Expatriate Forums in Paraguay

Paraguay Info · Joined: 01 Dec 2006 Posts: 14 Home Country: paraguay

DOING BUSINESS IN PARAGUAY

STARTING A BUSINESS

STANDARDIZED COMPANY
Legal Form: Corporation
Minimum Capital Requirement: 0
City: Asuncion

Registration Requirements:

Procedure 1. Check the uniqueness of the proposed company name

Time to complete: 2 days

Cost to complete: USD 30

Procedure 2*. Draft the Company Deeds signed by an Attorney

Time to complete: 5 days (simultaneous with procedure 1)

Cost to complete: USD 600 (minimum or 2 to 3% of the paid-in capital stock of the company)

Comment: It is customary to resort to professional attorneys in drafting the company formation documents since they should be made in compliance of corporate laws and regulations. With regard to the registration, the presentation of filings and applications (i.e. by-laws to the Treasury Attorney Office, to the court, to the registries, etc.) need to be signed by an attorney (either as an agent or counsel of founders). The organization of companies by attorneys acting through Powers of Attorney is also a common practice. The estimate of the cost to complete this formality is 2 to 3% of the paid-in capital stock of the company or a minimum of $600. The attorney's fee for this particular task is established in the Attorney's Fees Law No. 1376/88, Art. 72 (1) .

Procedure 3. Notarize the Company's Deeds

Time to complete: 3 days

Cost to complete: 0.75%-2% of the paid-in capital stock of the Company , depending on the capital

Comment: The Notary's fee for this particular task is established in the Notary's Fees Law. Usually a licensed attorney drafts the by-laws while the notarization (public deed to be included in the Notary's protocol and registered at the public registries) is done by a licensed Public Notary. Attorneys are not legally authorized to notarize or certify documents.

Procedure 4. Buy the company commercial books

Time to complete: 1 day

Cost to complete: The cost is approximately USD 20 for the acquisition of the hard cover books in any bookstore. The books need to be submitted to the civil and commercial court to have all the pages sealed with the Judge's and in the first page with a seal stating that the book has " x" number of pages sealed and that the registration in the public registry of commerce was ordered by the court order No. ___of __________(date) rendered by Mr.__________(Judge).

The company needs to keep some special commercial books at their registered office. The numbers of books and the accounting system to be utilized are left to the individual discretion of the merchant. At a minimum, however, it is required that a daily record of business transactions (daily record book) be kept and that an accounting as to current inventory also be maintained in a separate book (inventory record book). Other books may be required for certain types of commercial activities pursuant to specifically enacted laws. Accounting books and documentation must be kept by a merchant for a period of five years following the date that the last entry was made therein. All corresponding business receipts or vouchers must also be kept and maintained by the merchant during such five year time period, so as to allow for auditing of the company's books or records. A special request may be filed to the court and the tax authority to use computer continued forms instead of books. Corporate books are required to keep the records of the minutes of the board of directors and shareholders' meetings as well as labor books pursuant to the Labour Code and regulations. Books need to be authorized and sealed by each corresponding agency (corporate, tax, labour, social security).

Procedure 5. Submission of By-laws and other documents to the Civil and Commercial first Instance Court

Time to complete: 7 days

Cost to complete: USD 30

Comment: The court file containing the by-laws and other pertinent documents are submitted by a court resolution to the Treasury Attorney Office for an opinion on the compliance of the applicant with the laws and regulations on the organization and registration of companies.

Procedure 6. Study of by-laws and documents by the Treasury Attorney Office (Abogacía del Tesoro).

Time to complete: 10 days

Cost to complete: USD 25.00, included in the attorney's fees

Comment: Founders need to personally take the file to the Treasury Attorney Office and await for review and opinion. Pursuant to administrative laws establishing the functions of the Treasury Attorney's Office of the Ministry of Finance, the Department of Registration and Supervision of Companies (DRSC) of that office is in charge of the study and analysis of the charter documents of the companies. The DRSC verifies that the by-laws of the companies in process of organization are in accordance with the provisions of the Civil Code and other legislation in force as well as other pertinent data to verify compliance with the law. Once the analysis of the file on the organization is concluded, the DRSC issues a legal opinion and submits it to the superior (Treasury Attorney) for its further remittance to the corresponding civil and commercial first instance court for its registration in the Public Registries.

Procedure 7. Registration and publication order by the civil and commercial judge

Time to complete: 5 days

Cost to complete: After the Treasury Attorney has rendered its opinion founders need to go back to the civil and commercial first instance court and wait for the final resolution ordering the registration of the company in the two public registries mentioned. With the favorable opinion of the Treasury Attorney Office, the civil and commercial judge issues a resolution ordering the registration of the by-laws of the company in the Public Registries and the publication of an extract of the by-laws in the Official Gazette and a newspaper of wide distribution.

Procedure 8. Registration with the Commercial Registry

Time to complete: 4 days

Cost to complete: USD 40

Procedure 9. Registration with the Public Registry of Juridical Persons and Associations

Time to complete: 4 ays

Cost to complete: USD 40

Comment: Stock companies (S.A.) acquire their legal capacity and begin their existence after their recording in this registry.

Procedure 10. Publication of an extract of the By-laws in the Official Gazette and Newspaper

Time to complete: 4 days

Cost to complete: USD 160

Comment: The order of the judge is for the publication of an extract of the by-laws in the Official Gazette and another newspaper of wide distribution in the place of organization. It is published for 3 consecutive days.

Procedure 11. Registration with the Ministry of Finance, Undersecretary of Taxation

Time to complete: 15 days

Cost to complete: USD 280.00 (USD 80 registration fees and USD 200 for accountant's fees)

Comment: An application form provided by Ministry of Finance, Undersecretary of Taxation, the enclosing a certified copy of the By-laws of the company and the identity documents of the directors and managers as well as the opening balance sheet are filed at the mentioned agency. This agency then confers the "Taxpayer's Registry Number" (Registro Único de Contribuyentes - RUC) which enables the company to initiate operations.
Procedure 12. Complete post registration duties with the Treasury Attorney Office (DRSC)

Time to complete: 3 days

Cost to complete: USD 25

Comment: Within the first 10 days after the registration in the public registries the companies shall submit to the DRSC the following documents:
(i) The By-laws duly legalized and registered;
(ii) The opening balance sheet certified by the tax authority, and
(iii) Petition of registration.

Procedure 13. Registration with the Ministry of Justice and Labour to start hiring employees

Time to complete: 7 days

Cost to complete: USD 50

Procedure 14*. Registration with Municipality of Asuncion (which grants the Commercial License)

Time to complete: 10 days (simultaneous with procedure 13)

Cost to complete: USD 90.00, depending on the capital

Comment: Prior to the conferral of the License, inspectors of the Municipality perform an on site inspection (principal office of company) to verify compliance with Municipality's Ordinances

Procedure 15*. Registration with the Registry of State's Providers

Time to complete: 10 days (simultaneous with procedure 13)

Cost to complete: USD 50

Procedure 16*. Registration with the Social Security Institute (Instituto de Prevision Social)

Time to complete: 3 days (simultaneous with procedure 13)

Cost to complete: USD 20

Procedure 17*. Application for court authorization of Commercial Books

Time to complete: 5 days (simultaneous with procedure 13)

Cost to complete: USD 25

Comment: Court issues an authorization to the Registry of Commerce to seal the commercial books (official judicial seal).

Note: Procedures sometimes take place simultaneously. Instances of this are marked with an asterisk (*).

TAXATION

Corporate tax

Main rate: 10%

Paraguayan companies and branches of foreign companies are taxed only on income sourced in Paraguay. There is no taxation of foreign-source income. Companies pay tax on business income at 10%. The profits of a foreign branch or agency are subject to an additional 15% branch profits tax. Capital gains on the sale of immovable property are included in taxable income. Foreign companies without a presence in Paraguay are taxed by withholding on their Paraguayan-source income (including capital gains on shares) at a presumed profit of 50% of the gross amount.

Dividend distributions are subject to the main business income tax of 10% on net income, as well as a 5% surtax. Dividends paid to foreign shareholders are subject to a 15% withholding tax.

Individual tax

None

Individual income tax on salaries and other income was introduced in 2006, at a top rate of 10% on employment income, interest, capital gains from property and on 50% of dividends received from Paraguayan companies. The law will not enter into effect until January 1st 2007.

Individuals earning business income are required to pay tax at the same rate as companies. Individuals engaged in farming are subject to a separate tax of 10% or 2.5%, depending on the size of the land.

Capital gains

Gains on immovable property are taxed as income

Capital gains derived by companies on immovable property are included in taxable income for business income tax purposes. Capital gains derived by individuals on the sale of immovable property are subject to a 10% capital gains tax as from January 1st 2006.

Indirect tax

VAT standard rate: 10% Lower rate: 5%

Value-added tax (VAT) is compulsory for all companies and unincorporated businesses whose taxable turnover exceeds a certain amount. The standard rate is 10%, with a lower 5% rate applying to supplies of basic foodstuffs, pharmaceutical products, interest and commissions on loans, and the transfer of the right to use goods or immovable property. Exports are zero-rated. Exemptions include raw farm products, some fuels, foreign currency, books and newspapers.

Tax administration and compliance

Tax year:
Companies: accounting period;
Individuals: calendar year

Businesses subject to the business income tax must make four quarterly advance payments of tax, each amounting to 25% of the tax for the previous year. Exceptionally, advances paid during 2006 must be made at the rate of 15% based on the income tax of the previous year. Taxpayers engaged in farming make two advance payments amounting to 50% of the tax paid in the previous year. Tax returns must be filed within four months after the year-end (three months for small taxpayers). The final tax payment is due at the time the return is submitted.

Additional tax information

Withholding taxes: Dividends 15%, Interest and Royalties 15% (ie 50% of 30%).

Tax treaties: Paraguay has signed agreements for the avoidance of double taxation of income from international shipping and/or air transport with Uruguay, Chile, Belgium, Germany and Argentina.

Dividends: Individuals pay tax on 50% of dividends received from Paraguayan companies. Non-residents are taxed by way of withholding at a rate of 15%.

Revenue protection: There is no transfer-pricing or anti-tax haven (CFC) legislation.

Groups: There is no provision for group taxation.

Incentives: Exporters (maquiladoras); assembly operations; forestry.

Other taxes: Customs duties, Excise tax, Immovable property tax, Stamp duties.