Paraguay

Transfer Pricing Regulations in Paraguay

Law No. 6380 on the Modernization and Simplification of the National Tax System (the “Law”), published in September 2019, established the Personal Income Tax (IRP) and the Corporate Income Tax (IRE). With regard to the latter, Chapter III incorporates the Special Rules for Valuing Transactions involving related parties, which define the arm’s-length principle, methods, comparability, the definition of related parties, and technical analysis.

Related-Party Rules in Paraguay

Article 37 of the Law states that two or more persons (legal entities or individuals) are considered related parties when one person or group of persons participates directly or indirectly in the management, control, or capital of the other.

• A party shall be considered a related party by virtue of capital for the purposes of this rule when it holds, directly or indirectly, more than 50% of the share capital;
• “Person” includes: individuals and legal entities, permanent establishments, and domestic or foreign trusts; and
• Residents located in low- or no-tax jurisdictions, including free trade zones and maquiladora companies, shall be considered related parties of a resident of Paraguay.

Formal Obligations: Informative Affidavits

Technical Transfer Pricing Study – ETPT

Taxpayers required to prepare the Technical Transfer Pricing Study are those whose gross revenue exceeded G. 10,000,000,000 (ten billion guaraníes) in the immediately preceding fiscal year.

A Technical Transfer Pricing Study (ETPT) must be filed with the SET; it must consist of a detailed analysis of transactions subject to the transfer pricing regime and must include a description of the taxpayer and the multinational group to which it belongs, details of transactions with or between related parties, and an economic analysis, among other requirements set forth in the regulations.

In the event that the taxpayer exports goods subject to the special method for certain commodities as provided for in paragraph 7 of Article 38 of the Law (the “Paragraph 7”), the information specifically related to such transactions shall not form part of the ETPT, as this information must be reported via a special affidavit.

However, the taxpayer must indicate in the ETPT the amount corresponding to such exports as part of the total transactions carried out with its affiliated or related parties, along with the nature of the relationship.

The Technical Study must be submitted in PDF format, and the working papers used to perform the analyses must be submitted in Excel, including the formulas applied to allow for verification of the calculations or relationships used or applied.

Informative Affidavit DJI-No. 7

Through the DJI-Num 7, taxpayers who engage in the export of soybeans; soybean derivatives (oils, meals, pellets, and expellers); corn; rice; and wheat covered by Item 7 must report the exports of these goods carried out each month.

Information must be provided on the date of shipment, quantity exported, reference price, and other details.

Deadline for Filing Annual Affidavits.

The ETPT must be filed annually based on the IRE taxpayer’s fiscal year-end.

For the 2022 fiscal year, on an exceptional basis, IRE taxpayers with fiscal year-ends on April 30, 2021, June 30, 2021, and December 31, 2021, may file the ETPT by October 31, 2022.

Starting with the 2023 fiscal year, the ETPT for the previous fiscal year must be filed in accordance with the following:

Penalties for Noncompliance

The law does not specify a specific fine for failing to prepare a transfer pricing study; however, general fines for failure to file documentation would apply.