In the first place, we must point out for the readers understanding that the former Paraguayn tax(2) which structured the fiscal and administrative regime, established that commercial and industrial activities as well as services not classified as personal, should be taxed.
Secondly, the purpose of this commentary is to point out the benefits the expansion of the above mentioned law will bring to Paraguayan Citizens, and hence to businesses. The new amendment to an article of the former tax regime establishes that net income shall be determined by subtracting taxable gross income from the expenses realized to maintain a productive activity. These expenses must be proven through authentic documents with real market prices, and the expense must not constitute a personal income tax for the beneficiary.
The former law also provided a list of the tax deductible items, which has been expanded with the adoption of the new amendment to the following items:
- Social burdens on activities, goods and rights which affect the production of income, with the exception of the personal income tax.
- General expenses of the business;
- Personal incomes, including year –annual bonuses and paid vacations.
- Interests, rent …
- Extraordinary loses of business goods or exploitation due to an act of God or force majeure.
- Conjectures and penalties on bad credit.
- Losses originated to misdemeanours committed by a third party against taxable goods if they are not covered by insurance or compensation.
- Depreciations
- Amortization of intangible goods.
- Expenses and distributions necessary to taxable income incoming from international operations of importing and exporting goods.
- Moving expense and travellers provisions and other similar compensations.
- Donations to the State, municipalities, Catholic Church or other religious institutions, legally recognized social, educational assistance entities and charities.
- Percentage of remuneration paid for net profit for personal services.
- Professional fees
- Expenses and contributions for health assistance, education or cultural endeavours.
- Direct or indirect expenses or costs on reforesting or forest managing.
We must point out that the inclusion of these new items will foster foreign investment, the formalization of the labor market, and the adaptation to the global situation. We are hopeful that the reforms will further prepare our country to compete in the Global markets.
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