The Government of Paraguay sanctioned and enacted Law No. 5.542/15 (the "Law"), which guarantees the stability of Income Tax rate, equal treatment and legal security for those companies that apply to the regime established therein, through the execution of an investment contract with the government authorities. Likewise, when the investment involves high social impact, the Law foresees additional benefits such as, exemption from additional Income Tax rates on distribution of profits and up to 50% reduction of the withholding tax rate on dividend remittances abroad.
The Law is applicable to both new investment projects, as well as investments existing prior to its entry into force, provided such existing investments comply with the requirements set out in the Law, including approval of the investment project and the execution of the investment contract.
The Law shall be further regulated by means of a Presidential Decree within 120 days of enactment.
Scope of the Law
The protection of capital investment in industry and other productive activities in the country, when they contribute to:
Employment generation; and Economic and social development of the Nation, through the incorporation of added value to local or imported raw materials. Beneficiaries
Either natural or legal entities, whether local or foreign, who invest capital in companies that meet the above mentioned requirements, either by creating/incorporating them or adapting already existing companies to such requirements.
Combination with Law N. 60/90 "Of Incentives to Capital Investments"
Investments in physical goods may benefit from the incentives foreseen in Law 60/90 when the company applied to such law1. Exchange rate for the valuation of the investment and money transfers
Conversion of monetary investments in local currency (for operational, tax or other purposes), as well as remittances of capital and profits abroad, will be made at the most favorable exchange rate the beneficiaries may obtain in any bank or financial institution subject to Law No. 861/96 "Of Banks and Financial Institutions". Transfer of capital and net profits
Net profits obtained from the transfer of capital invested shall be exempt of all taxes up to the invested amount; Transfer abroad of the profits resulting from the investment shall be free and without any restriction, while remittances of the capital invested shall be allowed after two (2) years of the date the company started its operations. Tax stability...