DOING BUSINESS IN PARAGUAY IN 2021
For over a decade, Healy Consultants Group PLC has efficiently and effectively assisted our Clients with i) Paraguay business registration ii) business licensing iii) Paraguay business banking solutions iv) visa options and v) staff recruitment strategies.
|Compare different Paraguay entities||Limited Liability Company||Free zone company||Maquiladora company||Limited Liability Partnership||Representative office|
|Also known as||Compañía de responsabilidad limitada||Empresa de zona franca||Empresa maquiladora||Sociedad de responsabilidad limitada||Oficina representativa|
|Best use of company?||All products and services||Commercial, industrial and service activities||Manufacturing for export trading||Professional services||Marketing & research|
|How soon can you invoice Clients/sign sales contracts?||10 weeks||12 weeks||12 weeks||10 weeks||No sales|
|How soon can you hire staff?||10 weeks||12 weeks||12 weeks||10 weeks||10 weeks|
|How soon can you sign a lease agreement?||1 week||1 week||1 week||1 week||1 week|
|How long to supply corporate bank account numbers?||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks|
|How long to supply company registration / tax numbers?||10 weeks||12 weeks||12 weeks||10 weeks||10 weeks|
|Corporate tax rate on annual net profits?||10%||0.5% / 10%||1%||10%||0%|
|Limited liability entity?||Yes||Yes||Yes||Yes||No|
|Government grants available?||Yes||Yes||Yes||Yes||No|
|Government approval required for foreign owners?||No||Yes||Yes||No||No|
|Legal representative required?||Yes||Yes||Yes||Yes||Yes|
|Minimum paid up share capital?||US$1||US$1||US$1||US$1||US$25,000|
|Can bid for Government contracts?||Yes||Yes||Yes||Yes||No|
|Corporate bank account location?||Continental Bank||National Bank of Argentina||Atlas Bank||GNB Bank Paraguay||Banco Regional S.A.E.C.A.|
|Can secure trade finance?||Yes||Yes||Yes||Yes||Yes|
|VAT payable on sales to local customers?||10%||10%||0%||10%||None|
|Average total business set up engagement costs?||US$12,850||Request a proposal||Request a proposal||Request a proposal||US$13,450|
|Average total engagement period?||4 months||4 months||4 months||4 months||4 months|
Paraguay business setup summary
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Advantages of Paraguay company registration
- A Paraguayan limited liability company can be incorporated with 2 shareholders and one director, who can be of any nationality but must be resident in Paraguay. There are no minimum share capital requirements; however, the capital deposited must be adequate to meet the business requirements of the company;
- Healy Consultants’ Clients find Paraguay a great place to incorporate because:
- Paraguay is one of the leading growth economies in the world with i) 3.7% GDP growth in 2018, among the highest in South America ii) a 3.97% inflation rate iii) the second lowest public debt rate in Latin America;
- Foreign investment is encouraged and welcome in Paraguay. The government guarantees equal treatment of both local and foreign investors and allows full repatriation of capital and profits;
- Foreign companies enjoy incentives offered by the Paraguayan government including i) a reduced income tax from 30% to 10% ii) a solitary tax of 0.5% on gross sales for investments in the free trade zones iii) the maquila program iv) export incentive regime.
- Investments in many areas including exports will benefit from VAT exemption. The legislation acknowledges a tax credit for pre-production stages. A temporary admission program is also in place that relieves imports from import tariffs and VAT.
- Interests and dividends remittance abroad is guaranteed without restrictions provided the investors comply with the set-down tax obligations by the Paraguayan legislation and the money laundering regulations.
- Free trade comprising of i) the freedom to manufacture and market overall goods and services, ii) pricing freedom, except for regulated products such as pharmaceuticals, iii) freedom to import and export goods and services except those prohibited by law.
- The Paraguayan Free Trade Zones Laws offer a most comprehensive foreign investments legal systems including i) no need for approval by the government for investors to venture into business, ii) no limitations, restrictions or discriminations except for the border security laws.
- Investors can enjoy absolute exemption from all the taxes that are applicable to registration, formation and recording of companies and corporations.
- Businesses in Paraguay are exempt from all the charges and taxes relevant to transactions of foreign exchange coming about because of operations or capital contributions contemplated in investment undertakings.
- Our Clients stand to gain greatly from investments in Paraguay because:
- Investments in Paraguay enjoy absolute exemption from all the levies and taxes on fees and interests remittance in relation to foreign loans for the entire loan term, as long as i) the loans are a minimum of US$ 5million and ii) the lending financial institutions are recognized by the government.
- Entrepreneurs enjoy exemption from all the applicable dividend and profits generated taxes by the investment undertaking for a period not more than 10 years provided that i) the investment is exceeding US$5 million and ii) the taxes paid in Paraguay are not given a consideration of tax credit in the country where the investment originates.
- Under the Paraguayan 60/90 law companies are granted exemption from specific internal levies, customs duties, and relevant levies on the importation of capital goods.
- Paraguay is an excellent destination for agribusiness companies since it offers a range of agricultural opportunities, such as
- Orange Plantation Investment Opportunity enables the investors to own and operate orange plantation in the country and avail hedge against inflation;
- Greenhouse Investment Opportunity allows the investors to own fully-insured greenhouses and earn profits at projected rates between 17% and 28% per year; and
- availability of skilled and affordable agricultural labour force in the country.
Disadvantages of Paraguay company registration
- Our Clients will find it difficult to incorporate a Paraguayan limited liability partnership because; A Paraguayan LLC can only be formed by a minimum of two individuals after a formalization of a contract of incorporation that takes the form of a public deed. The directors are required by law to be temporary or permanent residents of Paraguay;
- Although there is no minimum share capital requirement when starting a business, the process is still expensive and time consuming, with the licensing process taking more than a month to complete;
- Conducting business in Paraguay can be challenging for English-speaking foreigners given that i) the two official languages in Paraguay are Guarani and Spanish ii) official documents must be translated to the said languages iii) important government websites are primarily built in Spanish;
- The government-owned companies always have monopoly of lucrative sectors like the petroleum industry and hydro-generated electricity markets;
- The capital markets in Paraguay remain mostly underdeveloped due to lack of efficient legal frameworks required to create a more dynamic financial sector;
- The World Bank has ranked Paraguay negatively at 125th out of 189 jurisdictions in its annual Doing Business Survey for the year 2020;
- Payment made overseas under contracts of lease are subjected to withholding taxes of 10% Value Added Tax and 6% Corporate Tax;
- Limited Liability Companies in Paraguay are not permitted to engage in insurance, banking or savings and loans businesses. Instead, these businesses must be done through an SA public company (which may be unlisted);
- There is widespread corruption in Paraguay that makes businesses suffer from red tapes and bureaucratic hurdles. Moreover, bribery is a common norm in the country. Consequently, Paraguay has also been ranked 132nd (out of 180 countries) in the Corruption Perceptions Index 2019.
- Time to incorporate: Ten weeks
- Cost to set up: US$12,850
- Minimum capital: None
- Physical office required: No
- Shareholders: 2
- Directors: 1
- Company secretary: No
- Resident director: Yes
- Corporate tax rate: 10%
- Corporate tax base: Territorial
- Shelf companies: No
- Main company type: SRL