Archivos del autor: Berke Report

A number of specialized magazines from the Latin American legal market published articles regarding the advisory assistance provided by the firm BKM | Berkemeyer to Rutas del Este S.A.

Read More:

http://lexlatin.com/noticia/rutas-del-este-crea-fideicomiso-garantizar-credito-sindicado-paraguay/https://latinlawyer.com/article/1166323/berkemeyer-gross-brown-vouga-and-olmedo-in-landmark-paraguayan-ppp-financinghttp://www.abogados.com.ar/consorcio-rutas-del-este-obtiene-financiacion-de-bancos-locales-en-paraguay/21071

Managing partner Hugo Berkemeyer is skilled at steering the firm towards areas of opportunity in Paraguay’s growing economy. The calibre of multinational companies that turn to it for deal work underscore the firm’s transactional skills, while investment in its project finance and infrastructure capabilities have more than paid off, particularly for PPP work.

Partners specialising in tax, environment and labour law, as well as litigation, are on hand to ensure clients receive a complete service offer. BKM | Berkemeyer also has a deep knowledge of the country’s more traditional sectors. It has an agribusiness and real estate practice to assist local and foreign companies investing in each area, and advises foreign financial institutions lending to them.

BKM | Berkemeyer is taking advantage of Paraguay’s economic growth. It has increased its headcount and taken on new offices in Asunción’s business district. The firm is doing more real estate work as developers also take advantage of the country’s growing economy. It has hired associates to accommodate the growing demand for labour advice from Argentine companies and boosted its tax team in line with new regulations from the tax authority.

While the firm is an established player having been in the market for 60 years, it has a modern approach. The leadership fosters team-work and promotes an open working culture that encourages associates to get involved. As part of that, it has a new compensation system and career programme, as well as policies in place for international studies and to foster diversity and pro bono.

Clients praise the firm’s high-quality advice and business-minded approach. International names dominate the firm’s books, thanks to lawyers speaking a range of foreign languages (German is a strength here). For clients unfamiliar with Paraguay’s business climate, the corporate practice is a one-stop shop offering services from human resources to accounting. The firm also maintains ties to the business world through its involvement in the Paraguayan American Chamber of Commerce. This firm’s service offer is enhanced through the team’s links to the government and the assistance its lawyers have provided in drafting parts of the country’s legislation.

Source: https://latinlawyer.com/ll250/firms/1132076/bkm-berkemeyer

Lawyers from BKM Berkemeyer Law Firm have actively participated in the process and negotiation between the private sector unions led by FEPRINCO and the current authorities of the National Government, represented by high officials of the Sub Secretaría de Estado de Tributación (SET) [State Tax Agency] of the Ministry of Finance in order to reach an agreement for the amendment of the previous Decree N⁰ 6.560/16 and derived regulations that governed to the Personal Income Tax (IRP). 
 
This way, the Firm’s Lawyers, who advised the National Chamber of Commerce and Services of Paraguay (CNCSPy), since October 2017, have conducted an exhaustive study of the current text of Law N⁰ 4.673/2012 and proposed several alternative solutions for the impasse arisen between the former SET authorities and the local business community during the previous Administration, actively accompanied the negotiations that took place at the end of last year and concluded with a Joint Statement between the private sector and the SET establishing the existing conflicts. Subsequently, together with accountants from the company ALIANZA, who represented another union, worked in a Non-Binding Consultation presented by all the business associations in the country and finally, at the request of business associations, they worked and exercised procedural representation in an action of class unconstitutionality filed by tens of affected taxpayers.  
 
Finally, after difficult negotiations that started upon the assumption of the current Government Authorities, namely after August 15, 2018, the Parties (that include, besides business associations and SET representatives, several unions and associations of accountants) reached an agreement on most of the conflicting issues, reflected on Decree 359/2018 issued on October 5th, considering that the filing of the first sworn statements for compliance with the IRP tax started on October 7th.
 
This Decree ended almost two years of discussions between businesses, accountants, and the National Government, unifying criteria and interpretations and providing legal security in tax matters in Paraguay until the next enactment of a new personal income tax expected by year 2020.  
 
For more information regarding the existing changes in Decree 359/2018 and modifications in regard to the previous regime, please contact Federico Valinotti (federico.valinotti@berke.com.py) and Jorge Figueredo (jorge.figueredo@berke.com.py)

• Deduction on Investment

2012 – 2016 Period

Standards and criteria applied during the Fiscal Years 2012 through 2016, included, remain unaltered, therefore, any interpretations published by the SET based on Decree N⁰ 6560/2016 and/or restrictive investments became null. 

Taxpayers who, upon receiving notices in October/2017, have amended their Sworn Statements and paid the tax, may request the relevant Reimbursement of Payment with no obligation to submit any External Tax Audit Report. 

General rule: 

Deductibility of all investments related to taxed activities and/or acts that generate the tax is allowed, according to Art. 10 of Law N⁰ 2421/04 and its amendments. 

Expenses as well as investments are deductible as long as they are necessary to obtain and maintain the source that causes the income, represent a real expense, and are duly supported by documents.

Non-deductible investments are expressly and exhaustively established.

Special Rules:

In the case of capital contributions to companies incorporated in the country, acquisition of stocks or share of companies incorporated in the country, since Fiscal Year 2017, a 50% deduction over said investments is allowed. 

So, it should be considered that:

– When the taxpayer pays a compulsory social security based on the obtained income and investments are assigned to registered shares issued by Publicly Traded Companies or other companies, the amount allocated to the investment will be deductible as such up to 50%, in any of the cases.

– When the taxpayer pays no compulsory social security based on the obtained income and investments are assigned to registered shares issued by Publicly Traded Companies,  the amount allocated to the investment will be fully deductible in this case as an investment up to 15% of the gross income for the settled fiscal year, in case of exceeding said percentage, the remaining portion will be deductible up to 50%.

• Carrying forward and compensation of investments losses 

Allowed deductions, conditions:

– Made with taxable income of any Fiscal Year, and/or

– Covered by loans.

– Generated tax losses may only be carried forward to the following fiscal years if they are the result of deduction of admitted investments, and up to 20% of the Net Income of the following five (5) Fiscal Years.

• Earnings from the sale of company stocks, shares of companies and real estate 

There are no changes regarding this item, incomes from transfer/sale of stocks, shares of companies, real estate, and other similar assets are settled based on imputed income or real income (when the buyer is an IRACIS or IRAGRO taxpayer), whichever is less.

• Dividend Billing

The billing of dividends paid by companies will not be considered or computed to determine if the taxpayer is required to have an External Tax Audit judgement.

Last October 17th, Attorneys of the Firm BKM I BERKEMEYER, Federico Valinotti and Jorge Figueredo Klein, offered a dissertation before the Paraguayan-American Chamber of Commerce (PANCHAM) regarding Decree No. 359/18 “By which the legal provisions regulating the Personal Income Tax (IRP) are specified and unified” issued on Friday, October 5th, 2018, mere days before the beginning of the submissions of tax returns for the settlement of the tax due for the fiscal year 2017.

In this regard, upon being invited by the PANCHAM, and after a brief introduction regarding the history of the Personal Income Tax in Paraguay  offered by the heads of said Chamber, Mr. Roberto Chinan (President) and Dr. Daniel Elicetche,  the aforementioned attorneys explained the process of the negotiations between the business sectors and accountants in representation of the private sector and the current authorities of the National Government, that ended with the signature of Decree No. 359/18 (which regulates the aforementioned tax), and also compared the changes included and the matters that were not affected with regards to the Decree previously in force, No. 6.560/16, which was then rendered invalid by Decree No. 359/18.

It is important to note that the issuance of the aforementioned regulations put an end to nearly two years of discussions and negotiations on the different interpretations of the way to settle the mentioned tax, which included the submission of a Non-Binding Query signed by all business sectors in the country, and several Unconstitutionality Actions. These are procedures in which the aforementioned attorneys have advised the National Chamber of Commerce and Services of Paraguay (CNCSPy) and by extent, the FEPRINCO (Federación de la Producción, la Industria y el Comercio – Federation for the Production, Industry, and Commerce) along with other prominent attorneys and accountants.

The dissertation had a significant attendance of professional accountants and attorneys as well as tax payers affected by the mentioned tax. The dissertation was open to not only members of the Chamber but also the general public, and ended with a Q&A segment which helped to clarify the most concerning aspects of the settlement of the tax as per the new regulation. The importance of the agreement achieved between the parties involved towards the legal certainty of the country was also highlighted.

For further information on the existing changes in Decree No. 359/2018 and the modifications with regards to the previous regime, please reach out to Federico Valinotti (Federico.valinotti@berke.com.py) and Jorge Figueredo (Jorge.figueredo@berke.com.py).

The use of bankruptcy proceedings as punitive sources for insolvent debtors has been left frozen in time. When enacted, Law No. 154/69 regarding Bankruptcy was one of the most modern in Latin America. However, to this date this law is rarely applied and the idea of «punishing» a debtor for reaching insolvency is gradually abandoned. Modern insolvency systems seek to recover the debtor’s business, by reorganizing or restructuring the debts rather than liquidating the assets, as this contributes to the development of the economy and is under the belief that it is preferable to maintain a business or company that once was feasible, despite the financial problems that the business or the company may have encountered on the way.

The truth is that, when facing financial problems in these days, insolvency and bankruptcy provided by Law No. 154/69 are not considered attractive for both debtors and creditors, so we express our total approval to the insolvency reform initiative in Paraguay. In fact, the Bill of Law on Insolvency Resolution was submitted to the Congress, intended to keep those effective provisions of the current law but, at the same time, adding some modern touches to our bankruptcy system through the incorporation of new institutions.

Extrajudicial reorganization agreement, preservation of business through a sale under way, cross-border insolvency and mixed model of receivership are some of the new additions.

Extrajudicial reorganization agreement is a preliminary step before filing for insolvency and allows the debtor in a state of insolvency or with financial problems to agree with an absolute majority of the creditors, namely representing two thirds of the accountable capital, a debt restructuring. The Bill provides for the approval of this agreement before a judge and such approval has the same effects as an approved composition of creditors in insolvency proceedings.

Furthermore, as a novelty, the bankruptcy process incorporates the sale of assets as a unit or the company in working order, which allows a more efficient settlement. In some cases, selling the unit or the company is more practical than liquidating the assets separately. This inclusion demonstrates the trend towards reorganization and recovery of a feasible business even in bankruptcy cases.

In addition, Model Law on Cross-Border Insolvency by the United Nations Commission on International Trade Law is adopted. This section of the project basically seeks to regulate cooperation between the Paraguayan authorities and those of foreign countries, create a mechanism that provides greater legal security to trade and investment, guarantee the protection of the debtor’s assets, optimize their value and protect the interests of creditors and other interested parties. 

Perhaps one of the most expected inclusions is the mixed system of receivers established by the bill. Currently, there are only six receivers in charge of all bankruptcy proceedings in the country. This deficiency also contributes to make the bankruptcy proceedings an unattractive solution for both debtors and creditors. This project is focused in appointing independent professionals with degrees in Laws or Economics, Accounting or Business Administration, as receivers; to that end, a registry or list under responsibility of the Judicial Council and the General Bankruptcy Receivership should be set. This list would be valid for five years. 

The interesting part of this is the procedure established for the selection and appointment of receivers in bankruptcy proceedings. The same will be drawn by lot and the appointed receiver shall not participate in future draws until the list is closed, which ensures a good and balanced distribution of the work for receivers.

Undoubtedly these inclusions will strengthen the system in regard to insolvency cases in the country. Promulgation thereof will contribute for developing the economy and attracting new businesses in the country.

A «Bill of Law on Movable Guarantees» was recently filed before the Congress for consideration, based on the Model Law on Secured Transactions of the United Nations Commission on International Trade Law. The purpose of this Bill is to incorporate into national legislation the possibility of establishing pledges on movable assets to secure the obligations to be entered.

The purpose of the mentioned Bill is the possibility that movable assets can be used as a guarantee on contractual obligations, following in a certain way the real property rights model, regulated and provided under our current laws. If the Bill is approved, movable assets may be given as a guarantee of compliance with any obligation, own or belonging to others, regardless of the form of legal figure used, and would comprise, by way of example, conventional pledges, registered pledges, operations with warrants, sales with retention of title, trust in guarantee on movable assets, financial or commercial leasing, factoring operations and other similar operations.

Regarding the constitution of guarantees on movable assets, they would be implemented through a written guarantee agreement, provided that the secured debtor has rights over the asset to be encumbered or powers to encumber it, and must indicate (a) secured creditor and secured debtor; (b) the guaranteed obligation; (c) the encumbered asset and (d) the maximum amount for which the guarantee on a movable assets could be executed. Likewise, also the constitution of guarantees on future movable assets, which will be conditioned on the fact that the secured debtor actually acquires rights over such asset or is empowered to encumber it. It is an extensive Bill, it provides detailed information on the obligations to be guaranteed, movable assets subject to guarantee, amount of guaranteed obligation, enforceability against third-parties, among others.

The virtue of the Bill lays on the fact that, if approved, it would expand the range of available alternatives for assets that could be used to guarantee obligations. Several economic sectors will benefit from the possibility of using movable assets as a credit guarantee, for instance, to generate new capital, thus increasing their productivity, competitiveness and growth. We see that this bill, if passed and enacted, will specially contribute with MIPYMES, which usually do not have real estate assets to guarantee their obligations, therefore they would be able to offer movable assets that make up their capital as guarantee, namely machinery, vehicles, receivables, among others. Considering the benefits that would be brought into the legal system of guarantees in Paraguay if aforementioned Bill is approved, we can assure that its economic impact will be beneficial not only for MIPYMES, in all economic sectors, but for the population in general.