Tax incentives on capital investments

By Lorena Dolsa

Paraguayan counts with the legal tools that unquestionably favor capital investments both from national and foreign sources. Law 60/90, which establishes the regime of tax incentives, is one of the significant legal bodies governing capital investments in Paraguay. Its objectives are: to increase the production of goods and services, promote exports, create permanent jobs, substitute imports, promote investment and reinvestment in capital goods and incorporate technologies to increase production efficiency and better use of raw materials, human resources and domestic energy resources.

As per benefits, Law 60/90 provides a set of municipal and tax exemptions for a maximum period of ten years.

Additionally, Law of Administrative Reorganization and Fiscal Adjustment established major changes to Law 60/90 and included more benefits to investments:

• Foreign investment exceeding the sum of US$ 5,000,000 shall be exempted from taxes levied on remittances and foreign payments in concept of interest, commissions and capital, during the period specified in the investment project.
• Taxes levied on dividends and profits of the investment project for a period of ten years shall also be exempted, provided that the tax is not considered investment tax credit in the country of origin of the investment.
• Under the new tax regime established by Law 2.421/04, investors protected under Law 60/90 are also exempt from payment of VAT on capital goods, domestic or imported, directly applicable to the industrial or agricultural production cycle.

The Investment Counsel, chaired by the Ministry of Industry and Commerce is the organ responsible for granting or refusing requests to access and benefit from the incentives system. Once all documents are submitted before the Investment Counsel, provided that no clarifications requests have been issued regarding the application, the resolution granting the investment project is issued in approximately 60 days.

According to reports prepared by the Ministry of Industry and Commerce, the industrial sector is currently the sector which most commonly applies and benefits from the tax incentives for capital investments foreseen in Law 60/90.

Eight investment projects were approved in July, 7 2011, the projects are dedicated to manufacturing of goods (production of corn starch, fertilizers, manufacture of disposable syringes and needles).

The investments reached by these projects amount to Guaranies (national Paraguayan currency) Gs 40.261,000,000, of which Gs. 16,200,000,000 is of foreign origin.

We are confident that the incentives on investments set forth by our laws and investments made accordingly will help Paraguay be placed amongst industrialized nations in the world in a near future.