Archivos de la categoría: Berke Report (en)

Recently, Decree No. 3988/2020 was issued to regulate Law No. 6480/2020 which created Simplified Joint Stock Companies (EAS). Said Decree establishes the process for opening EAS, registration and recordal procedures, and determining issues such as subscription and integration of capital stock.

The incorporation of this new legal figure in our legislation constitutes an additional option for investments in the country. The innovative aspects of this new tool include the possibility of having a single partner, short time for the establishment of the company, and a broad corporate purpose since it allows the creation of EAS to be engaged in any legal activity.

In this sense, we believe it is pertinent to mention that the procedure for opening an EAS can be carried out entirely via the web, through the SUACE portal and by filling out a single registration form. A pro forma bylaw can be used, or different bylaws, which must be approved. In both cases, speed in the opening process is guaranteed; setting a period of 3 business days in case the pro forma bylaws are used.

Additionally, notice on the approval of the file, and further start of the EAS, will be made via email to the user.

It is important to mention that, for the process of opening, closing, dissolving, liquidating and transforming an EAS, as well as any other modification that affects its structure, an electronic signature or digital signature may be used.

Regarding the limitations, it is important to bear in mind that the shares and other securities issued by the EAS may not be registered or traded at the Stocks and Products Exchange of Asuncion or at any other Stock Exchange entity.

Finally, we mention that Resolutions of the Ministry of Industry and Commerce and the Ministry of Finance that will establish the internal mechanisms to process the first EAS opening files are pending.

It will be a pleasure for the BKM team to assist you through the required legal advice.

For further information, please contact:

Carla Sosa: carla.sosa@berke.com.py

Leyla Apud: leyla.apud@berke.com.py

The Executive Branch, through Decree No. 3827/2020 dated 07/15/2020, exceptionally suspended the application of pecuniary sanctions and non- sanctioning measures for failing to meet the term established to exchange shares.

These regulations suspend the application of fines (pecuniary sanctions) and non-sanctioning measures established in Law 6399/2019, until 09/14/2020, taking into account the extraordinary conditions caused by the COVID-19 pandemic. Therefore, all those companies that carry out the exchange of shares as of 09/15/2020, will be subject to sanctions.

Likewise, obligation to suspend the economic rights of holders that do not exchange their bearer shares as of 09/15/2020 is established for Public Limited Companies, until they are actually exchanged fulfilling all formalities.

Finally, regarding meetings of shareholders, after 09/14/2020 meetings may be held only with registered shareholders.

For more information contact us at:

• mauro.mascareno@berke.com.py
• bruno.lafarja@berke.com.py

BKM|BERKEMEYER

Decree N° 3881/20 was published on 07/28/2020; tax measures taken by the Tax Administration (SET) as a result of the health emergency status in the country caused by the COVID-19 pandemic are expanded.

In fact, the provisions establish a transitory regime related to Value Added Tax (VAT) applicable to services involving hotel accommodations, restaurants, catering for events in the local market, sale of tourist packages destined for Paraguay, as well as the leasing of real estate for these economic activities

Specifically, the VAT taxpayer engaged in the aforementioned activities shall calculate the tax based on 50% of the net accrued price, and then apply the 10% rate. In the sales receipt, the respective percentages must be entered in the «exempt» or «taxed» columns.

This regime benefits taxpayers registered in the RUC under the following activities:

• 56101 Restaurants and Grill Restaurants
• 56102 Takeaway restaurants
• 56210 Suppliers for Gatherings
• 55101 Hotel accommodation activities
• 79110 Travel agency activities
• 79120 Tour operators activities

Additionally, this benefit is applicable to those taxpayers who rent and/or allow the use of real estate to those who are engaged in the activities described above.

This regime will be in effect from 08/01/2020 to 06/30/2021.

For any information you consider necessary, please contact us.

BKM Berkemeyer

On July 29, the Itaú group (the largest bank in the southern hemisphere, operating in 19 countries throughout the Americas, Asia, Middle East and Europe), through two Brazilian subsidiaries, signed a Stock Purchase Agreement to acquire 100% of the shares of Verbank Securities Casa de Bolsa SA

The amount of the transaction is confidential.

With this acquisition, the Itaú group lands on the Paraguayan stock market, which will mean a great stimulus for this market that has shown a significant growth.

The BKM | Berkemeyer team, led by Manuel Arias, specialist in charge of the Banking, Financial and Capital Markets Law area, and associates Paola Sapienza, Cecilia Vera and Verónica Recalde, acted as legal advisers to the Itaú group in this transaction.

Through Decision DNCP 2859/2020, the National Directorate of Public Procurement has released the third version of the Standard Specifications and Letters of Invitation, within the framework of Law 2051/03 application, to be used by State Offices and Entities, Public Limited Companies with Majority Participation of the State and Municipalities. The same is in force as from July 15, 2020, and applicable to contracting procedures carried out by conventional means or Electronic Auction.

Art. 3 of said provision establishes that all bidders must adjust their bidding processes and purchases in a mandatory manner to the guidelines governing the standard documents, through their respective Contracting Operational Units and Project Executing Units.

There are 12 new standard documents that entail an organized structure for the purpose of expediting public purchases for Bidding parties, bearing in mind the new specifications and the improved version of the existing ones. Such documents are the following:

a) Specifications for School Breakfast – Snacks Program *new

b) Specifications for School Lunch – Dinner Program (Catering) *new

c) Specifications for School Lunch – Dinner Program (Made) *new

d) Specifications for the Acquisition of Supplies for School Lunch – Dinner Program *new

e) Specifications of Goods and Services *improved version

f) Letter of Invitation for Goods and Services *improved version

g) Specifications for Security and Surveillance *improved version

h) Specifications for Full Cleaning *improved version

i) Specifications for Insurance on Properties *improved version

j) Letter of Invitation for Insurance on Properties *improved version

k) Specifications of Works *improved version

l) Specifications of Works for Municipalities *improved version

They are published in the Public Procurement Information System (SICP) in the “Legal Framework – Standard Document” section.

Finally, we announce that the DNCP has also published an explanatory document in order to make known the procurement or public purchase system funded by the Inter-American Development Bank (IDB), taking into account that although these bidding processes are governed by their own Procurement Policies, they are announced and published at every stage on the DNCP portal, as said public procurement portal is the only system that provides a database with full information on the parties involved in bidding processes. It is important to highlight the fact that in Paraguay there are, and there were in the past, a number of infrastructure projects with financing from multilaterals such as the IDB, CAF, World Bank, Fonplata, European Investment Bank, among others. This modality is usually convenient for the public sector, given the excellent financial conditions in which Paraguay has been in debt for a few years now. But for the private sector as well this type of project with assured financing to the contracting public sector allows to substantially reduce the risk of potential delays in payments or multi-year budgeting to face the progress of the work during the project construction term. For this reason, they tend to attract a greater number of local and foreign bidders.

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Martín Carlevaro, a specialist in charge of the infrastructure area and APPs of our study, takes a view of the possibilities for large investments in various sectors through different hiring mechanisms.

To read the full articles:

• Ventajas de la Participación Público – Privada (PPP) en Latinoamérica
• Conozca las ventajas y desafíos de la Alianza Público Privada (APP) en Paraguay

On September 17, 2020, the Tax Administration (“SET”) published, for the first time, General Resolution No. 65/20, which sets out the procedure and requirements for obtaining the tax residence certificate («TRC») for the application of agreements in order to avoid double taxation («DTA»).

Until recently, Paraguay had only two broad DTAs following a bit of the OECD and UN models (with Chile and the Republic of China – Taiwan), and three agreements to avoid double taxation regarding certain types of incomes (arising mainly from charges such as freight). However, between 2018 and 2019, three more DTAs were approved (with Uruguay, the United Arab Emirates and Qatar) which entered into force not long ago.

This shows the slow but important progress that we have in our network of international treaties, which seek not only to encourage foreign investment and assign each other’s tax sovereignty, but also to exchange information between the contracting States.

Bearing the above in mind, the SET issued RG No. 65/20 to bring transparency and legal security to the tax system, since a general provision that generates certainty about which document could or should be used as CRT for the application of the two broad DTAs did not exist before.

The resolution establishes the application requirements (having a Tax ID (RUC), being in good standing with tax obligations and a copy of the taxpayer or the representative’s identity card) which during the health emergency must be done via email, and then in person at the office until the «Marangatu» system includes such function.

The Tax Administration should analyze the application and, within ten business days following the filing date, release the acceptance or rejection and communicate such decision through the “Marandu” email box and at the email address stated in the application. The awarded certificate will be valid for one year.

An outstanding issue, still to be defined how would be applied, is the provision about applications for TRC involving natural persons, since in these cases the “Migration Movement Certificate” issued by the General Directorate of Migration is required, for the period of validity of said certificate.

In fact, in the domestic tax law field, a natural person is considered a tax resident since 2020 provided that the immigration requirements are met (which basically consist on holding an identity card and entering in the country at least one once every three years), an important and applauded fact, since before the clarification of the regulatory decree of the Non-Resident Income Tax (“INR”), taxpayers were somewhat uneasy in this regard (especially regarding taxes on dividends allocation).

However, the DTAs normally establish as the first rule to define a resident of certain State those who, by virtue of the legislation of that State, are subject to tax in that State due to their domicile, residence, place of incorporation, registered address, or other criteria of a similar nature.

When, by virtue of the preceding provision, a person is a resident in both countries, then a series of tie-breaking rules apply, which is ultimately decided by the person’s nationality. And if the subject has both, then it is defined by agreement of the States parties.

Therefore, we will have to wait and see how the issuance of TRC to natural persons is applied in practice.

Finally, the resolution also establishes minimum requirements that a TRC issued by another State must meet and, if written in a language other than Spanish, it must be translated by a certified translator, and kept attached to the TRC during the term set as statute of limitations.

For more information, contact mauro.mascareno@berke.com.py.

On September 23, through oral and public trial proceedings, a sentence of 2 years and 6 months of imprisonment was imposed to the owner of a Distribution point for the criminal act of counterfeiting OMO products as Perpetrator.

Federico Huttemann, Jorge Kronawetter, Enrique Guerrero, Enrique Kronawetter and Martín Romero, Attorneys at Law, representing UNILEVER DE PARAGUAY S.A. promoted the investigation, trial and conviction of the person responsible for the crime.

It should be noted that this resolution constitutes an extremely important and unprecedented fact in the Criminal Justice of our country, since investigations of this type of criminal acts usually end through agreements on remedies or abbreviated trials.

The convicted person was declared perpetrator of the criminal act of infringing trademark law and judged for the same, therefore, from that moment his criminal record will reflect said conviction.

In this case, our action not only achieved the application of a prison sentence of two years and six months to the person responsible, but also the obligation to publish the sentence in a widely circulated newspaper, a provision that contributed to communicating consumers in general about the fight against piracy carried out by our client.

On Saturday, November 7th, the Tax Administration published General Resolution No. 70/2020 in order to set regulations for certain aspects of Taxes on Dividends and Profits (IDU), specifically the obligation to file Informative Statements (DJI).

The Tax Administration «construes» Law No. 6380/2019 and defines the scope according to their criteria, addressing issues such as: i) filing of DJI by the «EDGUR» within the sixth month following the closing of the fiscal year, ii) information required to be provided to SET (date of meeting or the like, reported fiscal year, total amount of profits, amount to be distributed, etc.).

We emphasize on the importance of clarity when drafting the minutes regarding meetings of shareholders or stakeholders, as these documents must be attached to the DJI, and ambiguous or unclear drafting could give rise to IDU’s claims.

For more information, please contact:

federico.valinotti@berke.com.py

carlos.vargas@berke.com.py

mauro.mascareno@berke.com.py

BKM | BERKEMEYER

Frigorífico Concepción from Paraguay issued bonds in NY under Rule 144A / Regulation S for a value of USD 40 million. The Bolivian subsidiary of said issuer established guarantees on the debt, in addition to a number of properties in Paraguay and receivables from activities in Bolivia and Paraguay that were set as guarantees on behalf of the investors. To this end, a guarantee trust was created in Paraguay with Finexpar as trustee and Wilmington Trust acting as beneficiary. Wilmington Trust was also the Trustee in the Indenture under New York law.

The bonds expire in 2025 and accrue an interest rate of 11%. Oppenheimer acted as underwriter for the operation

Although issuances in international capital markets are not common for companies incorporated in Paraguay, this is the second debt offering from Frigorífico Concepción this year, being a “retap” of the USD 100 million issuance in January 2020.

With the proceeds from the last issuance, Frigorífico Concepción aims to increase production at its meat production facilities in Paraguay, as well as cancelling existing debts and funding the expansion of the meat production facilities in Bolivia.

Frigorífico Concepción ranks among the top five exporters of meat products in Latin America. Its facilities can accommodate up to 40,000 head of cattle. The Concepción Group exports meat products to more than 30 countries through eight subsidiaries that operate in the processing industry.

Wilmington Trust Advisor

BKM | Berkemeyer

ugo Berkemeyer and Martín Carlevaro, Partners, and Milena Sljivich, Associat, in Asunción