Recently, the SET issued General Resolution No. 62/20 (the “RG”) through which a number of provisions related to IDU, INR and VAT were clarified.
The RG clarifies and confirms the decision about the reduced IDU rate (5% for residents and 10% for non-residents) being in force until December 31, 2020 and applied to profits and results generated for the fiscal years ending on 12/31/19, 04/30/20 and 06/30/20. Indeed, although this was clear, some professionals understood that this was not the case
As for the INR, it is clarified that any service provided from abroad that serves the activity carried out by the IRE taxpayer and allows the use or exploitation of the service in Paraguay, will be taxed by the INR, and it is therefore confirmed that when the service is used or fully exploited abroad, it is not reached by the INR. The first should be deeply analyzed since there could be certain services that by law are not covered by the INR, but through this resolution (a lower level rule) they could be taxed by the same.
Likewise, it is clarified what is the taxable base of INR applicable to determinate freight and insurance in international sales contracts, in which these concepts are not expressly determined.
Therefore, the value of freight is presumed as 10% of the operation amount, over which the presumed profit of 30% is affected for the purposes of the INR, and 15% rate of this tax should be applied, obtaining an effective percentage of 0.45% of the total value of the invoice.
| Total amount | 100,000 | |
| Freight | 10% | 10,000 |
| Presumed profit | 30% | 3,000 |
| INR rate | 15% | 450 |
| Effective percentage | 0.45% |
The price of insurance is presumed to be 10% of the value of freight, over which the presumed profit of 30% is affected for the purposes of the INR, and 15% rate of this tax should be applied, obtaining an effective percentage of 0.045% of the total value of the invoice
| Freight | 10,000 | |
| Insurance | 10% | 1,000 |
| Presumed profit | 30% | 300 |
| INR rate | 15% | 45 |
| Effective percentage | 0.045% |
The tax base of VAT on services provided free of charge is added through this resolution, taking into account the price of the service in the internal market, which is defined as the average price in the last 6 months assigned by the taxpayer to a similar service. At this point, it must be highlighted that this element was not included in Law No. 6380/19 and, considering the constitutional provision that taxes and taxable matters can only be created by law, could be declared unconstitutional.
Definition and scope of digital services in VAT are also clarified and confirmed, including those of computer assistance, software development and maintenance, provided that they are rendered exclusively via the internet
Another important piece of news is the clarification about the VAT application to agricultural sharecropping and capitalization contracts, which lead us back to the system used in Iragro (distribution of fruits is not taxed, VAT is only applied when selling the products).
For further clarification, our specialists may be contacted at the following email addresses: mauro.mascareno@berke.com.py, federico.valinotti@berke.com.py and carlos.vargas@berke.com.py.
BKM Berkemeyer
