Con la Resolución SS.SG. N° 254/2022 (la “Resolución”), la Superintendencia de Seguros (la “Superintendencia”), aprueba el marco regulatorio del microseguro. Esta Resolución entró en vigencia a partir de su fecha de emisión, 14 de octubre de 2022; sin embargo, las aseguradoras que actualmente se encuentren comercializando con la denominación de microseguro, tendrán un plazo de 180 días para ajustarse a los nuevos requerimientos.
Mediante esta Resolución se define al microseguro como aquel diseñado en beneficio de personas de bajos ingresos, previéndose condiciones simples y coberturas acotadas, cuya prima mensual por riesgo asegurado no exceda de 1 jornal mínimo vigente para actividades diversas no especificadas en la capital. La modalidad de contratación del microseguro puede ser individual o colectiva.
De acuerdo a la Resolución, no podrán ser ofertados ni comercializados productos con la denominación “microseguro” si el plan y la póliza no hubieran sido inscriptos ante la Superintendencia . Los planes de microseguro inscritos a instancia de la Asociación Paraguaya de Compañías de Seguros (APCS) podrán ser aplicados por cualquier aseguradora sin más trámite.
Así también, las aseguradoras deberán presentar a la Superintendencia, al cierre de cada ejercicio, el desempeño del plan, basado en el ratio combinado resultante, considerando como mínimo tres años de experiencia, si los hubiera.
Además, la Resolución establece las condiciones y el contenido para una póliza de microseguro, incluso dispone obligaciones a las aseguradoras como la de publicar videos en su página web, donde se explique las condiciones de cada producto y el procedimiento en torno a ellos.
Otras cuestiones importantes que regula esta Resolución son el contenido mínimo de un contrato de microseguro, la prueba del contrato de microseguro, la entrega de la póliza, la comunicación entre las partes, el pago de las primas, la denuncia del siniestro, el pago de la indemnización y los canales de distribución de las pólizas. Un importante componente de estos puntos es que se reconoce el factor tecnológico para varios de estos puntos. Por ejemplo, se establece que los contratos de microseguro podrán ser celebrados de forma remota o no presencial y que la suscripción de un producto de microseguro se podrá evidenciar mediante la póliza de microseguro suscrita ya sea de manera impresa o digital. Además, permite que las pólizas sean entregadas a los tomadores por medios tecnológicos o convencionales; en tanto que las comunicaciones puede ser también por medios tecnológicos o convencionales.
Finalmente, las aseguradoras deberán informar mensualmente a la Superintendencia sus operaciones de microseguro. La Superintendencia podrá requerir cualquier información adicional que considere para sus labores de supervisión.
Con esta nueva Resolución la Superintendencia busca otorgar mayor facilidad y efectividad al desarrollo del microseguro ya que esta modalidad de seguro está íntimamente ligada a la inclusión financiera.
We congratulate our partners and each of the lawyers that make up the areas ranked for this achievement.
Estamos muy orgullosos de este reconocimiento que destaca la dedicación de nuestro equipo, la calidad del servicio brindado y la confianza de nuestros clientes.
Legal 500 es uno de los principales rankings internacionales que se encarga de analizar firmas de abogados a nivel mundial para sus publicaciones.
On 3rd May 2022, the Executive issued the Decree 7017, which regulates Law 3239/2007 on Water Resources of Paraguay, issued 15 years ago, but with full implementation pending since then.
Decree 7017 entrusts the environmental authority, the Ministry of the Environment and Sustainable Development (“Mades”), with the task of developing and constantly updating the tools provided for in Law 3239 for the sustainable and comprehensive use of water:
(i) The National Water Resources Plan: It will be the main instrument created by Law 3239 to manage the use of water resources in a sustainable way, setting the criteria to evaluate the use and the granting of the relevant permits.
(ii) The National Water Inventory: The Decree provides greater detail on its content, providing that it must include (i) the location of water resources, contamination sources, streams and works for discharge, collection or regulation that were granted environmental licenses, (ii) the classification of water resources and (iii) other data that Mades considers relevant.
(iii) The National Registry of Water Resources: Whoever is in possession of water resources, has rights of use or carries out activities related to water resources must be registered before this registry. Mades has previously implemented this registry by Resolution 2194/2007, which will be updated.
Likewise, Decree 7017 highlights the importance of wetlands and entrusts Mades with planning their management.
As a consequence of Decree 7017, Mades issued resolution 351/2022, which establishes the timeframe to work on the regulatory process, setting different deadlines to put into practice the different measures required to fully implement Law 3239:
(i) Short term – by September 2022: Setting up inter-institutional commissions or working groups to work on the planning of projects and strategies.
(ii) Medium term – October 2022 to May 2023: Among other things, it is intended, to formalize the National Water Inventory database, update infractions and sanctions related to the use of water, and establish different technical criteria and regulations applicable to permissions.
(iii) Long term – June 2023 onwards: Among the most important regulations to be issued are the granting of permits and concessions, the payment of fees for the use and management of water, and a registry of permits and concessions.
This long-awaited regulation assigns Mades with a series of procedures and measures that imply significant changes in terms of the parameters for obtaining permits and concessions for the use of water, including the payment of fees. It is expected that by 2024 Paraguay will have a regulatory framework for water resources that is substantially more complex and detailed than the current regulation.
Although the changes are expected to be gradual, it is important that companies that use or plan to use water resources are vigilant to the regulations that will be issued by Mades and, as far as possible, seek to participate in their preparation.
Authors: Paula Lovera and Rodrigo Fernández.
* First published in Legal Industry Reviews, Paraguay, September 2022
The Board of Directors of the Central Bank of Paraguay (Banco Central del Paraguay) (the "BCP"), through Resolution No. 17 dated October 7, 2022 (the "Resolution"), established special provisions for borrowings for the financing of long-term investment projects. In addition, the Resolution establishes new criteria, requirements, and definitions relevant to this type of financing to be granted by financial institutions in Paraguay (the "Financial Institutions"). The purpose of this new regulation is to encourage and support the financing of projects structured under the project finance modality by the Financial Institutions so that they can play an active role in the funding of this type of projects, especially considering their impact on the country's economy.
It is worth mentioning that one of the most used structures for the financing of sizeable long-term investment projects is the one known as project finance, whose main characteristics are:
The repayment of the loan is mainly based on the project's own capacity to generate the necessary cash flows for such repayment;
Recourse against the borrower is limited;
The existence of special purpose vehicles (SPV) incorporated for the sole purpose of carrying out the project;
The contributions of the sponsor of the project;
The granting of certain limited guarantees;
The execution of certain types of contracts that ensure the sustainability and profitability of the project;
The most important concepts established in the Resolution are as follows:
Definition and establishment of the characteristics that long-term financing must have to be considered as project finance, which consist of:
a. The existence of a borrower company with the sole purpose of developing the specific project (the "Project"), and whose main assets and business are constituted by such Project (the "Borrower"). The latter may be either a commercial company or a legal structure (a trust);
b. The assets and revenues of the Project constitute the principal and sometimes the only security for the financing. Recourse against the Borrower (i) is for amounts limited to the cash flows of the Project, and (ii) for collateral pledged over the assets of the Project;
c. Limitation of Recourse:
Recourse against the sponsors, shareholders or partners is limited to their capital contribution and their economic rights according to their participation in the Borrower;
The scope of the recourse against the Borrower is limited to the amount of the payments received by the Borrower;
Recourse against the Borrower or a member thereof, in general, is limited solely to claims for damages for the breach of any obligation; and,
The lack of authority of the creditor to initiate a proceeding for the liquidation or dissolution of the Borrower, the appointment or management of the appointment of receivers, trustees or officers to oversee or administer the Borrower or any of its assets, except for assets pledged as collateral.
d. The Project must be analyzed and treated from its beginning as a project finance by the Financial Institution; and
e. With respect to foreign financing, the amount financed by the Financial Institution to the Borrower must not exceed 20% of the total resources obtained for the project finance.
Establishment of the requirements that the Financial Institutions must comply with prior to the granting of financing under the project finance modality, which are as follows:
a. Evaluation and determination of the technical, financial, environmental, legal, and technological feasibility of the Project, based on credit risk and cash flows, where the Financial Institution expects, with a high degree of confidence or certainty, that the funds will be invested in the Project, that it will be completed in a reasonable time, within the foreseen deadlines and economic budgets, and that once completed it is capable of producing sufficient resources to repay the loan. Both the Project and its analysis must be duly supported and formally documented;
b. Obtaining additional guarantees during the construction phase of the Project, which will be raised only after completion of the work, verification of the Project's operation and its production capacity as foreseen in the feasibility studies and/or other contractual agreements; and,
c. To have the formal approval of the Board of Directors of the Financial Institution for the granting of this type of financing, on a case-by-case basis.
Limitation on the amount of credits and contingencies that a Financial Institution may grant within the framework of project finance, not exceeding, directly or indirectly, an amount equivalent to 20% of the effective net worth of such institution. This limit may be increased up to 30%, provided that there is sufficient collateral accepted by the Superintendency of Banks (the "SIB") to support the transaction. In turn, the guarantees accepted by the SIB are:
Mortgage Guarantees, attributable up to 70% of their appraised value;
Pledged collateral, imputable up to 50% of the appraised value;
Guarantees, sureties, and other obligations included in the ALADI Agreement on Reciprocal Payments and Credits;
Warrants on different products according to the computable value in accordance with the Rules for Classification of Assets, Credit Risks, Provisions, and Interest Accruals; or
Forestry Assets Security (Derecho Real de Superificie Forestal) up to 80% of its verifiable quotation value.
Not considering as a single risk unit the sponsors, shareholders, or partners of companies that carry out the Projects or the beneficiaries of trusts set up for Projects, which normally must be considered by the Financial Institutions as individuals and/or legal entities directly or indirectly related to such Project.
This is perhaps one of the most relevant points of the Resolution, since it will allow Financial Institutions to evaluate the sponsors, the Borrower or SPV and the Project as a risk unit different and separated from the other activities and businesses of the same economic group, which in turn will allow raising the lending limit established by banking regulations for Financial Institutions.
Finally, the obligation to make available to the Superintendency of Banks, at all times, all documentation that supports and sustains the granting of financing under the project finance.
The Executive Branch enacted and published Law No. 6,984/2022 (the "Immigration Law"), establishing a new immigration regime in Paraguay effective as of October 19, 2022. This new law has special consequences for foreigners who wish to settle in the country (defined as immigrants in the new law) and who carry out remunerated activities in Paraguayan territory. Furthermore, the new law also has significant consequences for Paraguayan companies that contract with them since foreigners do not acquire tax residence in Paraguay until they obtain a permanent residence permit.
The tax residency of individuals in Paraguay is particularly relevant since the enactment of Law No. 6,380/2019 (the "Tax Law") since those who do not have it are subject to a higher tax burden through the tax withholdings (discounts) that Paraguayan individuals or entities are obliged to practice on the payments made to them. In addition, individuals without tax residence in the country should not be able to register as taxpayers before the Taxpayer Registry ("Registro Único del Contribuyente" or "RUC").
According to the Immigration Law, one of the new requirements to obtain the permanent residence permit is that whoever wishes to apply for it, must have previously received the temporary residence permit and exhausted its two-year term. If immigrants do not comply with this, they cannot access the permanent residence permit, which means that Paraguayan companies must withhold taxes from all payments made to them during that time. However, it is essential to mention that the Immigration Law has yet to be regulated, so it is expected that the regulation will clarify many points.
More information:
To analyze the tax impact of the new Immigration Law, it is essential to start with the fact that foreign individuals need a permanent residence permit to acquire tax residency in Paraguay.
New requirement to obtain the permanent residence permit
According to the Immigration Law, there are two categories of admission of foreigners in the country, according to their intention of settling in the country: (a) transitory stay, and (b) resident. The first category applies to foreigners who do not intend to reside in Paraguay (tourists, transit passengers, among others), while the second applies to immigrants.
Within the category of admission as a resident, the new Immigration Law distinguishes four classes: (i) spontaneous or occasional residence; (ii) temporary residence; (iii) precarious residence, which applies to foreigners who are in the process of obtaining temporary residence; and (iv) permanent residence. Only the latter grants tax residency to foreigners, according to Article 2 of the Annex to Decree No. 3,181/2019, through which the Income Tax of Non-Residents ("INR") is regulated.
As of the Immigration Law, it was established that the immigrant could only access the permanent residence permit after first being in Paraguay with temporary residence for the entire term of this type of residence, which is of two years. However, the law needs to be more explicit about the need to comply with the entire period of two years of temporary residence or whether, on the contrary, it is possible to obtain the permanent residence permit by complying with a temporary residence of a shorter duration. In the latter case, it is necessary to clarify the minimum period for the temporary residence to allow applying for the permanent residence permit. It is expected that the regulations of the new Immigration Law will clarify this.
Exceptions to the requirement to comply with the prior temporary residence to access permanent residence
The Immigration Law provides for two situations in which a foreigner may have direct access to a permanent residence permit without the need to have previously complied with the term of temporary residence:
Investors or capitalists with investments in Paraguay who can prove reliably to have made investments in the country, as established by the Immigration Law, its regulations, and other applicable laws.
The following foreign relatives of a repatriated Paraguayan national: spouse, children, and grandchildren (up to 18 years of age). In addition, the spouses of the child of the repatriated Paraguayan national are also eligible for this benefit.
Taxes withheld from non-residents
As long as foreign individuals do not acquire a permanent residence permit (evidenced by the respective card), they are considered non-residents for tax purposes. Therefore, Paraguayan companies that make payments to them or make funds available to them for the rendering of services or sale of goods in Paraguay must withhold INR[1] and Value Added Tax ("VAT")[2]from the payments. In addition, Paraguayan companies that distribute profits, dividends or yields, must withhold the Tax on Dividends and Profits ("IDU”) applying a higher tax rate (15%) than the tax rate that corresponds to residents (8%).
The permanent residence permit is also necessary for the foreign individuals to register as a taxpayer in the RUC and thus liquidate their taxes, according to General Resolution No. 79/2021 issued by the Undersecretariat of State for Taxation (the “Tax Authority” or "SET"). Furthermore, the temporary residence permit cannot be used for registration before the RUC; only the permanent residence permit and the registration with the proof of refugee application serve this purpose.
It should be noted that the Migration Law also affects Paraguayan companies that contract with immigrants without tax residence in Paraguay since, as they are obliged to withhold INR and VAT, they are jointly and severally liable for these taxes. This means that the SET can claim these taxes from Paraguayan companies that do not comply with their obligation to withhold taxes on payments made to foreign individuals without tax residence.
Taxes applicable upon obtaining the permanent residence permit.
The immigrants are considered a resident for tax purposes from the moment they acquire the permanent residence permit in Paraguay, which is proved with the respective card. This implies that the Paraguayan companies that receive their services and pay them in return are no longer obliged to withhold INR or VAT[3] when foreigners acquire a permanent residence permit.
Thus, from the moment foreigners acquires tax residence in Paraguay by obtaining the permanent residence, they are the only ones who are obliged to comply with their tax obligations, so they must register as taxpayers with the SET and comply with their tax obligations on their initiative. Moreover, depending on the characteristics of their activity and the income he obtains from it, they may or may not be obliged to register as a VAT, Personal Income Tax ("IRP"), and/or Corporate Income Tax ("IRE") taxpayers.
[1] The INR establishes a general rate of 15% that is applied on the net income, which is established in accordance with the Tax Law. For the rendering of personal services, the effective INR rate is 10.5% on the amounts paid or made available to the non-resident.
[2] VAT applies a general rate of 10% on the sale of goods and the rendering of services performed independently.
[3] It could happen in cases of personal services that VAT should not be withheld long before obtaining tax residence if the immigrant without permanent residence is registered as a dependent worker before the Social Security Institute. Based on this registration, these services are characterized as provided in a relationship of dependency. Therefore, there is an assumption of non-taxability of VAT on the payments made as remuneration for such dependent work.
Con el fin de seguir apoyando a las empresas paraguayas que buscan generar un triple impacto (social, ambiental y económico) en nuestra sociedad. A través de su departamento especializado Vouga Venture Capital Advisors (Vouga VCA), Vouga Abogados ha firmado en mayo una alianza con Sistema B Paraguay, representante local del Movimiento B, con el objetivo de que las Empresas B nacionales puedan acceder a ciertos servicios (personalizados de acuerdo con sus necesidades) que son ofrecidos por el estudio.
En complemento a esta alianza, Rodolfo G. Vouga, Georg Birbaumer y Cecilia Vera, participaron como invitados de un webinar organizado por Sistema B, para explicar en detalle a los participantes los beneficios y servicios a los que podrán acceder a través de esta unión.
Desde Vouga Abogados estamos orgullosos de poder contribuir al crecimiento y consolidación de la Comunidad de Empresas B en Paraguay.
The Paraguayan Government announces launch of infrastructure project tenders for more than USD 1 billion to be executed under PPP and Law 5074 regimes in 2022. «Alianza Público Privada (APP)» (Ley 5102/13) y «Llave en Mano» (Ley 5074/13).
The National Economic Team (Equipo Económico Nacional or “EEN”) announced its plans to launch 6 projects beginning mid-2022 comprising:
Improvement and duplication of Route PY01 in approximately 108 km (estimated at USD 180 million, to be financed under the PPP law)
Improvement, duplication and operation of Route PY06 in approximately 60 km (estimated at USD 100 million, to be financed under the PPP law)
Light Train (tren de cercanías) connecting the cities of Asuncion and Ypacaraí (estimated at USD 320 million, to be financed under the PPP law)
Paraná-Paraguay Waterway (Hidrovía Paraná-Paraguay) for the opening and dredging of the Paraguay river on sovereign tranche (estimated at USD 110 million, to be financed under the PPP law)
A Ferrysystem for the transport of passengers from the capital to neighboring cities (estimated at USD 83 million, to be financed under the PPP law)
Improvement of the national electricity network (estimated at USD 300 million, to be financed under turnkey law 5074 and with sovereign guarantee according to law 6324/2019).
The projects for the improvement and duplication of Route PY01 (#1) and the improvement of the national electricity network (#6) are at a more advanced phase and tenders are expected to be launched during the first half of 2022. The projects for the improvement, duplication and operation of Route PY06 (#2), the Light Train (#3) and the Paraná-Paraguay Waterway (#4) are expected to be launched during the second half of 2022.
The EEN and Ministry of Finance are still reviewing the Ferry project (#5), and expected tender date will be disclosed at a later date.
Until the end of the year, the Selective Consumption Tax ("ISC" per its Spanish acronym) rates for cell phones and other electronic equipment are reduced by half
Decree No. 8.048
October 21, 2022
Until the end of the year the taxable base of the Value Added Tax ("VAT") for the importation of goods under the Tourism Regime is gradually reduced.
Decree No. 8.154
October 31, 2022
Extends until November 30, 2022, the validity of the special ISC taxable bases for certain oil derived fuels.
General Resolution No. 121
October 06, 2022
The Undersecretariat of State for Taxation ("SET") approved the second version of form No. 516 to determine Personal Income Tax under the category of Income and Capital Gains ("IRP-RGC"), applicable as from fiscal year 2022
General Resolution No. 105
December 17, 2021 (Reminder)
The SET established the schedule of due dates for several groups of taxpayers to compulsorily adhere to the Integrated National Electronic Invoicing System ("SIFEN") - Reminder for Group 3 and following.
More information:
►Decree No. 8,047/2022 - ISC rates for cell phones and certain electronic products are reduced by half until the end of the year.
Through Decree No. 8,047/2022, the Executive Branch reduced by half the ISC rates on certain goods taxed by such tax. The effective date of this reduction is from October 26 to December 31, 2022, according to the publication of the decree in Official Gazette No. 207, dated October 25, 2022.
The goods affected by this ISC reduction are the electronic products indicated below, whose rates are normally 1% but which, during the effectiveness of this modification, are reduced to the following percentages:
Product
Taxable Base
Automatic data-processing machines and units thereof; magnetic or optical readers, copying machines, hectographic machines, mimeographs, address printing machines, electrical machines, apparatus and equipment and parts thereof; sound recorders and reproducers, television reception apparatus, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus; video monitors and video projectors
0,5%
Cellular telephony devices and portable terminals
0,5%
A partir del 01 de enero de 2023, se aplican nuevamente las tasas del 1% del ISC correspondientes a estos productos, establecidas en el Decreto N° 3.109/2022
► Decree No. 8,048/2022 - The VAT taxable base for importing goods under the tourism regime is gradually reduced until the end of the year.
Intending to encourage border trade, the Executive Branch temporarily modified the VAT taxable base applicable to goods under the tourism regime, cited in the annex to Decree No. 1,931/2019.
As the end of 2022 approaches, the VAT taxable base will be reduced monthly by one-third (1/3). Thus, when importing goods under this regime, the following taxable bases will apply:
Period
Taxable Base
10% VAT effective tax rate
From November 1 to 30, 2022
10%
1%
From December 1 to 31, 2022
5%
0,5%
Subsequently, as from January 01, 2023, the taxable base of 15% will be applied again for the importation of goods under the Tourism Regime, as ordered by Article 4 of Decree No. 1,931/2019.
► Decree No. 8,154/2022 - Extension until November 30, 2022, of the special ISC taxable bases for certain petroleum fuels.
Through Decree No. 6,620/2022, the Executive Branch modified, on a transitory basis, the ISC taxable bases for the importation and commercialization of the following oil-derived fuels:
Product
Taxable Base
1) Gas Oil/Diesel Type III
G. 2.388,9 per liter
2) Virgin Naphtha
G. 3.045,6 per liter
3) Naphtha RON
G. 6.033,3 per liter
Originally these tax bases were to be in force only during February 2022, but then their validity was extended monthly at the rate of one decree per month. Decree No. 8,154/2022 is the last of these extensions to date, extending the validity of these tax bases until November 30, 2022.
► General Resolution No. 121/2022 - Modifying the form to determine the IRP-RGC to be used to liquidate and pay the 2022 tax year.
The SET issued General Resolution No. 121/2022 (the "RG") on October 6, 2022. Through this RG, the use of the second version of Form No. 516 to determine the IRP-RGC was approved.
It is important to clarify that this version of form No. 516 will apply for the liquidation and payment of the 2022 tax year and will be available in the Marangatú Tax Management System as of January 2023.
The IRP-RGC is a tax obligation determined under code 716 and settled with form N° 516 annually unless any of the events in which this tax must be withheld have occurred.
The differences found between the first and the second version of form 516 are mainly the following:
Items "d" and "e" of Item 1 of the first version were eliminated due to Decree No. 7,047/2022, since before this decree, the IRP-RGC for vehicles had to be settled on its cost plus 30% of the sale price exceeding such cost, in the cases in which it had been deducted from the Personal Income Tax under the category of income for personal services.
The cases in which the taxpayer himself collects the installments of the installment sale of a real estate property, without the intervention of the notary public as a withholding agent of the IRP-RGC in this operation, were added. Now it is possible to declare this type of transaction in items "d," "e," and "f" of Item 1.
The item to declare the income obtained from lottery and gambling prizes has been eliminated in Item 4 due to the withholding provided for in Decree No. 4,661/2020. The items for dividends not subject to the Tax on Dividends and Profits and income obtained by taxpayers through Transparent Legal Structures, due to the withholdings provided for in General Resolution No. 100/2021, were also eliminated.
► General Resolution No. 105/2021 - Mandatory schedule was established for several groups of taxpayers to adhere to SIFEN - Reminder for Group 3 and following.
All taxpayers, especially those in Group 3 of the SIFEN, are reminded that the SET issued General Resolution No. 105/2021 (the "RG") on December 17, 2021. Through this RG, the mandatory calendar for several groups of taxpayers to adhere to the SIFEN was established, providing for ten groups with nine different due dates, with a difference of one quarter between the dates foreseen for one group and another, except for groups 1 to 3, according to the following calendar.
Groups
Date from which they are obliged
1 – “Pilot plan”
July 01, 2022
2 – “Voluntary adherence”
July 01, 2022
3 – “Compulsory phase”
January 02, 2023
4 – “Compulsory phase”
April 03, 2023
5 – “Compulsory phase”
July 03, 2023
6 – “Compulsory phase”
October 02, 2023
7 – “Compulsory phase”
January 02, 2024
8 – “Compulsory phase”
April 01, 2024
9 – “Compulsory phase”
July 01, 2024
10 – “Compulsory phase”
October 01, 2024
Obligated taxpayers from groups 3 to 10 may start issuing electronically before the established date in case they wish to do so gradually. However, once the compulsion date arrives, they must exclusively issue all their documents electronically since the authorization and stamping of their pre-printed or self-printed documents, granted by the SET, will cease to be valid, except for the one related to virtual withholding vouchers.
Taxpayers should take into account that they will bear the cost of the development and implementation of an electronic invoicing system, which often involves a considerable implementation time, as acknowledged by the SET in article 4 of the RG when it grants a period of up to 12 months of adaptation to those who wish to become voluntary electronic billers.
Therefore, it is extremely important to be aware of whether you or your company is covered by the mandatory SIFEN, because, if you are and you do not take the appropriate measures in time, you may no longer be able to operate normally. If you want to know if you or your organization are affected by this RG, you can consult the complete list of taxpayers in the complete list of taxpayers in the following search engine . For further details or better advice, don't hesitate to get in touch with our tax professionals.
The Executive Branch issued Decree No. 8,175/2022 (the "Decree") on November 7, 2022, whereby the list of purchases of goods and services that generate a deductible tax credit for the determination of Value Added Tax ("VAT") was expanded for individuals who provide personal services independently.
The Decree allows using as a tax credit 30% of the VAT included in invoices for the purchase of food, as well as 50% of the VAT included in invoices for the lease of real estate and the provision of basic services, used jointly for the rendering of the taxable service (office, among others) and personal use (housing, among others).
Other concepts that give rise to using the VAT tax credit are added, clarified, or limited. The Decree is effective as of November 9, 2022, since the Executive Branch published it in Official Gazette No. 217, dated November 8, 2022. Therefore, only from that moment may taxpayers apply its provisions in VAT liquidations.
More information:
Through the Decree, the Executive Branch amended Article 19 of Decree No. 3,107/2019, which regulated VAT. Specifically, the Decree expanded the concepts that allow individuals who provide personal services taxed by this tax to use as a tax credit the VAT borne on purchasing goods and services directly or indistinctly affected to operations taxed by the tax.
This extension in the list of goods and services susceptible to generating VAT tax credit arose as a reaction of the Executive Branch to the current legislative dispute between the Chambers of Deputies and Senators (Legislative File D-2164401) on the extension of the deductibility of the VAT tax credit of personal service providers.
In this respect, the Chamber of Deputies sought to allow the use of 100% of the VAT on practically all purchases as a tax credit. In contrast, the Chamber of Senators sought to establish the same limitations of the Decree. Finally, a few days ago, the version of the Chamber of Deputies prevailed, pending to be sent to the Executive Power, which had already advanced its decision to veto this law.
Thus, the Executive Branch has transcribed in the Decree the text of the legislative amendment bill of the Senate Chamber, which it expects to prevail its veto and thus settle this discussion.
New deductible items
According to the Decree, the VAT taxpayer may now use as a tax credit in its VAT liquidations:
(i) 30% of the input VAT tax credit on purchasing food made in the taxpayer's name, including non-alcoholic beverages.
(ii) 50% of the input VAT tax credit for the office lease if the taxpayer also uses the leased property for his private use. However, 100% of the tax credit may be used if the property is used exclusively for office purposes.
(iii) 50% of the input VAT tax credit for electricity supply services, water supply, sewage, waste collection, or telecommunication services, partially used for the provision of the service taxed by VAT and for the taxpayer's private use.
It is important to note that taxpayers may use the VAT tax credit for these concepts only from the entry into force of the Decree, i.e., from November 9, 2022, and not before.
Clarifications on the deduction of other concepts
The Decree also provides more details on the use of the input VAT tax credit on some concepts already previously contemplated while including new concepts and establishing certain limits, as follows:
(i) When the taxpayer contracts prepaid medicine and the coverage includes other persons, the taxpayer may use the VAT tax credit in the proportion corresponding to the same. However, it is not clear whether this proportion is defined according to the number of affiliates or by the amount paid by each one.
(ii) The use of VAT paid on the purchase of servers and computer and telecommunications equipment, including their maintenance, is added.
(iii) It also includes as a tax credit the VAT paid for the hiring of advertising and marketing services.
Finally, the Decree also mentions the possibility of the taxpayer deducting up to 30% of the input VAT tax credit for the purchase of motor vehicles, which is the limit established in Article 88 of Law No. 6,380/2019; at the same time, it clarifies that the use of the input VAT tax credit for the purchase of motor vehicles, which is the limit established in Article 88 of Law No. 6,380/2019; at the same time it clarifies that the use of the input VAT tax credit for the
