18 Feb 2020

The ‘maquila regime’ is regulated by Law N.° 1064/97. Through this regime, investors may temporarily introduce goods, products, or services into the country so that they can be installed, repaired, or processed for their subsequent exportation, once the added value of the “Paraguayan element” is incorporated.

Paraguay is an attractive place to install a ‘maquila’. Fiscal incentives are provided by law and approximately 65% (Sixty-five percent) of the Paraguayan population is under 35 years old, which means that there is a high availability of workforce.

Who may benefit from this regime?

Both individuals and entities, national and foreign, may be beneficiaries of the incentives recognized for the ‘maquiladoras’, provided that they are domiciled in the country.

Foreign companies may benefit from the ‘maquila regime’, regardless of the corporate structure they select to incorporate in Paraguay (i.e. Sociedad Anónima, Sociedad de Responsabilidad Limitada, Sucursal).

There are no limitations to the participation of national or foreign capital in the ‘maquila’ industry.

There are no restrictions as to which goods, products, or services can be included.

What are the benefits of the regime?

Suspension of all taxes and duties applicable to the importation of raw materials, supplies, and capital goods necessary for the development of the maquila program. The Port Authority will demand a warranty for the same value of the suspended taxes as an insurance policy, warrant, or bank guarantee. The warranty will be canceled and returned upon the exportation of the goods.

Unique Tribute: The only applicable tax to the ‘maquiladoras’ is a unique tax of 1% (one percent) over the added value in the national territory or the value of the invoice issued by the order of the head office.

Fiscal Exemptions: With exception to the unique tribute and the taxes established by law for sales in the local market, the ‘maquila contract’ and the ‘maquila’ activities are exempt from any other national or municipal taxes.

Value-added Tax: The ‘maquiladoras’ may recover the fiscal credit for their purchases of goods and services in the country.

What are the requirements to be a beneficiary of this regime?

The National Council of the Maquiladora Export Industry– CNIME for its Spanish initials– is an advisory body of the Ministry of Industry and Commerce and of the Ministry of Finance. It is responsible for evaluating and approving the “maquila program”.

The CNIME is composed of representatives from both Ministries, as well as from the Ministry of Foreign Relations, the Central Bank and the Secretariat of Technical Planning for Social and Economic Development.

The ‘maquiladora’ must develop a “maquila program” and submit it to the CNIME for its approval. The approval of the ‘maquila program’ is given through a resolution.

The maquiladora must begin its temporary importations within one year from the date in which the ‘maquila program’ was approved. The ‘maquiladora’ may request authorization of the CNIME to extend this deadline once, and up to the additional period of 3 (three) months.

At Altra Legal, we have a consolidated team that will perform a feasibility study of your ‘maquila program’, and, if applicable, advice you on the possibility of obtaining a MERCOSUR certificate of origin.

For more information on the Maquila Regime, contact Karin Kennedy kkennedy@altra.com.py

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