In a bid to enhance its economic competitiveness and attract foreign investments, the Paraguayan government has unveiled a new tax reform package that promises to reshape the business landscape in the country. The reform, which was approved by Congress last week, includes significant reductions in corporate tax rates and a simplification of regulatory processes for both local and international businesses.
The new tax policy reduces the corporate tax rate from 10% to 8% for companies reinvesting profits within the country, a move designed to encourage businesses to expand their operations in Paraguay rather than repatriating profits. Additionally, the reform introduces a streamlined process for obtaining business licenses, which is expected to cut bureaucratic red tape and reduce the time required to start a business by up to 40%.
Minister of Finance Óscar Llamosas emphasized that the reform is part of a broader strategy to position Paraguay as a hub for investment within the Mercosur region. 'We are committed to creating a business-friendly environment that facilitates economic growth and job creation,' Llamosas stated during a press conference in Asunción. 'These changes will not only attract new investments but also support local entrepreneurs in expanding their businesses.'
The reform also includes measures to enhance transparency and compliance, such as the implementation of digital tax filing and payment systems. This initiative aims to reduce compliance costs for businesses and increase tax collection efficiency, potentially boosting government revenues without imposing additional burdens on compliant taxpayers.
Business leaders in Paraguay have largely welcomed the reform, viewing it as a positive step toward improving the country's attractiveness to foreign investors. The Paraguayan Industrial Union (UIP) expressed support for the changes, noting that the reduction in corporate tax rates would likely lead to increased foreign direct investment (FDI) inflows. 'This reform positions Paraguay as a competitive option for investors looking at Latin America,' said Eduardo Felippo, President of UIP.
As Paraguay seeks to diversify its economy and reduce its reliance on agricultural exports, these reforms represent a critical step in fostering a more dynamic business environment. With the Mercosur trade bloc's support, Paraguay aims to leverage its strategic position in South America to attract investments, particularly in sectors such as manufacturing, technology, and renewable energy.