Through Circular SB. SG. No. 01 dated January 2, 2024, the Superintendency of Banks communicates that the legally required minimum integrated capital for various entities is structured as follows:
Through Resolution No. 268 dated December 14, 2023, the Secretariat for the Prevention of Money Laundering or Assets ("SEPRELAD") authorized the implementation of SIRO to carry out communications regarding Compliance Officers and/or Compliance Managers by Obligated Subjects.
Through Resolution No. 08, Minute No. 73, dated December 26, 2023, the Board of the Central Bank of Paraguay (“BCP”) modified the deadline from which the entities authorized to operate as Credit Information Bureaus (“BIC”) can provide credit reference services.
In this regard, an extension is established until May 1, 2024, allowing the authorized entities to initiate their credit information service activities.
This circumstance is ascribed to the ongoing review of all the required documentation for the entities, as mandated by Resolution No. 03, Minute No. 08, dated February 21, 2023, which has not yet concluded.
Through Resolution No. 4 dated December 6, 2023, the Central Bank of Paraguay ("BCP") established the extension of temporary measures to support the productive sector until March 31, 2024.
These measures aim to mitigate the adverse effects of climate change, particularly for agricultural producers who suffered losses due to the reduction in the prices of their products in previous periods.
In this regard, the BCP has directed that, in the case of loans granted to sectors related to agricultural and livestock activities that were affected by the reasons determined in the previous paragraph, the counting of the overdue period in the formalization of renewals, refinancings, or capital restructurings, including accrued interest and other charges, will be allowed to be interrupted until the date of the new agreement or contract. For higher risks, it will be essential to conduct a prior analysis individually or by economic sectors or similar activities, or by a group of clients with a similar risk profile.
Through Resolution No. 01, Minutes No. 01 dated January 3, 2024, the Central Bank of Paraguay ("BCP") ordered the intervention by the Superintendency of Banks ("SIB") of the Retirement and Pension Fund for Employees of Banks and Related Institutions ("CJPEBA"), due to the disintegration of the Board of Directors. The SIB will intervene until the new authorities of the Board assume their roles, a period that cannot be extended for more than 90 days.
The administration of CJPEBA will be assumed by the interveners designated by SIS before CJPEBA, with the authority to carry out the following acts of administration and conservation: (i) Collect mandatory contributions and dues; (ii) Pay retirements, pensions and other retirement benefits; (iii) Collect principal and interest installment payments, fees, and others, from loans granted by CJPEBA; (iv) Grant pensions, retirements, and other retirement benefits; (v) Physically preserve the assets and documents of the entity, taking appropriate security and conservation measures; (vi) Provide information to SIS and the Board of the BCP, upon their request or on its own initiative, to alert authorities about situations that require immediate action; and (vii) Perform other acts that may be necessary to enable the functioning and continuity of the administration and conservation of the intervened entity, which may be authorized by SIS.
Through Resolution SV. SG. No. 030 dated December 26, 2023, the Superintendency of Securities ("SIV") approved the Unique Chart of Accounts ("PUC") and the Manual of Accounting Records for mandatory use by brokerage firms and investment fund management companies. These are detailed in Annexes I and II, respectively.
The PUC will become effective on January 1, 2024. Consequently, the financial statements for the first quarter of the year 2024 are required to incorporate the detailed records of operations in accordance with the PUC.
Additionally, it is clarified that the mere listing of operations in the PUC does not authorize its validity. Therefore, in case of new transactions, brokerage firms and investment fund management companies must obtain prior approval from the SIV.
The Sectors specified in the PUC are: (i) Assets; (ii) Liabilities; (iii) Net Equity; (iv) Contingency; (v) Off-Balance Sheet Accounts; (vi) Income; and (vii) Expenses.
In Annex II of the Resolution, the Manual of Accounting Records defines each Sector and Chapter that constitutes the PUC.
In accordance with Resolution No. 202 dated November 21, 2023, the Secretariat for the Prevention of Money Laundering or Assets ("SEPRELAD") authorized the implementation of the Integrated Operations Reporting System ("SIRO") for the submission of compliance reports by the Obligated Subjects. The resolution will come into effect on January 1, 2024.
The annual reports on the evaluation of Internal Control procedures will be submitted through SIRO according to the following timetable:
Obligated Subject
Applicable regulations
Date
Entity
Real Estate
Art. 13 – Res. 201/20
Within 90 days following the close of the fiscal year
SEPRELAD
Automobiles
Art. 13 – Res. 196/20
Within 90 days following the close of the fiscal year
SEPRELAD
Jewelry
Art. 13 – Res. 222/20
Within 90 days following the close of the fiscal year
SEPRELAD
Gambling
Art. 13 – Res. 258/20
Within 90 days following the close of the fiscal year
SEPRELAD/CONAIZAR
Remittance Agency
Art. 13 – Res. 176/20
Within 90 days following the close of the fiscal year
SEPRELAD
Cooperatives
Art. 13 – Res. 156/20
Within 90 days following the close of the fiscal year
SEPRELAD/INCOOP
E-wallet
Art. 13 – Res. 77/20
Within 90 days following the close of the fiscal year
SEPRELAD/SIB
Insurance
Art. 13 – Res. 71/20
Within 90 days following the close of the fiscal year
SIS
Currency Exchange
Art. 13 – Res. 248/20
Within 90 days following the close of the fiscal year
SEPRELAD/SIB
Securities
Art. 13 – Res. 172/20
Within 90 days following the close of the fiscal year
SEPRELAD/SIV
Virtual Assets
Art. 13 – Res. 314/20
Within 90 days following the close of the fiscal year
SEPRELAD
The annual external audit reports will be submitted through SIRO according to the following timetable:
Obligated Subject
Applicable regulations
Date
Entity
Real Estate
Art. 14 – Res. 201/20
Within 180 days following the close of theaudited fiscal year
SEPRELAD
Automobiles
Art. 14 – Res. 196/20
Within 180 days following the close of theaudited fiscal year
SEPRELAD
Jewelry
Art. 14 – Res. 222/20
Within 180 days following the close of theaudited fiscal year
SEPRELAD
Gambling
Art. 20 – Res. 258/20
Within 180 days following the close of theaudited fiscal year
SEPRELAD/CONAIZAR
Remittance Agency
Art. 23 – Res. 176/20
Within 180 days following the close of theaudited fiscal year
SEPRELAD
Securities
Art. 23 – Res. 172/20
Within 180 days following the close of theaudited fiscal year
SEPRELAD/INCOOP
Cooperatives
Art. 22 – Res. 156/20
Within 180 days following the close of theaudited fiscal year
SEPRELAD/SIB
E-wallet
Art. 20 – Res. 77/20
Within 180 days following the close of theaudited fiscal year
SIS
Currency Exchange
Art. 23 – Res. 248/20
Within 180 days following the close of theaudited fiscal year
SEPRELAD/SIB
Virtual Assets
Art. 15 – Res. 314/21
Within 180 days following the close of theaudited fiscal year
SEPRELAD/SIV
Non-profit Organization (Level 3)
Art. 34 – Res. 490/22
Until June 30 of the following year for each audited fiscal year
SEPRELAD
Finally, the compliance officer's reports will be presented through SIRO according to the following timetable:
Obligated Subject
Applicable regulations
Date
Entity
Gambling
Art. 16 – Res. 258/20
Within 60 days following the close of the fiscal year
SEPRELAD/CONAIZAR
Remittance Agency
Art. 18 – Res. 176/20
Within 60 days following the close of the fiscal year
SEPRELAD
Securities
Art. 18 – Res. 172/20
Within 60 days following the close of the fiscal year
SEPRELAD/SIV
Cooperatives
Art. 17 – Res. 156/20
Within 60 days following the close of the fiscal year
SEPRELAD/INCOOP
E-wallet
Art. 15 – Res. 77/20
Within 60 days following the close of the fiscal year
SEPRELAD/SIB
Insurance
Art. 56 – Res. 71/19
Within 60 days following the close of the fiscal year
The Superintendency of Banks through Resolution No. 19/23 dated November 8, 2023 (the "Resolution") modified the categories of applicants for credits destined to housing loans provided in Resolution No. 12 dated October 29, 2020, which was rendered ineffective by the latest Resolution.
Identification of loans granted by financial institutions
The Resolution provides that loans disbursed by financial institutions for housing financing, regardless of their amount, shall be identified as "PERSONAL DEBTORS - HOUSING". However, the Resolution provides that loans for commercial purposes will not be included in this classification.
In addition, the Resolution provides that, the loan balances destined to housing financing will be classified as "Category II Assets with 0.10 rating". This is to determine solvency indicators.
Categorization of debtors
Debtors will be categorized according to their payment behavior, based on the default observed depending on the number of days of delay. In this regard, the Resolution provides for categories that are divided on a scale from 1 to 6, with the higher scale corresponding to a longer duration of the debtor’s defaults. For example, loan balances up to 60 days past due will be part of category 1, and loan balances more than 330 days past due will be part of category 6. The Resolution also provides that the projections will be applied from risk category 2 onwards.
Minimum information requirements
Financial institutions must comply with certain minimum information requirements for debtors, for example, identification of the debtor (identity card or equivalent), information on the application, purpose and conditions of the loan, among others. If a co-debtor is involved, the minimum information requirements will also apply to the latter.
Interruption of the computation of days in default
The resolution stipulates that in cases of renegotiations, whether it be renewal, refinancing and/or restructuring of housing operations, the payment by the client with their own resources of 10% of the overdue debt (capital plus interests) and other due charges will interrupt the computation of the days in default. This will allow the upgrading of the category to the next lower risk category.
Appraisal of the property and minimum projections
The Resolution also provides that 100% of the quick sale value of the appraised value of the real estate received as collateral for housing loans will be established as the computable value for the determination of the minimum projections.
The appraised value of the collateral must be updated within a period of no more than 5 years. However, when the debtor is more than 90 days in default, or any other indicator of deterioration, a new appraisal must be made, provided that the last appraisal is not less than 3 years old.
El Poder Ejecutivo emitió el Decreto 933 de fecha 27 de diciembre de 2023 (el “Decreto”) por el cual reglamenta la Ley 5741/2016, encargada de regular la incorporación de propietarios y/o responsables de microempresas al seguro social del Instituto de Previsión Social (“IPS”) y establece un sistema especial de beneficios del sistema de seguridad social para estos.
En líneas generales, el Decreto establece:
Aplica a propietarios y/o responsables de las Microempresas clasificadas conforme a la Ley 4457/2012 en: dueño, titular o propietario de Microempresa; socio de una Microempresa, y; responsable de Microempresa. Estos sujetos podrán registrarse como asegurados titulares ante el IPS, y podrán registrar a sus familiares como beneficiarios del seguro social de acuerdo con la ley aplicable.
Las Microempresas están obligadas a inscribirse ante el IPS y registrar a los sujetos señalados en el punto anterior, conforme a las normativas aplicables.
Para la inscripción, que será gradual, el Decreto prevé un Programa de formalización y regularización. Para acreditar la calidad de Microempresa, se tomará la categorización de microempresa. La inscripción será conforme al siguiente cuadro, sin perjuicio de que los sujetos obligados se inscriban antes:
Años
Criterios para incorporación gradual
2023 2028
Los propietarios y/o responsables de las microempresas con cédula MIPYMES vigente que soliciten su inscripción.
2028
A partir de 1 de julio del año 2028, todos los sujetos obligados por ley deberán estar inscriptos ante el IPS, según la categorización del Ministerio de Industria y Comercio MIC.
La base imponible del aporte que deben hacer los propietarios y responsables de Microempresas es el mayor salario mensual declarado y abonado a sus trabajadores, que en ningún caso podrá ser menor al salario mínimo legal vigente para actividades diversas no especificadas, y la tasa de aporte es del 23% (veintitrés por ciento) sobre dicha base imponible. Sin embargo, en su calidad de empleadores, los propietarios y/o responsables de Microempresas, están obligados a cotizar de conformidad a las normativas generales del IPS (16,5% empleador – 9% trabajador).
Las prestaciones que otorga el IPS son por riesgos de accidente y enfermedad común; accidente y enfermedad profesional; maternidad; invalidez; vejez, y; muerte, conforme a las disposiciones legales del IPS.
Las prestaciones económicas de largo plazo se calcularán tomando como periodo de referencia el promedio de los últimos 120 (ciento veinte) salarios mensuales sobre los cuales se cotizó al IPS.
El MIC se encargará de proveer información actualizada sobre las microempresas.
La base imponible se deberá declarar mensualmente de manera a realizar la liquidación respectiva.
La mora de aportes por un periodo de sesenta (60) días en adelante imposibilitará al titular y grupo familiar el acceso a prestaciones otorgadas por el IPS. El IPS establecerá el plazo para el pago de los aportes mensuales.
Los aportes se distribuirán para el fondo de jubilaciones y pensiones, de enfermedad y maternidad, y administración general en el porcentaje fijado por ley.
Se pierde la calidad de sujeto obligado cuando: no se acredite la calidad de propietario y/o responsable o no sea categorizado como MIPYMES conforme a las leyes aplicables; ante la suspensión temporal, cierre, clausura o cancelación definitiva del RUC de la empresa (debe comunicarse la inactividad ante el IPS, y; ante la muerte del titular.
El propietario y/o responsable de una Microempresa que sea categorizada por el MIC, en el nivel superior de pequeña o mediana empresa, podrá: continuar aportando el 23% para acceder a las prestaciones aplicables a microempresas, o; podrá acogerse al régimen de continuidad en el beneficio o de trabajador independiente para continuar cotizando solamente para la jubilación, de acuerdo con las leyes aplicables. El cambio de categoría no implica pérdida de aportes que se acumularán para efectos jubilatorios.
La implementación de las disposiciones del Decreto será regulada por el MIC y el Ministerio de Trabajo, Empleo y Seguridad Social, y, el IPS.
The consular fee and the contribution to the Paraguayan Institute of the Indigenous ("INDI") on trade documents and international transportation of goods are eliminated.
October 27, 2023
Law N° 7218
The withholding on account of Corporate Income Tax ("IRE") to public sector suppliers is increased until December 31, 2023.
November 16, 2023
Decree N° 777
The withholding of IRE as a single and definitive payment for small producers of earth minerals extracted from mills is reduced by half until December 31, 2023.
November 24, 2023
Binding Consultation
The previous Tax Authority (“SET”) ruled on the deductibility in the IRE of interest paid for late cancellation of taxes or penalties applied by any public body.
May 2023
Administrative Court Ruling No. 281/2023
The Administrative Court decided to confirm the response of the previous SET to a binding consultation on the deductibility of the provisions for premium debtors for the determination of the IRE.
November 2023
More information:
► Law No. 7196/2023 - Modifies several articles of Law No. 4033/2010, "On the Consular Tariff", eliminating it together with the contribution to INDI as costs associated with trade documents and international transportation of goods.
With the sanction and enactment of Law No. 7196/2023, published in Official Gazette No. 214 of November 2, 2023 and effective as of the following day, Paraguay eliminated the economic restriction to international trade and transportation that consisted in charging consular fees for the legalization or visa of commercial documents issued abroad that are necessary for the international transportation of goods destined to Paraguay, as well as their importation into the country.
Specifically, the decree eliminated the legalizations or visas corresponding to the trade chapter's navigation, air navigation, rail transport, land transport and import operations sections. It also eliminated the contribution to INDI, provided in Article 57, paragraph a) of Law No. 904/81, as 7% of the consular fee on specific international trade and transport documents. In this way, the cost of imports into the country is reduced, since the aforementioned economic costs are eliminated.
Law No. 7218/2023 - Establishes extraordinary management measures for public finances, among which is the increase in the withholding of IRE on account of public sector suppliers until December 31, 2023.
Law No. 4218/2023, published in Official Gazette No. 225 of November 16, 2023, provided several measures to bridge the financial gap faced by the new Government at the end of 2023. One of these measures consists in the increase, until December 31, 2023, of the withholdings on account of the IRE applied to public sector suppliers, excluding Municipalities and Governors' Offices. Thus, withholdings to public sector suppliers are as follows:
Withholding IRE
Until 11/16/2023
From 11/17/2023 to 12/31/2023
From 01/01/2024
Variation
Public sector suppliers
3%
4%
3%
+/-1%
The amount withheld will be credited as an advance payment of the IRE that public sector suppliers will pay in April of each year, which, in financial terms, implies a loan at zero interest rate ("0") for the State, for an indefinite term, since the end of this financing to the public sector will depend on the date on which the tax credit for advance payments of the IRE is offset, or its repetition is obtained.
IRE withholding will not be made when the amount of sale or service rendered, excluding VAT, is less than PYG 2,550,307 which is the minimum salary for unspecified miscellaneous activities for the Capital that was in force as of January 1, 2023, by Decree No. 7270/2022. For the taxpayer to be able to apply this exception to IRE withholding, the splitting of invoices on the same day will not be taken into account since all purchases made from the same supplier on the same date constitute a single transaction; the number of invoices used is irrelevant.
Decree No. 777/2023 - Reduces by half until December 31, 2023, the withholding of IRE as a single and definitive payment for small producers of earthy minerals extracted from mills.
By means Decree No. 777/2023, published in the Official Gazette No. 238 of December 1, 2023, the Executive Power provided that taxpayers of IRE that acquire earth minerals extracted through mills of small producers, who lack the size to determine the IRE on their account, must withhold this tax applying the general rate of 10% on a net income that drops from 30% to 15% of the price of the operation, until December 31, 2023.
This measure implies a transitory reduction by half of the IRE taxable base for the referred activity, which also means a reduction by half of the respective levy, which drops from 3% to 1.5% of the transaction price, as follows:
Withholding IRE
Until 01/12/2023
From 02/12/2023 to 31/12/2023
From 01/01/2024
Variation
Taxable base
30%
15%
30%
-/+15%
Rate 10%
3%
1,5%
3%
-/+1,5%
The purpose of this measure is to facilitate compliance with tax obligations, as well as to promote the growth and formalization of the sector benefited by it. It is worth mentioning that this measure is not new since reductions had already been provided for exceptional periods in 2020 and 2021 through Decree No. 3725/2020.
► Answer to Binding Consultation on the deductibility in the IRE of interest for late cancellation of taxes or penalties applied by any public body.
In response to a binding consultation in May 2023, the former SET established its position on the deductibility in the IRE of interest for late payment of taxes or penalties applied by any public body. In the consultation, the taxpayer referred explicitly to the interest charged by the tax authority when granting IRE payment facilities. The taxpayer stated that it should be deductible.
In this regard, the taxpayer pointed out that although Article 16 of Law No. 6380/2019 (the "Tax Law") establishes as non-deductible costs and expenses for the determination of the IRE the penalties for infringements applied by any competent public agency, the mentioned regulation does not include as non-deductible costs or expenses the interest paid for the fractioning of the IRE, since these, in its opinion: (1) are not the tax itself, (2) nor do they constitute an infraction penalty, but rather (3) are a financial cost similar to a loan from a banking entity, which is considered deductible for the determination of the IRE.
The Tax Authority approached the consultation recognizing that interest for late payment originates in the deferral of the payment of the principal obligation and that its purpose is to maintain in the future the original value of the amount owed, the payment of which is deferred. Thus, the Tax Administration qualified interest as an accessory of the principal obligation and used the legal principle that states that "the accessory follows the fate of the principal obligation" to affirm that interest shares the deductibility of its principal, which in this case was the IRE, which is not deductible in the liquidation of the tax itself, which also made the interest paid for it "non-deductible".
This reasoning would also apply to the interest paid for the deferral of any penalty applied by any public body, which would be a non-deductible expense since such penalties would also be deductible. However, this would not be sufficient to state that interest for any tax other than IRE would not be deductible in the liquidation of this tax because, to the extent that the tax is deductible as a cost or expense, the interest paid for it would also be deductible.
With this in mind, the Tax Administration also referred to numeral 10 of article 15 of the Tax Law as a second argument to deny the deductibility of late payment interest paid to public entities, stating that in such cases, the interest is not income taxed by an Income Tax. Therefore, it would not be a deductible expense in the IRE.
Regarding this last argument, it is worth mentioning that Article 56 of the IRE regulations annexed to Decree No. 3182/2019 provides for the interaction between the requirements for deductibility of interest in the IRE and establishes that the main requirement for this is that (a) they involve income taxed by an Income Tax, without reference to any rate limit; and, failing this, that (b) they do not exceed the average passive rates of the banking and financial market for similar operations. In other words, this second requirement allows the deductibility of interest that does not comply with the first one.
► Administrative Court Ruling No. 281/2023 - the Administrative Court resolved to confirm the response of the previous SET to a binding consultation on the deductibility of the provisions for insurance’ premium debtors for the determination of the IRE.
The Administrative Court confirmed through Ruling No. 281/2023, the response issued by the former SET to a binding consultation formulated by a guild of insurance companies regarding the deductibility in the IRE of the provisions on "debtors for premiums". The previous SET had issued the answer stating its position on the non-deductibility of such a concept, arguing that it does not fall within the concept of "reserves similar" to mathematical reserves but rather that they are provisions on bad debts, whose deductibility is only allowed to banks and finance companies under certain conditions.
The former SET added that to consider the reserves of insurance companies as "similar" to mathematical reserves, they must meet the following requirements (which would be missing in the reserves for prize debtors): (1) not increase the equity of the companies, (2) be integrated with premiums or portions of premiums economically unearned or unearned in the year, and (3) form a provision to cover the risk corresponding to subsequent periods, i.e., constitute company liability.
On this point, the taxpayers based their position on the following arguments related to the provisions discussed: (a) they are established by the control authority (the Superintendence of Insurance of the Central Bank of Paraguay), and therefore constitute mandatory reserves and, therefore, are necessarily deductible expenses; (b) they are comparable to mathematical reserves and, therefore, deductible; (c) it is inconsistent not to consider them as deductible since this would imply taxing them, contrary to the income concept.
The Administrative Court, by a majority vote (two judges voted in the same sense and one against), resolved as follows concerning the allowance for doubtful accounts for insurance premiums: (i) they are not similar or equivalent to mathematical reserves, but constitute technical credits; (ii) they are provisions for debtors and, as such, do not constitute deductible expenses as they do not meet the requirements of numeral 17 of Article 15 of the Tax Law, and (iii) only provisions on bad credits granted by entities regulated by Law No. 861/1996 (banks, finance companies and other credit entities) under the conditions established by the Central Bank of Paraguay are deductible, this deductibility not being extensible to insurance and similar entities.
It is important to note that Administrative Court Ruling No. 281/2023 can still be appealed before the Criminal Chamber of the Supreme Court of Justice, where this decision could be reversed.
