Our partner Rodolfo Vouga discusses the dynamic landscape and opportunities in the carbon sector, touching on policies and initiatives that are shaping the future of Paraguay during the Paraguay Investor Day organized by @Citibank in New York.
Watch the video!
The Paraguayan House of Representatives approved the "Carbon Credits" Bill without amendments to the bill approved by the Senate, which can be downloaded in the following link
The bill will be sent to the Executive Branch for its enactment or veto.
For further information, please contact our team: Rodrigo Fernandez (rfernandez@vouga.com.py), Rodolfo G Vouga (rgvouga@vouga.com.py) and Cecilia Vera (cvera@vouga.com.py).
Executive Summary
| Regulation | Date | Content |
| Law N° 7143 | August 04, 2023 | The National Directorate of Tax Revenues ("DNIT" per its Spanish acronym) is created. |
| Decree N° 83 | August 18, 2023 | The Presidency of the Republic appoints Mr. Oscar Orué, former Vice-Minister of the Undersecretariat of State for Taxation ("SET"), as National Director of DNIT. |
| Decree N° 82 | August 18, 2023 | The Presidency of the Republic establishes the validity of Law No. 7143/2023 creating the DNIT. |
| Resolution N° 99 | August 29, 2023 | The DNIT establishes administrative measures regarding the subscription of certain administrative acts issued by the DNIT, the General Management of Internal Taxes and its dependencies. |
| Binding Consultation | August 2023 | The SET issued its opinion on the inapplicability of Value Added Tax ("VAT") to the provision of call center services through the Internet for customers located abroad. |
| Administrative Court Ruling N° 174/2023 | August 2023 | The First Chamber of the Administrative Court ruled to admit a lawsuit against the Municipality of José Félix Estigarribia, which sought the taxation of the municipal patent tax for agricultural and livestock activities. |
More information:
► Law No. 7143/2023 – Though which the DNIT is created
On August 4, 2023, the Executive Branch enacted and published Law No. 7,143/2023 (the "DNIT Law"). This law created the DNIT, which is a new public law entity. For that purpose, the former SET was separated from the then Ministry of Finance (now the Ministry of Economy and Finance) and merged with the National Customs Directorate ("DNA").
The purpose of the DNIT is to collect both customs and internal taxes, and it has all the functions and powers previously held by the SET and the DNA over the respective taxes corresponding to each area.
The DNIT is an autonomous public law entity communicating with the Executive Branch through the Ministry of Economy and Finance but is no longer part of the latter. You can access a more extensive analysis we prepared on the Law of the DNIT through the following link.
► Decree No. 83/2023 – The Presidency of the Republic appoints Mr. Oscar Orué, former Vice-Minister of SET, as National Director of DNIT.
Through Decree No. 83/2023, the Presidency of the Republic appointed Mr. Oscar Orué, who previously served as Vice Minister of SET, as National Director of DNIT.
With this appointment, the National Director has continuity in the functions he previously performed as the highest authority of the SET and will be in charge of implementing the DNIT Law, by which the SET and the DNA are merged.
As the first official act after his appointment, the National Director appointed Braulio Ferreira as Executive Manager, Ever Otazú as General Manager of Internal Taxes and Juan Olmedo as Customs Manager.
► Decree N° 82/2023 – The Presidency of the Republic establishes the validity of the DNIT Law and other provisions on the functions of this entity
Through Decree No. 82/2023, the Presidency of the Republic established that the DNIT Law and the transitory rules for its effective implementation are in force. While the merger process between the former SET and the former DNA takes place, the institutional continuity of the entities that are in the process of integration is necessary, as well as legal certainty for taxpayers and users of foreign trade.
In this sense, as a reason for the decree mentioned above, the Presidency of the Republic explains in the reasons for the Decree that it is necessary to appoint a person in charge to carry out the merger process until the organizational structure and the manual of functions of the DNIT and its divisions are approved. Consequently, the DNIT Law became effective from the day following its publication in the Official Gazette on August 22, 2023. However, several provisions of the DNIT Law will enter into force at a later date, as follows:
On the other hand, until the implementation of the units and operative departments that will be established by regulation, the temporary structure of the DNIT will be as follows:
Finally, through the referred Decree No. 82/2023, the Presidency of the Republic designated the Executive Management as the unit responsible for organizational restructuring and regulation of the Law of the DNIT. The National Director must report to the Executive Branch through the Ministry of Finance on the progress made in merging or amalgamating the organizational structures of SET and DNA.
► Resolution No. 99 issued by DNIT – Whereby administrative measures are established with respect to the subscription of certain administrative acts issued by the DNIT
Through Resolution No. 99 of the DNIT (the "RG 99") it was established that the highest authority of the DNIT, which is the National Directorate, will take over the competences of the General Internal Revenue Directorate with respect to certain administrative acts, among which we mention the following: (1) Resolution of requests for tax credit refund and repetition of undue or excess payment; (2) Resolution of appeals for reconsideration filed against (2.1) the particular resolutions of tax assessment and application of penalties, (2.2) the response to binding consultations and (2.3) resolutions on tax credit refund and repetition of undue or excess payment; (3) Issuance of executive title or debt certificate, among others.
Avocation is an administrative law technique used in the public administrative organization to transfer the powers to resolve a specific matter from a hierarchically inferior body to a superior one. This technique is only effective between organs of the same administration.
On the other hand, the highest authority of the DNIT delegates to the head of the General Directorate of Internal Taxes the powers to execute the following administrative acts: (a) Audit orders, together with the Intervening Director; (b) Resolution of administrative proceedings for tax assessment and application of penalties; (c) Execution of the guarantee in the accelerated tax credit refund system of the exporter; and, (d) Answers to binding and non-binding consultations, among others.
In addition, the highest authority of the DNIT establishes powers to perform certain administrative acts to the following entities: (a) Directorate of Taxpayer Assistance and Tax Credits; (b) General Directorate of Tax Auditing; (c) General Directorate of Collection and Regional Offices; (d) General Directorate of Large Taxpayers; and (e) Directorate of Tax Planning and Technique.
► Response to Binding Consultation on the non-applicability of VAT to the provision of call center services via internet to foreign customers
Through a response to a binding consultation issued during August 2023, the SET established its position on the non-applicability of VAT on call centre services provided from Paraguay to customers outside the country.
For VAT not to be applied to this type of service, the operation must be within the digital services category and used outside the Paraguayan territory. According to the provisions of Law No. 6,380/2019 (the "Tax Law"), digital services are those services that are made available to the user through the internet or any adaptation of protocols and that are essentially characterized by being (a) automatic and (b) not feasible in the absence of information technology. Decree No. 3,107/2019, which regulates the VAT of the Tax Law, establishes that call centre services are digital services if they are provided through the internet or other networks.
Thus, for the service in question to be considered as provided to customers abroad and used outside the country, it is necessary that none of the following elements are located in Paraguay: (a) IP address of the device used by the customer; (b) country code of the SIM card; (c) billing address of the customer; (d) bank account used for remitting the payment; (e) billing address of the customer available to the bank; (f) financial entity issuing the SIM card; (g) bank account of the customer; (h) bank account of the customer used for remitting the payment; (i) bank account of the customer used for the payment; (j) bank account of the customer used for remitting the payment; (k) bank account of the customer used for remitting the payment; and (l) bank account of the customer used for remitting the payment.
Consequently, the SET responded by endorsing that call centre services that meet the indicated conditions may issue an invoice without generating a VAT tax debit.
► Administrative Court Ruling N° 174/2023 by which the First Chamber of the Administrative Court ruled that the municipal patent tax for an agricultural company was inapplicable
The First Chamber of the Administrative Court resolved a contentious administrative action brought by a company engaged in agricultural activities against the claim of the Municipality of Mariscal Estigarribia to collect the municipal trade tax on the assets that this company has in such Municipality. As the primary basis for filing this action, the taxpayer argued that the company does not carry out industrial, commercial or professional activities and, therefore, is not obliged to pay the municipal trade tax, as provided for in Law No. 620/1976.
The representative of the defendant Municipality answered the contentious administrative lawsuit mainly arguing that the plaintiff company is constituted as a mercantile entity in the General Directorate of Public Registries and that it has a merchant's registration and, therefore it is obliged to comply with the obligations related to such condition. Consequently, such formalities are, in themselves, acts of commerce, and for this reason, all entities of a mercantile nature are obliged to pay the municipal patent tax.
The First Chamber of the Administrative Court resolved the matter in a majority (vote of two of the three members), upholding the action filed by the plaintiff company, since it understood that the agricultural production activity is not included in the factual assumption of the tax and, therefore, is not taxed by it. Consequently, it ordered the revocation of the contested administrative acts, by which the plaintiff was ordered to pay the municipal patent tax.
Although this ruling is favorable to the plaintiff company, it cannot be ignored that the Municipality may appeal this resolution and submit it to review the Penal Chamber of the Supreme Court of Justice. It is essential to note that the position of the Supreme Court of Justice on this point has varied over time, and there is case law supporting the arguments of the plaintiff company in the present case, as well as case law against such claims, the latter being the trend in recent years.
Breaking news - The Paraguayan Senate approved the "Carbon Credits" Bill during the session held yesterday.
The Bill will now pass to the House of Representatives. The Carbon Credit Bill seeks to set a legal framework that would provide certainty on the ownership of carbon credits generated by projects located in the country and to avoid double counting of carbon credits. The Ministry of Environment and Sustainable Development (MADES) would act as enforcement authority, and will be in charge, among other, of keeping a registry of carbon credits generated by projects in Paraguay and those acquired from abroad. The registry will not imply double counting of credits.
With this initiative, Paraguay seeks to position itself as a leading jurisdiction in the regulation of carbon credits, in order to promote the access of high-quality projects to global carbon markets. According to estimates, Natural Based Removals projects located in Paraguay could represent more than 50% of the carbon credits to be issued over the next 5 years in this sector worldwide. Additionally, Paraguay has great potential to develop carbon projects in the energy, transportation, and other sectors.
The Bill is available in the following link
Vouga Abogados is participating in several of the largest carbon credit projects in the country. For further information, please contact our team: Rodrigo Fernandez (rfernandez@vouga.com.py), Rodolfo G Vouga (rgvouga@vouga.com.py) and Cecilia Vera (cvera@vouga.com.py).
We will keep you updated on this important news in development.
The Superintendence of Insurance through Resolution SS.SG. No 168/23 dated August 9, 2023, has expanded Article 4, item e) of Annex No. 1 of Resolution No. 14/96, which establishes the requirements for legal entities to operate as insurance brokers or claim adjusters in the insurance industry.
Pursuant to said extension, legal entities wishing to operate as insurance brokers or loss adjusters shall, in addition to attaching to their application for registration or renewal, prove the suitability required by the Insurance Law of their administrators and legal representatives by means of any of the following requirements:
On August 21, 2023, the Superintendency of Securities (the "Superintendency") issued Resolution CNV No. 41/23, in order to set forth with greater clarity the processes exempted from the collection of fees.
Among the most relevant provisions, the Superintendency established that Certificates of Savings Deposits issued by financial institutions under the supervision of the Superintendency of Banks, Quota Shares of mutual funds and Financial Derivative Contracts are exempted from the payment of fees for the registration of securities issued, provided that the latter are traded or listed in a stock exchange authorized by the CNV.
In addition, the Superintendency clarified that Stock Market Advisors, operators of brokerage firms, operators of commodities brokers and Multilateral Organizations, where the Republic of Paraguay is a party, are exempted from the payment of fees for the application for registration and maintenance of the registry.
It should be noted that this Resolution was formally issued by the National Securities Commission, which was replaced in its functions by the Superintendence of Securities, created on September 1, 2023 with the enactment of Law No. 7162/2023.
The Superintendence of Securities (the "Superintendence") issued on August 17, 2023 Resolution CNV No. 40/23, in order to establish the conditions and requirements for the provision of stock advisory services in Paraguay. In this regard, such resolution incorporated a new title within the General Regulations of the Securities Market (the "Regulations"), number 34, especially dedicated to regulate these services.
General Provisions
The Superintendency defined securities advisory or stock market advisory as the making of personalized recommendations to a client with respect to one or more transactions related to financial instruments. It also excluded from this definition recommendations of a generic nature.
Next, it established that advisors must make an evaluation of their clients, preparing a personalized investment profile, for which purpose they must request, at least, certain data established in the resolution. These profiles must be available to the Superintendency.
The resolution also establishes that advisors must classify the investment products included in their offerings into complex and non-complex investment products, and establishes the classification parameters for each category. Complex investment products may only be offered to qualified investors or institutional investors.
Additionally, advisors must establish policies and procedures aimed at ensuring that the client understands the relationship between the risk and return of the products and that the client's financial situation allows the investments to be financed. Furthermore, they may only offer the client services and products that fit his or her profile.
Registration of advisors with the Superintendency
The Superintendency will set up a registry of persons providing stock market advisory services, called the Advisors Registry. These persons will be subject to the supervision and oversight regime of the Superintendency. In this sense, the advisors must provide the service themselves and may not delegate their functions.
The resolution establishes the documents to be submitted for registration in the Advisors Registry.
It should be noted that this Resolution was formally issued by the National Securities Commission, which was substituted in its functions by the Superintendence of Securities, created on September 1, 2023 with the enactment of Law No. 7162/2023.
On September 2, 2023, Law No. 7162/23 "That creates the Superintendence of Securities in substitution of the National Securities Commission and grants it greater powers" was enacted, whereby the National Securities Commission ("CNV") is replaced by a new entity called the Superintendence of Securities, which will have a more robust and autonomous role in the supervision and regulation of the stock market.
The most relevant provisions implemented by Law No. 7162/23 are:
Chapter I: Creation and Structure of the Superintendency of Securities
As mentioned above, this law establishes the creation of the Superintendence of Securities, which will assume the responsibility of regulating, supervising and controlling the securities market in substitution of the CNV. Although this new entity will be part of the Central Bank of Paraguay ("BCP"), it will have functional autonomy to perform its functions.
As part of this change, the law provides that the Superintendence of Securities will be headed by a Superintendent of Securities, whose appointment will be the responsibility of the Executive Branch. The Superintendent will have a term of office of five years, with the possibility of being re-elected.
The selection of the Superintendent of Securities will be based on criteria of Paraguayan nationality, university degree and proven experience in areas related to economics, finance, law or other related fields.
The regulations prohibit the appointment of persons who have direct links with the entities supervised by the BCP, as well as those who may present conflicts of interest in relation to the decisions of the Superintendency of Securities. In addition, restrictions are established for persons with a history of fraudulent bankruptcy, convictions for financial crimes, among others.
Chapter I: Functions and Attributions of the Superintendency of Securities
In addition, the Law No. 7162/23 exclusively attributes to the Superintendency of Securities several functions and powers, including the supervision and inspection of the entities under its jurisdiction, the oversight of compliance with securities market regulations, the promotion of competition and transparency in the market, as well as the protection of investors.
The law also establishes that the Superintendency of Securities will assume the same functions and attributions previously held by the CNV, including those set forth in previous laws. In addition, all the properties, rights and powers that the previous laws granted to the CNV will be transferred to the BCP.
The internal structure and operational functioning of the Superintendency of Securities will be defined by the Board of Directors of the BCP.
Chapter II: Access to and Exchange of Information
In relation to the access and exchange of information, the Law No. 7162/23 establishes the powers of the Superintendency of Securities. This includes the ability to request, obtain and share information related to activities affecting the securities market, both nationally and internationally. In addition, confidentiality conditions are imposed on the information shared.
Chapter III: Securities Advice
It is also important to emphasize that the Law No. 7162/23 also introduces regulations in relation to stock advisory services within the Paraguayan territory. Those persons interested in providing this service must register in the records of the Superintendence of Securities and be subject to the regulations issued by this entity. Criminal penalties are established for those who provide advice without the proper registration.
The Central Bank of Paraguay ("BCP") recently issued Circular No. 132/23 on August 14, 2023, with the purpose of providing clarity and transparency in the calculation of interest rates based on the Interest Rate Regulation, which was previously approved by the BCP through Resolution No. 23, Act No. 9, dated February 23, 2023.
The purpose of this regulation is to establish guidelines that financial entities must follow for the calculation of interest rates in a fair and transparent manner, thus promoting greater equity in financial relations between entities and consumers.
One of the highlights of Circular No. 132/23 is the provision of examples for the calculation of interest rates. These examples reflect the current financial practices and are considered general standards. The purpose of these examples is to provide supervised entities with a clear reference framework for determining interest rates in various financial operations. It is important to note that these examples are neither rigid nor exclusive.
Circular No. 132/23 places a strong emphasis on the responsibility of supervised entities to ensure that interest rate calculations and other associated charges are consistent with current regulations. In addition to interest rates, the circular also addresses the charging of fees, expenses and penalties.
Executive Summary
| Regulation | Content | Date |
| Law N° 7.067 | Value Added Tax ("VAT") exemptions provided for in Law No. 6,380/2019 (the "Tax Law") for public passenger transportation services, and for other matters, were amended. | July 10, 2023 |
| General Resolution N° 133 | The Undersecretariat of State for Taxation ("SET") changed the requirements for registration and assignment of an identifier in the Taxpayer Registry ("RUC") for foreign individuals. | July 14, 2023 |
| General Resolution N° 134 | The SET established an exceptional mechanism for submitting the transfer pricing technical study ("ETPT") and supporting documents to rebut the presumption of relatedness with entities that are resident abroad. | July 18, 2023 |
| Binding Consultation | SET issued its opinion on VAT exemption for carbon credits. | February 2023 |
| Binding Consultation | The SET ruled on the incidence of the Dividends and Profits Tax ("IDU") on the formation of treasury stock or acquisition of shares from the same company. | June 2023 |
More information:
► Law No. 7067/2023 - Modifying the VAT exemptions provided for in the Tax Law for public passenger transportation services, and for other matters
Law No. 7,067/2023 amended the exemptions established in the Tax Law on VAT applicable to domestic public passenger transportation services. The new wording of the Tax Law maintains the exoneration set in the VAT for this type of transportation service. However, the modification clarifies that the exoneration is extended to urban, metropolitan or, short, medium and long-distance public transportation services. In other words, the previous wording of the Tax Law, which established that to apply this exoneration, the total round trip itinerary authorized by the competent agency must not exceed one hundred (100) kilometres, was eliminated.
On the other hand, Law No. 7,067/2023 also modified the second paragraph of numeral 5 of article 100 of the Tax Law, which established restrictions to the subjective exoneration of VAT applicable to alienated goods and services rendered by entities that develop or carry out activities of social good or public interest. Under the amendments proposed by Law No. 7,067/2023, the leasing of spaces, carpentry, plumbing, electricity, and catering services rendered by entities that develop or carry out social welfare or public interest activities are exempt from VAT.
It should be noted that, under the original wording of the Tax Law, the development of these activities did not benefit from the subjective VAT exemption applicable to this type of entity. It is essential to mention that Law No. 7,067/2023 did not modify article 25, numeral 2, paragraph "c", third paragraph of the Tax Law; therefore, although the development of the referred activities is exempt from VAT, the income obtained from there is taxed by the Corporate Income Tax ("IRE") for the entities that develop or carry out activities of social good or public interest.
► General Resolution No. 133/2023 - The SET changed the requirements for registration and assignment of an identifier in the RUC for foreign individuals
Through General Resolution No. 133/2023 ("RG 133"), the SET amended General Resolution No. 79/2021 ("RG 79") through which the requirements for registration in the RUC, updating of data and cancellation in such registry were regulated. Among the reasons that motivated the SET to issue RG 133, the following are mentioned:
a) the need to update Annex 1 of RG 79, considering the amendments that were introduced by Law No. 6,984/2022 ("Migration Law"), which established the new legal immigration regime in Paraguay; and
b) the need to update Annex 2 and Annex 4 of RG 79 to facilitate taxpayers' compliance with their fiscal obligations.
The main novelty introduced by RG 133 is the possibility for foreign individuals to register as taxpayers in the RUC by presenting either of the following two documents issued by the Paraguayan authorities, which are in force: (i) Paraguayan identity card ("C.I."); or, (ii) Paraguayan passport. Previously, RG 79 required foreign individuals to present their permanent residence permit issued by the Paraguayan immigration authority and the identity card or passport of the country of origin to register as a taxpayer in the RUC.
The requirement of the permanent residence permit in the country for registration in the RUC was because, according to Article 2 of the Annex to Decree No. 3,181/2019, permanent residence is equivalent to tax residence in Paraguay. Then, the formal criterion for registration in the RUC of foreign individuals was that they prove their tax residence in the country. This was also reflected in the requirements to obtain the certificate of tax residence in Paraguay since, in this respect, General Resolution No. 65/2020 ("RG 65") only requires an RUC or C.I. to access this document.
However, this became a major inconvenience with the entry into force of the Migration Law, which established stricter conditions to access the permanent residence permit, since now foreign individuals working in Paraguay must previously fulfil two (2) years of temporary residences to access permanent residence (for more information on this point, you can access the newsletter issued on the issue by clicking ). To address this practical problem, SET changed the documents for the registration of foreign individuals in the RUC, replacing the permanent residence permit card with the C.I. or Paraguayan passport.
It is vital to take into account that with RG 133, a regulatory inconsistency is created since, as advanced, the tax residence in Paraguay is acquired by foreign individuals with the obtaining of the permanent residence permit, as established in Article 2 of the Annex of Decree No. 3,181/2019 which is in force at the date of issuance of this document. Despite this, with RG 133, a foreign individual who obtained his C.I. with the temporary residence permit can register as a taxpayer in the RUC and, thus, be taxed as a Paraguay tax resident and even access the country's tax residence certificate.
On the other hand, according to what is now established by RG 133, the RUC identification number for foreign individuals will be the one that corresponds to the C.I. number, except in the case of refugees. This provision applies to foreigners who register in the RUC as of the effective date of RG 133.
Previously, when foreign individuals registered in the RUC by presenting their permanent residence permit card, they were given the RUC numerical identifier starting with the series 50,000,000. Now, according to RG 133, this RUC series is reserved exclusively for foreign individuals who are refugees, so those who are not refugees must change their RUC identifier through Marangatú to match the C.I. number that they should have according to the following schedule:
| RUC Termination | Month in which the change in the identifier must be conducted |
| 0 | August 2023 |
| 1 | September 2023 |
| 2 | October 2023 |
| 3 | November 2023 |
| 4 | December 2023 |
| 5 | January 2024 |
| 6 | February 2024 |
| 7 | March 2024 |
| 8 | April 2024 |
| 9 | May 2024 |
The SET will notify each taxpayer at the beginning of the month when the obligation to make this modification is activated so that they can update their RUC identification number through the "Marandú" electronic tax mailbox of Marangatú.
► General Resolution No. 134/2023 - The SET established an exceptional mechanism for the presentation of the ETPT and supporting documents to rebut the presumption of relatedness with entities residing abroad
Through General Resolution No. 134/2023 ("RG 134"), the SET ratified that the obligation to file the ETPT expires on the seventh month after the end of the respective fiscal year, while the third month is the deadline for taxpayers who have transactions with foreign entities to submit the documents that rebut the presumption of relatedness that may be generated concerning them, under the provisions of Articles 9 and 15 of General Resolution No. 115/2022, respectively, which provide as follows:
| Month of submission (*) | ||
| Closing date of the taxpayer’s fiscal year | Documents against presumptive relatedness | ETPT |
| December 31 | March | July |
| April 30 | July | November (**) |
| June 30 | September (**) | January |
However, exceptionally, for compliance with these obligations in 2023, and even until January 2024, the form of their presentation changes, since, instead of being presented through the "Marangatú" System, they must be entered at the SET's front desk in digital format, on an external storage medium (CD, DVD or USB memory), as follows:
The ETPT submitted in digital format must contain the signature of the authorised professional to issue it until the option is enabled in the "Marangatú" system for the professional to confirm it from their user.
► Response to Binding Consultation on VAT exemption for carbon credits
Carbon credits are a tradable economic instrument issued by a carbon manager, which assigns a unit of value to activities that seek to combat the excess of carbon dioxide (CO2) in the environment. Using this unit of value, the effects of these activities (reduction, avoidance and capture of CO2) can be objectified, and, thus, their ownership can be transferred to those who acquire them, with the counterpart of funding for those who carried out the project that generated them.
In other words, through carbon credits, the effects of the aforementioned environmental activities are subtracted from a particular subject to become an object through the title in which its value is represented to be traded, which is measured for each ton of carbon equivalent of greenhouse gases (tCO2eq) that is reduced, avoided or captured from the environment by the actions of a specific project.
With this in mind, a taxpayer asked the SET whether the sale of carbon credits, carbon bonds or Verified Carbon Units (“VCU’s*) is exempt from VAT under the category of public and private securities, to which the SET confirmed such exemption under article 100, numeral 1, paragraph a), of Law 6.380/19.
► Response to the Binding Consultation on the impact of the IDU on the formation of treasury stock or acquisition of treasury stock
In the dynamics of the shareholders of a corporation, it may be the case that the corporation itself wishes to buy the shares issued by it from its shareholders. This is known as the acquisition of own shares or treasury stock. Article 1072 of the Paraguayan Civil Code regulates this situation, providing that the repurchase of shares issued by a company can only be made in sums coming from the net and realized profits, provided that the shares are integrated.
In this context, a taxpayer asked the SET whether or not this treasury stock transaction, to be paid with funds from net profits, approved by the meeting and transferred to the optional reserves account, constitutes a distribution of profits that would be subject to the IDU. Given this, the SET referred that the distribution taxed by the IDU occurs when the excess of the legal reserve, the optional reserves or the capital by reduction thereof, when integrated by capitalization of undistributed profits or reserves, are made available to the partner or shareholder.
In this case, since the purchase of the treasury stock would be made with funds whose counterpart would be the optional reserves that were integrated with liquid profits, the SET concluded that such treasury stock operation constitutes distribution of profits, dividends or yields reached by the IDU, at the corresponding rate.