Law on Factoring, Exchange Invoice and Electronic System of Guaranteed Operations

Law No. 6.542/2020 was recently enacted to regulate Factoring, Exchange Invoice and Electronic System of Guaranteed Operations (SEOG). Said Law will be effective on December 17, 2020. Regulation and definition of certain topics by the Central Bank of Paraguay and the Ministry of Finance are pending, as identified below.

This newsletter addresses each of the topics that form the purpose of the law, namely: (1) factoring; (2) exchange invoice and (3) SEOG.

1. Factoring

  • What is Factoring?

Law defines factoring as a legal transaction in which a person (the assignor) transfers totally or partially, for sale or administration, to a third party (factor or assignee), the receivables arising from commercial activities or provision of services in exchange of a valuable consideration. This valuable consideration may be, for instance, a proportional discount on the sums advanced by the factor, a commission or a percentage calculated on the amount of the assigned receivables.

This newsletter addresses each of the topics that form the purpose of the law, namely: (1) factoring; (2) exchange invoice and (3) SEOG.

  • Operations

In a factoring contract, the factor may:

a) Grant funds in advance on account of the receivables, object of the assignment, to the assignor.

b) Be assigned with a credit supported by an obligation to pay certain amount within a specified period, with or without discount.

c) Manage a portfolio of receivables.

d) Send a notice to the debtor of the receivables, object of the contract, to inform about the assignment or discount of the receivables.

e) Collect the assigned receivables, in his own name, or in the name of the assignor.

f) Protect or manage the protection of the assignor against default of the debtor.

g) Carry out operations with the receivables, object of the factoring contract.

h) Provide the assignor with services additional to the provision of liquid resources, in exchange for a global valuable consideration or to be agreed for each additional service. These services may consist of commercial research and information, accounting services, market research, comprehensive advice and others of a similar nature.

2. Exchange Invoice

  • Concept

Law introduces the exchange invoice as a title payable to order. This title will be used for selling products or services for a specified term (under credit-sales modality) which may later be the subject of a factoring operation.

The interesting and innovative part is the fact that Law delegates the regulation of electronic exchange invoices as a credit title to the Ministry of Finance, which will further facilitate business flow.

  • Elements or Requirements

Exchange invoice must meet the following:

a) The name “exchange invoice” must be inserted in the heading text

b) Place and date of issuance.

c) Due date of the payment obligation expressed as a fixed day.

d) Description of the charges.

e) Amount due, expressed in numbers and letters, currency and breakdown into gross sales or services amount, applicable VAT and clearly indicating the total net amount payable.

f) Name or company name, and Taxpayer ID (RUC) of Identity Card Number of the issuer.

g) Name or company name, and Taxpayer ID (RUC) of Identity Card Number of the debtor or person in whose name it is issued

h) Debtor’s domicile and place of payment.

The regulatory decree may establish other additional requirements to those mentioned above.

  • Issuance, copy and acceptance

In order to get the acceptance of the debtor, the issuer of an exchange invoice must present the original invoice. Acceptance must appear on the invoice by means of the word “I accept” and the signature of the debtor, if a natural person, or its representative, if a legal person.

Once the exchange invoice has been accepted by the debtor, this must return it to the issuer and keep a copy.

In case the issuer delivers the exchange invoice to the debtor and this does not express the acceptance or rejection in the following 10 days, then the invoice will be considered as accepted and the issuer may, at the expiration date stated therein, bring enforcement proceedings against the debtor. In such case, the receipt of the invoice signed by the debtor will be considered an enforceable document.

  • Endorsement

Once the exchange invoice has been accepted, the original invoice may be assigned by means of an endorsement to the order, with express identification of the endorsee, clarification of signature, ID number, if a natural person, or RUC, if a legal person.

The Ministry of Finance must define and regulate the form of registration and endorsement of electronic invoices.

  • Enforceability

In order to make an exchange invoice enforceable, debtor’s signature must be recognized before courts or certified by a notary public


  • Creation

Law creates the SEOG to operate as an electronic database in which forms will be registered in order to report on ordinary credit assignments not contained in receivables and made under a factoring contract.

It would work as a public registry for declarative rather than representative purposes

  • SEOG Administrator

The Central Bank of Paraguay will oversee the administration of the SEOG and the organization of the database contained by the same.

To this end, the Central Bank of Paraguay must approve a regulation with all necessary provisions for the effective operation of the SEOG

4. Conclusion

This law arrives on such a very suitable moment in which many companies, especially MSMEs, are seriously affected in their finances by the health crisis caused by the COVID-19 pandemic. Its mission is to facilitate liquidity, boost the economy and contribute to financial inclusion.

For more information, do not hesitate to contact:

Manuel Arias:

Federico Valinotti:

Paola Sapienza: