Although Paraguay may not be one of the best-known destinations in Latin America to invest or do business, the country has an open economy with a low tax regime, and has introduced reforms to its immigration system that reduces the time it takes to obtain residency. As such, starting a business in Paraguay is not only straightforward, but a great opportunity for business executives looking to expand their commercial presence in an unsaturated market.
If you are seeking to hire staff in Paraguay on a short-term or limited-scale basis, or would simply prefer to avoid going through company formation, you may wish to consider working with an employer of record (EOR) in Paraguay, who can hire staff on your behalf, while you retain full control over their timetables and workload.
Known as “the Heart of South America” due to its geographical location, Paraguay has experienced exponential economic growth since the turn of the century, with gross domestic product (GDP) increasing more than five-fold between 2002 and 2019, when it reached $38.14 billion (all figures in USD). That saw a corresponding rise in prosperity, as measured by its gross national income (GNI), which reached $5,520 per capita at the end of that period, placing Paraguay as an upper-middle income nation by international standards.
Paraguay’s rapid growth has been met with a concomitant increase in interest among international investors, with foreign direct investment (FDI) inflows growing from $90.4 million in 2002 to $596.2 million in 2019. Despite being landlocked, the country engages in significant trade with neighbors Brazil and Argentina, respectively the largest and third-largest economies in the region by GDP.
Along with those two countries and Uruguay, the country is also a founding member of the Southern Common Market (Mercosur), an economic integration and free trade initiative that recently celebrated its 30th anniversary, and which Bolivia is awaiting formal acceptance to. Through Mercosur, Paraguay is a party to a range of free trade agreements (FTAs), while it is currently negotiating its first bilateral FTA with Chile.
The country also operates a number of free trade zones (FTZs) providing significant incentives to investors interested in starting a business in Paraguay, with those zones mainly concentrated around Ciudad del Este, near the tri-border area with Argentina and Brazil.
While Paraguay has long implemented a low-tax regime to encourage business and investment, in an interview published in September 2020, then-Finance Minister Benigno López announced that the country would be further cutting taxes, as well as streamlining the process for investors to receive visas and residency. During the interview, López highlighted the fact that Paraguay has enjoyed 4.5% growth per year on average over the 15 years prior to the COVID-19 pandemic, while inflation has been kept below 3%.
Starting a business in Paraguay: some considerations
Some considerations to take into account when starting a business in Paraguay include:
Choose your legal representative: If you are not going to be in the country permanently, you will need to appoint a legal representative in Paraguay. This can be anyone of legal age who isn’t otherwise barred from such a role, however, you will ideally want to appoint someone with a good understanding of the local corporate legal framework.
Entity type: Which type of entity best suits your needs will be based on how you want to structure your enterprise, how much liability you wish to accept, and how much capital you intend to invest. The two most common types of entities chosen by foreign investors are the limited liability company (Sociedad de Responsibilad Limitada — SRL) and the stock company (Sociedad Anónima — S.A), while you may also wish to consider forming a branch or registering a subsidiary.
Economic activity: To remain in full compliance with local regulations, you will need to properly identify your economic activity and all sources of revenue. Note that it is strongly recommended to engage with a trusted corporate lawyer, able to advise you on how to properly define your operations in all official documentation.
How to form a company in Paraguay: 4 key steps
Starting a business in Paraguay involves four key steps, as explained below:
Step 1: Draft the company’s bylaws
Draft your company’s bylaws, where the subscribed capital of the company will be defined, as well as the fiscal address and the legal representative. Note that this process can take up to 12 weeks.
Step 2: Obtain a VAT ID and certificate from the Chamber of Commerce
Depending on the type of entity you choose, you may need to declare the final beneficiaries, while if you are hiring local employees, you will need to register at the Labour Ministry.
Step 3: Open a corporate bank account to start your business in Paraguay
Based on the type of business you are involved in or your geographic base, your legal representative in Paraguay can advise you on the best provider to choose for your corporate bank account.
Step 4: Make an initial investment
With your company registered and the bank account open, you can now make your initial investment to complete the process of starting a business in Paraguay.
Biz Latin Hub can help with company formation in Paraguay
At Biz Latin Hub, our multilingual team of company formation experts has years of experience supporting foreign investors starting a business in Paraguay. With our complete portfolio of back-office services, including legal, accounting, tax advisory, and recruitment, we can be your single point of contact for all of your business needs in Paraguay, or any of the other 15 countries across Latin America and the Caribbean where we operate.
Reach out to us now for personalized assistance or a free quote.
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