BUSINESS ORGANIZATIONS
Corporations (sociedad anonima - denoted SA): There are five procedures
which must be followed for a corporation to be legally established.
* A founding shareholders' meeting must be held to approve the corporate
bylaws, designate the directors and statutory auditors, and subscribe the
entire corporate capital.
Branch of a Foreign Corporation (sucursal): The following must be filed
and registered at the Public Trade Registry in order for a branch to be
formed: authenticated copies by a notary public of the foreign corporation's
bylaws, the board of directors minutes of the meeting resolving to establish
a branch in Paraguay, and a general power of attorney by the head office
to its representative in Paraguay. These documents must also be registered
with the Treasury Inspection Department no more than 10 days after having
them registered at the Public Trade Registry. The administrative duties
of a branch must be handled by an authorized representative possessing a
general power of attorney as defined by the head office of the corporation.
Power of attorney must be sufficient to allow the representative to deal
with all aspects of the branch's activities. It is recommended that the
representative reside in Paraguay.
EXPORTING
Agents and Distributors: There are no laws requiring persons or companies
exporting to Paraguay to employ local agents or distributors. However, exporters
who are not familiar with the Paraguayan market may be advised to employ
local representation. Importers must retain the services of a Paraguayan
customs agent to dispatch import formalities. Fees for customs agents are
fixed by law.
Import Restrictions: Imported goods are not subject to licensing. However
foreign goods competing with locally manufactured goods may be subject to
special tariff treatment under Law No. 1163. Such treatment may consist
of prohibition or temporary import restrictions in order to protect local
manufacturers, to maintain a sound trade balance, or to offset dumping of
foreign goods. In practice, such import bans are most often imposed on seasonal
agricultural products competing with domestic production.
Import Duties: Paraguay introduced the Harmonized System (HS) for tariff
classification in January 1992. All imports are subject to ad valorem or
specific duties (or both). The customs valuation procedure is based upon
transaction value that includes: the price actually paid for the imported
goods plus import costs, charges, and expenses which are not reflected in
the price.
Selected imports from Latin American Integration Association (ALADI)
member states receive beneficial tariff treatment and are given an average
tariff rate reduction of 60 percent. In addition, Mercosur imports not subject
to special treatment benefits will benefit from tariff reductions that will
reach zero in January 1996.
Documentation: In order to export goods to Paraguay, specific information
is required for all shipments. Every shipment must include the full name
and address of the exporter, the means of shipments and date and place where
the documents were legalized for export. Accurate data for importing includes
the weights, dimensions, and bulk of shipments as well as the quantity and
value of the goods being shipped. For all imports valued at, or over, US$
100, one original and three copies of a consular invoice are necessary.
Invoices must be purchased from a Paraguayan consulate and prepared in Spanish.
In addition, one original and three copies of the commercial invoice
must be provided in Spanish, certified by a recognized Chamber of Commerce,
and legalized by a consulate. Three copies and one original of a legalized
bill of lading, prepared in Spanish are also required for import procedures.
Shipments of livestock, seedstock, or plant life into Paraguay must be accompanied
by a notarized and authenticated sanitary certificate. Furthermore, import
of such items requires a permit issued by the Paraguayan Vegetable Sanitation
Section of the Ministry of Agriculture and Livestock.
COMMERCIAL POLICIES
Free-Trade Zones: Paraguay maintains "transit" zones at Concepcion
and Encarnacion for Brazil, and Brazil maintains transit zones for Paraguay
at Paranagua and Santos. Chile maintains a transit zone for Paraguay at
Antofagasta. An international free-trade zone was established at Ciudad
del Este under Law 273 of 1971.
Exchange Controls: Paraguay does not have controls on foreign currency
exchange transactions. The government also unified the exchange rate and
implemented a free floating foreign currency exchange rate regime. Hard
currency transactions of US$ 10,000 or more must be registered with the
Central Bank. Moreover, there are no restrictions on remittance of capital
and profits. In the case of repatriating profits, funds are subject to a
withholding tax of five percent on the gross amount remitted.
FOREIGN INVESTMENT
The Government of Paraguay encourages foreign investment. The government
has established a number of fiscal incentives to promote both foreign and
domestic investment and at the end of 1991 the government implemented a
law establishing guarantees for foreign investment. Activities that are
reserved for state monopolies include oil, cement, electricity, water, and
the telecommunication sectors.
The legal framework governing investment incentives is expressed in Investment
Incentive System Law 60/90. The fiscal incentive package includes total
exemption from certain taxes on the establishment of operations and important
reduction of customs duties on imports of capital goods. There is a 95 percent
corporate income tax exemption for five years.
INTELLECTUAL PROPERTY RIGHTS
Paraguay has established trademarks, industrial patents, or invention
agreements with Argentina, Brazil, Chile, and Uruguay.
Patents: Law No. 773 established an Office of Patents of Invention which
administers the rules and procedures for obtaining patents. The patent is
granted by a certificate in the name of Paraguay, with the authority of
the Government, and is termed a "patent of invention". Decisions
of the Patent Office granting or refusing patents are subject to appeal.
In principle, foreign patents must be registered in the Office of Patents
of Invention and are subject to the same procedures and fees as national
patents. Patents are granted for 15 years and may be renewed.
Trademarks: Paraguayan Trademark legislation is set forth in Law 751
of 1979; in Decree No. 10732 of 1979; and in Resolution No. 244 of 1979.
The procedures for registering a trademark are similar to the U.S. system.
An application must be filed at the Office of Industrial Property of the
Ministry of Industry and Commerce. In the event an application is denied,
the applicant may appeal the decision in court. The legal protection enjoyed
by the person who registers a trademark lasts for 10 years. This period
may be extended indefinitely for 10-year periods.
In order for foreign trademarks to enjoy the guarantees granted under
the Trademark Law of 1979, they must be registered in the same way as domestic
trademarks.
Copyrights: In 1991, Paraguay became a signatory to the Berne Convention
for the Protection of Literary and Artistic Works.
TAXATION
Corporate taxes: Foreign corporations doing business in Paraguay are
subject to the same tax rules as those applied to domestic business entities.
With the implementation of the new tax system, corporate income will be
subject to a 30 percent tax rate. In the case of reinvestment, the income
tax is reduced to a 10 percent rate. All entities are subject to tax, except
those which can claim tax exemption under special laws. The taxation of
branches engaged in business operations is the same as for corporations.
Personal Income Taxes: The Paraguayan government only taxes "high-level"
executives on their income earnings. In such cases, income may be treated
for tax purposes in two ways. The business employing the executive may deduct
a level of the executive's remuneration as allowed by law, or the total
remuneration may be deducted by the business. In the former case, no tax
would be paid by the executive since only part of the remuneration has been
deducted. In the latter case, the executive would be subject to personal
income tax.
All individuals, both Paraguayan and foreign, are obliged to contribute
to social security. Employee's must contribute 9.5 percent on payroll, and
employer's must provide 16.5 percent on payroll.
Other Taxes: The Government of Paraguay recently introduced a value-added
tax (VAT). Decree Law No. 5/52 places a tax on the manufacturing, importing,
exporting, circulation, or sale of a product listed either specifically
or generically in the legislation.
All land and buildings located within Paraguayan territory are subject
to an annual tax based on a fiscal valuation of the property.
A license tax exists, as established under Law No. 344/71, which must
be paid by all persons and entities engaged in commercial and industrial
activities or other kinds of direct or intermediate activity considered
a permanent form of business within Paraguay.
Tax Treaties: As a member of LAIA, Paraguay has signed tax treaties with
Brazil, Argentina, and Uruguay. The United States and Paraguay have no treaty
regarding double taxation.
REGULATORY AGENCIES
* The Ministry of Industry and Commerce is responsible for administrating
the trade and industrial policy of the Paraguayan government. It is responsible
for setting prices for certain basic necessity products such as sugar,
bread and gasoline.
* The Ministry of Finance acts to regulate all financial activity of
the Paraguayan state.
* The Paraguayan Central Bank is responsible for regulating all banking
and finance activities within Paraguay.
* The Public Trade Registry is responsible for all individuals and legal
business entities wishing to perform any type of business, either industrial
or financial, within Paraguay.
The Ministry of Industry and Commerce is responsible for the administration
of the Investment Incentive System Law (law 60/90).
USEFUL CONTACTS
U.S. Embassy in Paraguay 1776 Mariscal Lopez Avenue Casilla Postal 402
Asuncion, Paraguay Telephone: (595) 21 213715 Facsimile: (595) 21 213728
Embassy of Paraguay in the United States 2400 Massachusetts Avenue, NW
Washington, DC 20008 Telephone: (202) 483-6960
