New Criteria for Tax Havens

July 14, 2022

Criteria to consider a low or non-tax jurisdiction in Paraguay have been amended through Decree N°7402/2022, published on July 11, 2022.

On July 11, 2022, the Central Government published Decree No. 7402/2022, which removes subparagraph a) of Article 5 of Decree N°4644/2020. This subparagraph established one of the criteria to consider a country, territory, jurisdiction, domain, or associated state as low or non-tax if it appeared on the list of international bodies, such as the OECD, the European Union, or the “Tax Justice Network,” among others, or if it had not satisfactorily complied with the peer review carried out by the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes.

1. New Criterion

In this regard, the Executive Power has established a new criterion to consider a jurisdiction as low or non-tax, which must meet two requirements:

  • Subject income derived from activities, goods, or rights economically used in the jurisdiction to effective taxation or an income tax rate lower than the one applied in Paraguay in similar transactions.
  • Do not have a bilateral or multilateral agreement in force allowing the effective exchange of information between Paraguay and such jurisdiction.

2. Changes

The new subparagraph b) mentions that the bilateral/multilateral agreement must allow the effective exchange of information with Paraguay, compared to the previous subparagraph that indicated that the agreement should allow the exchange of information without including our country.

3. Bilateral Agreements in Force

Paraguay has five bilateral agreements in force to avoid double taxation and the Multilateral Agreement on Mutual Administrative Assistance in Tax Matters, which allows the exchange of information with over 140 countries.

4. Other Modifications

In addition, the Decree established that the Tax Administration may prepare a list of jurisdictions to be directly considered a tax haven.

Hence, the criteria to determine whether it is a low or no tax jurisdiction will be the same as whether the exemption from the Tax on Dividends and Profits can apply or not to investment projects to be carried out.


Source: 14/07/22