Author: dev_

On October 31, 2019, the Executive Branch issued Decree 2787/2019 (the Decree) establishing the schedule of the effective dates and the effectiveness of the provisions contained in Law 6380/2019 (the Law/Reform).

In view of the foregoing, the Reform will be effective and will impact the taxes according to the following schedule:

1. For the Corporate Income Tax (IRE), it will have the following cuts:

a. The Reform will become effective on January 1, 2020 for those companies whose next fiscal year-end is December 31, 2019.

b. The Reform will become effective on May 1, 2020 for those companies whose next fiscal year-end is April 30, 2020.

c. The Reform will become effective on July 1, 2020 for those companies whose next fiscal year-end is June 30, 2020.

2. Regarding the Special Valuation Standards for Transactions: The Reform will become effective on January 1, 2021.

3. Regarding Dividends and Profits Tax (IDU): The Reform will be effective as of January 1, 2020.

4. Regarding Personal Income Tax (IRP): The Reform will be effective as of January 1, 2020.

5. Regarding the Non-Resident Income Tax (INR): The Reform will be effective as of January 1, 2020.

6. Regarding Value Added Tax (VAT): The Reform will become effective as of January 1, 2020.

7. Regarding the Selective Consumption Tax (ISC): The Reform will become effective as of January 1, 2020.

8. With respect to the General Provisions: Except for articles 144, 145, 149, 151 and 152, the Reform will become effective as of January 1, 2020.

On the other hand, the provisions related to the Income Tax on Commercial, Industrial or Service Activities and the Income Tax on Agricultural Activities will remain in force until April 30 and June 30, 2020, so that taxpayers who have their tax closings on such dates may comply with their tax obligations in an orderly manner.

Likewise, the system of Advances and Withholdings affecting the payment of the IRE, provided for in Article 24 of Law 6380/19, will not enter into force until January 1, 2023.

Article 3 of the Decree establishes that the Electronic Invoice will come into force once the State Secretariat of Taxation (SET) has regulated the Integrated Electronic Invoicing System (SIFEN).

Finally, the Decree authorizes SET to take the necessary measures for the correct application of the Law.

We believe that the Decree is in line with the spirit of the Law; on the one hand, it seeks that the regulation of the same be carried out as expeditiously as possible, and on the other hand, that the introduction of the reforms be carried out in a gradual, orderly and staggered manner in order to allow the best possible adaptation by the subjects affected by the Reform. 

For further information on the Tax Reform Law and its application, please contact Andrés Vera, our associate expert in fiscal and tax matters (avera@vouga.com.py)  

Vouga Abogados advised TMF Paraguay S.R.L. in its capacity as guarantee agent in the framework of part of the financing of the project for the design, rehabilitation, construction, operation and maintenance of Routes 2 and 7. This is the first project to be implemented under the Public-Private Partnership (“PPP”) modality.

The financing obtained by the successful bidder, Rutas del Este S.A., amounted to a total of USD 658 million. Of this amount, USD 458 million was obtained through the issuance of debt and USD 200 million through financing granted by the Inter-American Development Bank (“IDB”) and IDB Invest.

Vouga Abogados' advice consisted in the review of the collateral structure and guarantee documents corresponding to the USD 200 million financing granted by the IDB and IDB Invest.

For further information, please contact Cynthia Fatecha (cfatecha@vouga.com.py), Geor Birbaumer (gbirbaumer@vouga.com.py) or Carlos Vouga Z. (cvouga@vouga.com.py)

The Executive Branch enacted Law 6399/2019 which imposes the exchange of 100% of the bearer shares to registered shares. The deadline to proceed with the exchange was extended until December 10, 2019.

During this period, Corporations may update their bylaws and request the corresponding opinion from the Treasury Solicitor's Office. 

The Ministry of Finance is expected to issue the corresponding Regulations in the next few days, which will provide more details about the administrative procedure for the share exchange. 

Failure to proceed with the exchange will result in penalties ranging from the suspension of economic rights to the loss of such rights.

Through Resolution No. 4118/2019, the National Directorate of Public Procurement (DNCP), regulates the implementation of the Electronic Bidding Form for the acquisition of goods, in any process governed by Law No. 2051 “On Public Procurement”. 

The objective of the implementation of the Electronic Bidding Terms and Conditions is to speed up and improve the efficiency of the purchasing entities, as well as to improve transparency in the bidding processes.  

The implementation will affect, in the first instance, all those entities that were part of the pilot plan; with respect to the other entities, the training and implementation process will be staggered, starting in 2020. 

The IFLR100 directory, the world's leading guide specialized in banking and financial law, has ranked Vouga Abogados as a Tier 1 firm in the areas of Financial and Corporate Law. Likewise, this directory has included our Firm among the 5 firms considered as Active in the area of Project Development. 

Thus, the Corporate Law Department obtained the best rating in the three most prestigious directories worldwide: Band 1 in Chambers and Partners; Tier 1 in The Legal 500 and finally, Tier 1 in IFLR1000. In the area of Banking and Finance Law, the Firm obtained the best rating in 2 of the 3 directories mentioned above: Band 1 in Chambers and Partners; Tier 1 in IFLR1000 and Tier 2 in The Legal 500.

For more information about the news, please click on the following link. 

The prestigious publishing house Thompson Reuters (Argentina) has published a special supplement that analyzes the Decree 274/2019 of Commercial Loyalty in Argentina. The compendium makes an extensive analysis on the subject of unfair competition where aspects of both substantive law and procedural aspects are addressed, the link with other subjects and professional disciplines, as well as the impact of the matter in the economic field.

In the section dedicated to the analysis of Comparative Law, Marta makes a detailed analysis of the Paraguayan reality in this area, where she considers aspects related to (i) local regulations, (ii) the study of sources and their problems, (iii) the comparison between the law of unfair competition and the law of unfair competition vis a vis competition law (differences and points in common), (iv) standing to sue, (v) a brief review of the jurisprudential criteria and (vi) his final considerations regarding the desired evolution of the matter in Paraguay.

First, Marta mentions that in Paraguay, unlike other countries with special laws on unfair competition or where the competition authorities hear cases of unfair competition and in the absence of a unified regulatory body, it is the commercial judge who is responsible for assessing the qualification of unfair acts within a dispersed and extremely comprehensive regulatory catalog where the civil and commercial judge is the competent authority in cases of controversy.

Regarding the differences between unfair competition law and competition law, the author mentions that since competition law is a relatively new subject in Paraguay, it tends to be commonly confused with unfair competition law. Regarding the substantive aspect, Marta mentions that, historically, unfair competition deals with settling disputes between private parties within the commercial and professional sphere, while competition law deals with disciplining those competitive facts that may affect a public good, this being the main difference between one discipline and the other.

Finally, Marta considers that the main legal problem lies in the difficult task to be performed by the commercial judge (Civil and Commercial Court) when assessing issues such as: good practices, honest use in industrial or commercial matters and means contrary to the principles of professional ethics that may cause harm to the competitor, being this assessment -beyond the normative dispersion- what makes the legal system of protection against unfair acts in Paraguay vulnerable. In addition, with respect to the relationship between acts of unfair competition and anti-competitive acts, Marta recommends directing national legislation towards: (i) the international trend of understanding unfair acts as those that ultimately threaten the proper functioning of the market, either with the enactment of a special law on unfair competition or (ii) with the incorporation of unfair acts in the current antitrust legislation.

For further details on the subject, please contact Marta Martínez (mmartinez@vouga.com.py) 

On September 24, 2019, the National Congress released the Tax Reform as Law 6380/19, forwarded on such date to the President of the Republic, who, the following day, promulgated it and had it published in Official Gazette 186 of September 25, 2019, as a special and second edition of that date, the only content of which is the Tax Reform Law.

Here you will find the link to Gazette No. 186 from where you can download the text of the Tax Reform Law in PDF format. 

For further information or assistance regarding this or other tax issues, please contact Andrés Vera (avera@vouga.com.py).

On October 21, the President of the Republic, Mario Abdo Benítez, issued the Regulatory Decree establishing a new regime for the production of hemp for industrial purposes. 

The purpose of this Decree is to benefit small farmers who will have up to a maximum of two hectares of crops each. It is estimated that some 25,000 small farmers in the Departments of Paraguarí, San Pedro, Concepción, Central and Chaco will be the first to benefit from this measure.

According to experts, this cannabis variety has a yield of up to two harvests per year, which could generate a profit of up to 10,000,000 guaraníes per hectare per harvest.

The first seeds will be imported from Hungary, France and the United States and the first plantings are expected to begin in March or April 2020. 

This measure complements what has already been established by Law 6007/2017, Decree 9303/2018 and Resolution S.G. 433/2019 which legislate and regulate the production and industrialization of cannabis for research and medicinal purposes.  

We will be attentive to the publication of the Decree in the Official Gazette in order to prepare a detailed analysis on the matter. 

In its Ordinary Session yesterday, Thursday, September 12, the Senate did not gather the necessary votes (23 out of a possible 45) to ratify the version of the Tax Reform Bill it sanctioned in its Extraordinary Session of June 19, 2019 and thus reject the amendments introduced by the Chamber of Deputies in its Extraordinary Session of July 10, 2019.

Of the 24 Senators present when the bill was discussed in said session, only 18 voted to ratify the version approved by the Chamber of Senators; consequently, the version approved by the Chamber of Deputies, which should be sent to the President of the Republic in the next few days for his promulgation and publication as law.

It is uncertain how long it would take for the Senate to send the enacted law to the Executive Power, but, judging by the time it would take from one Chamber to the other, it could be estimated that no more than 2 weeks would be necessary for this to happen. Once the President receives the sanctioned law, he has 20 working days to veto it, since it has more than 20 articles.

Once the aforementioned term has elapsed without the Executive Branch having issued an opinion on the Bill enacted as law by the Congress, the same is automatically enacted, pursuant to Article 205 of the National Constitution.

The Tax Reform approved by the Chamber of Deputies has very little chance of being vetoed by the President, since it presents almost no changes with respect to the text presented by the Executive Branch on May 9, when the legislative process began.

The schedule for the entry into force (total or staggered) of the Tax Reform would be set by Decree of the Executive Power within 90 days following its enactment, as set forth in Article 154 of such regulation, and as confirmed by the experience of the entry into force of the major amendments to the tax regime in force occurred with Laws 2421/04 and 5061/13, provided by Decrees 4306/04, 1012/13 and their complements.

According to comments made by some exponents of the Undersecretariat of State for Taxation, the entry into force of almost all the Tax Reform would be planned for January 1, 2020, except for specific issues whose implementation would require more time, such as the rules on transfer pricing, which could enter into force on July 1, 2020, thus replicating what happened with the entry into force of Law 5061/13, which was enacted in October of one year while its tax amendments and the price adjustment entered into force on January 1 and July 1 of the following year, respectively.

Here you can download the text of the Tax Reform Law passed by the National Congress in DOC format.

For further information or assistance regarding this or other tax issues, please contact Andrés Vera (avera@vouga.com.py).

The Labor Court of Appeals of Asunción, Second Chamber, upheld the claim for lost profits of the heirs of a worker who died while working.

In its decision, the Court decided to grant the compensation to the heirs based on the fact that the task entrusted and performed by the worker was of a risky nature, since the employer sent two workers without taking the corresponding safety measures for the transportation of valuables, and one of them died while performing such task.

In this sense, the Court considered that the employer did not comply with its obligation to protect the physical, functional and psychological integrity of its employee, as provided by labor law. In addition, it considered that the same labor legislation enables the heirs of the deceased to file a lawsuit with the sole accreditation of the relationship to claim the legal benefits, even when the worker had died after having been dismissed without cause.

However, the majority vote limited the indemnity to the last outstanding monthly salary, the proportional Christmas bonus and a 20% indemnity, giving a total of G. 5,399,999. On the other hand, the minority vote considered that the indemnity should be G. 38,399,999, mainly due to the inclusion of an indemnity according to life expectancy.

In any case, the ruling is relevant considering the figure of compensation for loss of earnings in the labor jurisdiction and claimed by the heirs of a worker who died while working as a result of the employer's non-compliance (by not having taken the safety measures), the Court having understood that they were fully entitled to such effect.

It should be noted that Vouga Abogado has not had any participation in the aforementioned process.

For more information about safety and health in the workplace, please do not hesitate to contact Perla Alderete (palderete@vouga.com.py) or Marcela Dos Santos (madosantos@vouga.com.py).