Paraguay tax: Paraguay Tax developments in 2009

A number of changes were made to Paraguay's tax law during 2009, some of which implement regulations relating to the tax reform begun in 2004.

Perhaps the most important tax change of 2009 was the suspension of the individual income tax, which was slated to have been introduced at the beginning of the year. However, mid-year the Parliament decided to delay introduction of the tax until 1 January 2010. Once in effect, individual income tax will be levied at rates of 8% and 10% on Paraguay-source income derived by individuals. Taxable income will be the difference between gross income and expenses at year end. The tax will need to be paid at the time the annual tax return is submitted.

No major changes were made to the corporate income tax rules during 2009, although there were some minor changes to the rules on the deductibility of expenses.

The rules relating to the audit process have been clarified significantly, with a distinction now made between two types of audit: a complete tax audit and a partial tax audit. A complete audit, which generally applies to large taxpayers, involves an examination of the taxpayer's financial statements and its tax obligations. The fiscal periods under examination may be extended beyond the normal five-year statute of limitations if issues are identified during the course of the audit. Partial tax audits focus on specific aspects of taxpayer liabilities and focus on a specific tax or compliance with formal obligations.

Beginning in 2009, taxpayers whose income in fiscal year 2008 exceeded PYG 6 billion (approximately USD 1,225,000) are required to submit financial statements accompanied by the opinion of an external auditor. The auditor opinion must include a special section regarding the taxpayer's compliance with its tax obligations.

New "tax certificate" rules have been introduced. Tax certificates are issued by the tax authorities and are required to carry out certain transactions (e.g. transactions with government entities, the purchase or sale of a home, etc.). Banks and other financial institutions are allowed to obtain a tax certificate on behalf of taxpayers that are granted loans from the institution. Two kinds of tax certificates are available: a "tax accomplishment certificate" and a "non-taxpayer certificate." A tax accomplishment certificate proves that the holder has fulfilled its tax liabilities, while a non-taxpayer certificate provides that the holder does not have any tax obligations.