities. 2.2 Type of Entity Entrepreneurs are generally advised to incorpo- rate as an SA or an EAS, depending on the size of the project and the level of liability founders are willing to accept. The EAS is a new type of vehicle available from 2020. It is easier and faster to incorporate if the pro forma by-laws are used, as it is incorporated via a government system and is ready within a
In the past 12 months, the technology M&A mar- ket in Paraguay has shown moderate growth, aligned with post-pandemic economic recovery. While the global pace of growth has been faster, increased activity in fintech and digital services transactions has been seen in Paraguay, driven by accelerated digitalisation and growing inter- est from foreign investors in the region. Locally, tech companies are seeking consolidation and attracting foreign capital, highlighting the crucial role of foreign investment in the market’s growth. Before this publication, Paraguay recently reached investment grade status, a significant milestone that is expected to have a positive impact on the technology M&A market. There- fore, in the short and midterm, the authors antici- pate a considerable boost in foreign investment in general, and given the rapid advance of tech- nology, this niche will increase in prominence in the country, providing promising prospects for investors and tech companies alike. 1.2 Key Trends Over the past year, there has been a notable increase in investments in technology, particu- larly in fintech and telemedicine, which are criti- cal sectors for developing the digital ecosystem in Paraguay. Government incentives for the tech- nology sector and the growth of tech start-ups have contributed to this trend. Additionally, inter- national investors are increasingly interested in acquiring stakes in local tech companies.
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