Attitude toward Foreign Direct Investment
The GOP encourages private foreign investment. Paraguay guarantees equal treatment of foreign investors and permits full repatriation of capital and profits. Paraguay has historically maintained the lowest tax burden in the region, with a 10% corporate tax rate and a 10% Value-added Tax (VAT) on most goods and services.
Paraguay's export and investment promotion bureau, REDIEX, provides useful information for
foreign investors, including business opportunities in Paraguay, registration requirements, and
laws, rules, and procedures.
Other Investment Policy Reviews
Laws/Regulations on Foreign Direct Investment
The Investment Incentive Law (60/90) passed in 1990 permits full repatriation of capital and profits. No restrictions exist in Paraguay on the conversion or transfer of foreign currency, apart from bank reporting requirements for transactions in excess of USD 10,000. This law also grants investors a number of tax breaks, including exemptions from corporate income tax and value-added tax.
The 1991 Investment Law (117/91) guarantees equal treatment of foreign investors and the right to real property. It also regulates joint ventures, recognizing JVs established through formal legal contracts between interested parties. This law allows international arbitration for the resolution of disputes between foreign investors and the Government of Paraguay.
In December 2015, President Cartes signed a new Investment Guarantee Law (5542/15) to promote investment in capital-intensive industries. Implementing regulations will be published in 2016. The law protects the remittance of capital and profits, provides assurances against administrative and judicial practices that might be considered discriminatory, and permits tax incentives for up to 20 years. There is no minimum investment amount, but projects must be authorized by a joint resolution by the Ministry of Finance and Ministry of Industry and Commerce.
The business registration process was modified in 2006 with U.S. assistance. The GOP instituted a coordinated system among all the offices involved known as the SUAE (www.suae.gov.py) or Unified System for Opening of Companies, reducing the number of steps and the time to open a business to 7 procedures, 35 days and lowering the cost to 39.9% of income per capita, according to the World Bank. This is an improvement; however, some aspects of opening a business are still lengthy and costly, such as building health inspections and environmental licenses.
In 2013 the Paraguayan Congress passed a law to promote Public-Private Partnerships (PPP) in public infrastructure and allow for private sector entities to participate in the provision of basic services such as water and sanitation. The government signed implementing regulations for the PPP law in 2014. As a result, the Executive Branch can now enter into agreements directly with the private sector without the need for Congressional approval. In 2015, the Government of Paraguay implemented its first contracts under the new law, with more expected in 2016. Large infrastructure projects are usually open to foreign investors.
The Government of Paraguay seeks increased investment in the assembly/distribution (maquila) sector and Paraguayan law grants investors a number of incentives. In addition to tax exemptions, inputs are allowed to enter Paraguay tax free, and up to 10% of production is allowed for local consumption after paying import taxes and duties. There are few restrictions on the type of product that can be produced under the maquila system and operations are not restricted geographically.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign and domestic private entities may establish and own business enterprises. Foreign businesses are not legally required to be associated with Paraguayan nationals for investment purposes.
There is no restriction on repatriation of capital and profits. Private entities may freely establish, acquire, and dispose of business interests.
Screening of FDI
Paraguay passed a Competition Law in 2013, which entered into force in April 2014. Law 4956/13 explicitly prohibits anti-competitive acts and created the National Competition Commission (CONACOM) as the government’s enforcement arm.