General Practice Law at Paraguay
Paraguay operates under a civil law system, heavily influenced by the legal traditions of Argentina and France. The legal framework is primarily based on codified laws rather than judicial precedent, although jurisprudence (court decisions) plays a significant role in guiding the application of these laws.
Here's an overview of key areas in general practice law in Paraguay:
1. Corporate and Commercial Law:
Company Formation: Foreign investors commonly establish various business entities in Paraguay. The most common forms include:
Sociedad de Responsabilidad Limitada (SRL - Limited Liability Company): Requires at least two shareholders and one director who must be resident in Paraguay. There are no minimum or maximum paid-up capital requirements.
Sociedad Anónima (SA - Public Limited Company): Preferred by foreign investors for larger enterprises. Requires at least two shareholders and one director who must be resident in Paraguay, and a fully subscribed capital stock. No minimum share capital requirements.
Branch Office: Foreign companies can establish branch offices to conduct regular business. Requires at least one resident director in Paraguay and a minimum paid-up capital of around US$25,000. 100% foreign ownership is allowed.
Representative Office: Similar to a branch office, also allowing 100% foreign ownership and requiring a resident director and minimum paid-up capital.
Foreign Investment: Paraguay actively seeks foreign investment and its laws generally provide equal treatment to foreign and domestic investors (Law 117/91 on Investments). There are investment incentives (Law 60/90) that offer tax benefits for certain projects, including exemptions on customs duties for imported capital goods and tax stability (fixed income tax rates for up to 20 years).
Contracts and Agreements: Lawyers assist with drafting, reviewing, and enforcing various commercial contracts, including sales, distribution, franchising, and service agreements.
Regulatory Compliance: Businesses need to adhere to various regulations and obtain necessary permits and licenses, particularly in regulated industries like telecommunications, banking, energy, and those requiring environmental approval.
2. Real Estate Law:
Foreign Ownership: Paraguay has no restrictions on foreign ownership of property, making it an attractive destination for foreign investors. Foreigners can purchase residential, commercial, and rural properties.
Process: The typical process involves:
Finding a property and making an offer.
Signing a purchase agreement (often a preliminary one, "Contrato Privado de Compraventa").
Due diligence, including a title search to ensure a clear title, checking for liens, debts, or encumbrances.
Formalizing the sale through a public deed before a notary public.
Registration of the deed with the Public Registry.
Taxes and Fees:
Transfer Taxes: Apply when transferring property ownership.
Notary Fees: For the presence of a notary public, which is mandatory for property sales.
Registration Fees: For registering the property with relevant authorities.
Annual Property Tax (Impuesto Inmobiliario): A 1% annual tax on the fiscal value of real property, payable to the municipality.
Municipal Real Estate Transfer Tax: A municipal tax on the transaction value when assigning land or real estate (e.g., 0.3% in Asunción, 0.2% elsewhere, plus a judicial fee).
Financing: The mortgage market in Paraguay is not highly developed, and foreign buyers may face limited financing options, often requiring substantial cash reserves.
3. Immigration and Residency Law:
Permanent Residence: Individuals can apply for a permanent residence permit. A common pathway involves making a deposit of an amount equivalent to 35 minimum monthly wages (approximately US$4,500) or setting up a company with a minimum capital, or purchasing agricultural land (minimum 10 hectares).
Investor Residency Programs (SUACE): Investors can obtain residency by proving an investment amount (e.g., approximately US9,150forindividualsorUS27,500 for company investments) and obtaining a certificate from the Vice Ministry of Industry and Commerce.
Citizenship: After three years of permanent residence, individuals may be eligible for Paraguayan citizenship by naturalization. This typically requires demonstrating ties to the country (e.g., real estate or company ownership, continuous fiscal residence), a basic notion of Spanish, and knowledge of the country's history, geography, and politics.
Requirements: Common requirements include a valid passport, criminal record certificates, health certificates, proof of legal entry, an affidavit to abide by laws, and evidence of economic solvency.
Dual Citizenship: Paraguay's constitution allows for multiple nationality through international treaties, with a treaty currently in force with Spain. De facto, renunciation of other nationalities is rarely required, but legal advice is recommended.
4. Tax Law:
Territorial Tax System: Paraguay operates on a territorial tax system, meaning only income generated from sources within Paraguay is subject to Paraguayan taxation. Foreign-source income is generally not taxed, which is a major draw for individuals and businesses.
Corporate Income Tax (IRE): A flat rate of 10% on Paraguayan-source income. Recent reforms have expanded this to include certain types of foreign financial income for Paraguayan corporations.
Personal Income Tax (IRP): Individual residents are subject to tax on local-source income at progressive rates, capped at 10%.
Value Added Tax (IVA): Applies at rates of 5% or 10% to most sales of goods and services, and imports.
Other Taxes:
Excise Tax (ISC): Levied on specific goods (e.g., tobacco, alcoholic beverages, fuel).
Municipal Taxes: Including Municipal Trade Tax (based on company assets) and Construction Tax.
No Wealth, Gift, or Inheritance Taxes: This is a significant advantage for high-net-worth individuals.
Tax Incentives: Various incentives exist to promote investment, particularly through laws like Law 60/90 and Free Trade Zones (Law 523/95), which offer tax exemptions.
5. Intellectual Property Law:
Protection: Paraguay protects various IP rights, including trademarks, patents, copyrights, industrial designs, and utility models. The Dirección Nacional de Propiedad Intelectual (DINAPI) oversees IP rights.
Trademarks: Governed by Law 1.294/98, trademarks are valid for ten years and renewable indefinitely. Registration involves filing, examination, publication, and opposition processes.
Copyrights: Paraguay is a member of the Berne Convention. Copyright protection is granted automatically for original creative works.
Recent Developments: Paraguay recently enacted Law No. 7467/2025, which establishes a special IP protection regime for international sporting events, focusing on trademark protection, ambush marketing, and audiovisual rights. This aligns Paraguay with international best practices for large-scale events.
6. Labor Law:
Working Hours: Standard workweek is 48 hours; overtime is compensated at a higher rate.
Minimum Wage: A statutory minimum wage is in place (currently around Gs. 2,289,072 per month, approx. USD 320).
Leave Entitlements: Employees are entitled to paid annual leave (e.g., 12 days), sick leave, maternity leave (e.g., 18 weeks), and public holidays.
Anti-Discrimination: Paraguayan labor law prohibits discrimination in employment based on various protected characteristics.
Termination: Specific rules govern termination of employment, including severance pay and just cause requirements.
7. Litigation and Dispute Resolution:
Judicial System: The judicial system is headed by the Supreme Court of Justice, with various tribunals and courts at lower levels (civil, commercial, labor, criminal, family, child and adolescent courts).
No Trial by Jury: In Paraguay, there is no trial by jury in either civil or criminal cases; facts are decided by a judge.
Evidence Collection: There is an evidentiary stage where parties can collect evidence. Witnesses may be summoned and examined by the parties.
"Amparo" Proceedings: Similar to a writ of mandamus, an "Amparo" action exists to protect constitutional rights that may be infringed during a dispute, either against the government or a private party.
Alternative Dispute Resolution (ADR): Arbitration and mediation are increasingly used and recognized for commercial disputes, offering an alternative to traditional court litigation. Major law firms in Paraguay have strong dispute resolution practices, particularly in commercial litigation and international arbitration.
Challenges: A known weakness in the Paraguayan judicial system is often the delay in issuing decisions, partly due to courts not always specializing in specific types of cases.
For any legal matters in Paraguay, especially for foreign individuals or businesses, it is highly advisable to engage experienced local legal counsel to navigate the specific nuances of the civil law system and ensure compliance with all relevant regulations.
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