Author: Content

Executive summary::

Standard	Content	Date
General Resolution No. 129	The Undersecretariat of State for Taxation (“SET”) has moved the due dates for the filing of tax returns and for the payment of certain tax obligations.	April 03, 2023
Instructive No. 04	The National Customs Directorate (“DNA”) adopted measures related to the registration process of signatures of persons involved in customs activities.	April 20, 2023
Decree No. 8,895	The regimes of (i) Value Added Tax (“VAT”) taxable base for certain goods under the tourism regime, and (ii) ISC tax rates for certain electronic products were not extended.	February 28, 2023 (Expiration)
General Resolution No. 105	The SET established the schedule of due dates for taxpayers to compulsorily adhere to the Integrated National Electronic Invoicing System (“SIFEN”) - Reminder for Group 4 and subsequent groups.	December 17, 2021 (reminder)

More information:

► Resolution No. 129/2023 - The SET moves the due date for the filing of tax returns and for the payment of certain tax obligations

Through General Resolution No. 129/2023, the SET decided to move some due dates for filing tax returns and payment of tax obligations. This decision was made due to the non-business days of Easter Week.

Consequently, the following due dates for the filing of tax returns and the payment of tax obligations have been moved according to the following calendar:

The other maturities were not altered and are therefore governed by the Perpetual Maturity Schedule.

► Instructive No. 04/2023 – The DNA establishes rules for the registration of signatures of persons involved in customs activities

The DNA issued Instruction No. 04/2023 (the "Instruction"), whereby administrative measures are taken for registering persons related to the customs activity, regulated by Resolution DNA No. 80/2020.

The measures indicate that the registry of persons related to customs activity continues to be the only mechanism for registering and authorizing the signature registration file online. In addition, for the current fiscal period, the DNA established the option for customs brokers and forwarding agents to submit the bank reference with a savings bank instead of the current account bank reference requirement in order to register them as persons related to the customs activity.

On the other hand, DNA established that the deadline for importing companies to submit the meeting minutes with their meeting communication is June 30, 2023. This same date is also the deadline for submitting the financial statement documents (balance sheet, income statement, cash flow statement, statement of changes in equity, notes to the financial statements).

Finally, the other documents required by DNA Resolution No. 80/2020 for the registration of the signature of persons related to the customs activity must be submitted. The DNA's corporate contact e-mail address established through the Instructions is pvaa@aduana.gov.py.

► Decree No. 8,895/2022 - On April 30, the regimes for the reduction of (i) the Value Added Tax ("VAT") taxable base for certain goods under the tourism regime, and (ii) the ISC tax rates for certain electronic products expired

The Executive Power had issued Decree No. 8895/2023, whereby it resolved to extend until April 30, 2023, the validity of the following Decrees:

Decree	Provision
Decree No. 8048/2022	By which the taxable base of 5% was established for the liquidation of VAT at the time of importing goods under the tourism regime.
Decree No. 8.782/2023	Whereby the temporary modification to 0.5% of the ISC rates for cellular telephony devices and various household appliances, mentioned in paragraphs 2 and 3 of Article 12 of the Annex to Decree No. 3,109/2019, was provided for.

In accordance with the provisions of the measure related to the tourism regime, the VAT taxable base remained at 5% for the goods referred to in the annex to Decree No. 1,931/2019. Thus, the effective rate was as follows:

Period	Taxable Base	10% VAT effective tax rate	5% VAT effective tax rate
Until April 30, 2023	5%	0,5%	0,25%

The Executive Branch no longer extended these special regimes, so that as of May 01, 2023, the taxable base of the VAT applicable to the importation of goods subject to the tourism regime returned to 15% of the customs value (including customs duties), according to Decree No. 1,931/2019 and its amendments.

On the other hand, regarding the measure adopted concerning the ISC on electronic devices, the Executive Power had resolved to temporarily reduce by half the ISC rates for the following goods:

Product	Regular tax rates	Reduced tax rates	Difference
Automatic data-processing machines and units thereof; magnetic or optical readers, copying machines, hectographic machines, mimeographs, 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	1%	0,5%	-0,5%
Cellular telephony devices and portable terminals	1%	0,5%	-0,5%

This special regime was also not extended, so as of May 1, 2023, the 1% ISC rates for cellular telephony devices and miscellaneous household appliances will apply again, according to Decree No. 3109/2019.

► General Resolution No. 105/2021 - The calendar for taxpayers to join SIFEN was established (REMINDER for Group 4 and subsequent groups)

All taxpayers, especially those in group 4 of the SIFEN, are reminded that the SET issued General Resolution No. 105/2021 (the "RG") on December 17, 2021. Through this RG, SET established the mandatory calendar for several groups of taxpayers to adhere to the SIFEN, foreseeing ten groups with nine different due dates, with a difference of one quarter between the dates anticipated 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 4 to 10 may start issuing electronically before the established date in case they wish to do so gradually. However, once the mandatory date arrives - April 3, 2023, for group 4 - 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 crucial to be aware of whether you or your company are covered by the SIFEN obligation 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 or your organization are affected by this RG, you can consult 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.

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On March 28, 2023, the Secretariat for the Prevention of Money or Asset Laundering (Secretaría de Prevención de Lavado de Dinero o Bienes -SEPRELAD, by its Spanish acronym) approved, by Resolution No. 95/23, the implementation of the Module called: "Annual Information Form of the Obligated Entity and the Instructions for the Presentation", addressed to Non-Profit Organizations (NPOs). Said resolution abrogated Resolution No. 247 dated November 05, 2020, which approved the form for submission and update of data and the use instructions directed to NPOs.

The form must be submitted annually through SEPRELAD's Integral Operations Reporting System (Sistema Integral de Reporte de Operaciones - SIRO, by its Spanish acronym). The deadline for submitting the form, corresponding to fiscal year 2022, is May 31, 2023, and subsequently on May 31 of each year.

The aforementioned resolution has annexes corresponding to the form to be submitted, as well as the corresponding filing instructions.

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py), Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact.

Decree No. 9213 of April 25, 2023, has regulated Law No. 2640/05 which established the creation of the Development Finance Agency (Agencia Financiera de Desarollo – AFD, by its Spanish acronym), as amended by Law No. 6769/21, and abrogated Decree No. 7395/06.

Decree No. 9213 establishes that the AFD may grant financing to Intermediary Financial Institutions (IFIs) in legally authorized modalities and dictated by its Board of Directors. In addition, obtaining funding to grant financing to IFIs is not subject to the regulation of Law No. 6490/20 on Public Investment.

On the other hand, it indicates that the AFD may obtain loans with or without a Paraguayan government guarantee in local or foreign currency. For guaranteed loans, the AFD needs the favorable opinion of the Ministry of Finance; however, for unsecured loans, the AFD must communicate the Ministry of Finance the execution of the loan agreement within fifteen business days.

Likewise, prior to the issuance of bonds, with or without government guarantee, the AFD must communicate to the Ministry of Finance the issuance schedule, the amount and the financial conditions of each issuance. In the case of issuance of bonds with Paraguayan government guarantee, the AFD will need the prior favorable opinion of the Ministry of Finance within fifteen business days of receiving the communication. If the Ministry of Finance does not issue an opinion within the aforementioned term, it will be considered as an unfavorable opinion. The AFD may not unilaterally modify amounts, dates or financial conditions related to bonds issued with a Paraguayan government guarantee after receiving the opinion of the Ministry of Finance, and any modification will require the opinion of the Ministry of Finance.

In addition, it is established that the AFD may act as trustee, trustor and beneficiary in trust businesses related to its corporate purpose or the development of the financial, capital, insurance, pension funds or infrastructure markets. AFD may participate in trust business operations and modalities of trust permitted by Law No. 921/96 on Trust Businesses, and AFD's Board of Directors will determine the requirements and procedures for its participation in each trust business, as well as the risk limits it may assume. In addition, specific authorization from the Board of Directors is required for AFD's participation in each transaction.

Additionally, the AFD may participate in the financing of public infrastructure works through trusts. The Board of Directors will determine the form and percentage of AFD's participation based on the size, amount and complexity of the project. The AFD may also grant funds to IFIs to finance public infrastructure investment projects carried out or executed by the private sector, municipalities, local states and public companies. However, the total amount of loans must not exceed 30% of the AFD's net worth at the close of the previous year's fiscal year, and collateral or credit risk hedging instruments will be required.

In summary, the aforementioned decree establishes the provisions governing the legal nature of the AFD, its relationship with the Executive Branch and its powers. In addition, it regulates the obtention of loans and the presentation of reports for the obtention of bonds, determines the intervention in trust businesses and establishes the financing of public infrastructure. It also establishes the destination of funds and the credit certificate, as well as the regulation of foreign accounts and credits in process of liquidation. Finally, it establishes provisions for the composition, duties and powers of the Board of Directors, as well as for the admission and regulatory regime of its personnel.

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py), Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact.

The Ordinary Shareholders' Meeting of the Asuncion Stock Exchange (Bolsa de Valores y Productos de Asunción S.A. – BVA, by its Spanish acronym), which has appointed authorities for the 2023-2024 period, was held on April 19, 2023. The current composition of the board is as follows:

• Chairman: Eduardo Borgognon
• First Vice-President: César Paredes
• Second Vice-President: Raymundo Mendoza
• Director: Albaro Acosta
• Director: René Ruíz Diaz
• Director: Sergio Pérez
• Director: Roland Holst
• Director: Maria Fernanda Carrón
• Director: Rafael Lara
• Alternate Director: Rodrigo Callizo
• Alternate Director: Pablo Lu
• Alternate Director: Federico Montossi
• Alternate Director: Daniel Moreno
• Alternate Director: Mathias Angulo
• Syndic: José María Peña Nieto
• Alternate Syndic: Fernando Álvarez

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py), Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact.

On 21 April 2023, Law No. 7066/2023, "Modifying Article 7 of Law No. 489/1995 "Organic Law of the Central Bank of Paraguay", as amended by Law No. 6104/2018", was published in the Official Gazette.

Pursuant to Article 6 of the Organic Law of the Central Bank of Paraguay (Banco Central del Paraguay – BCP, by its Spanish acronym), the information, data and documents of third parties held by the BCP, by virtue of its functions, are confidential, unless otherwise provided by law. Any person who performs or has performed duties at the BCP and has or has had knowledge of confidential information, data and documents of third parties is obliged to maintain the secrecy of such information. Failure to comply with this obligation shall imply criminal and other liabilities provided for by law. These persons may not give any statement or testimony, nor may they publish, communicate or exhibit information, data or documents of third parties, even after having left their service at the BCP, unless expressly mandated by law.

With regards to the aforementioned duty of secrecy, Law No. 7066/2023 amends and incorporates certain provisions related to the exceptions allowed to disclose confidential information to which they had access, as detailed below:

• It clarifies that the exception to disclose information on credit institutions declared judicially insolvent shall not apply to the operations of their clients.
• It expands on the information that can be requested by congressional chambers and investigation commissions, such requests for information will be granted only in relation to financial institutions, but not about the operations of their clients. The BCP shall put in place appropriate measures to ensure that information on the operations of clients of financial institutions is not disclosed.
• The information requested by the Ministry of Finance shall be made through the Undersecretariat of State for Taxation, in the exercise of its functions.
• Requests for information made by the Secretariat for the Prevention of Money or Asset Laundering, the State Prosecutor's Office and the prosecutors of the Prosecutor’s Office must be justified and refer to a specific person, who must be subject to any investigation or proceedings initiated by the aforementioned institutions.

The amendments and additions made by Law No. 7066/2023 provide protection to the users of the financial system and oblige both the BCP and the recipients of such sensitive information to guarantee the inviolability of the data provided.

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py), Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact.

On May 2, 2023, the Secretariat for the Prevention of Money Laundering and Asset Laundering (Secretaría de Prevención de Lavado de Dinero o Bienes - SEPRELAD, by its Spanish acronym) issued Resolution No. 158/23, by which it approves the procedures and requirements for the registration as regulated entities in the SEPRELAD Registry of the regulated entities in the sector of safe deposit boxes, transport or storage of securities or valuables, art and antiques and philatelic or numismatic investments (the Regulated Entities) through the Integral Operations Reporting System (Sistema Integrado de Reporte de Operaciones - SIRO, by its Spanish acronym), including as attachment the procedures and requirements for the registration of the same.

SEPRELAD urges such Regulated Entities to register or, as the case may be, re-register through the SIRO, establishing a deadline for re-registration through said system until July 31, 2023. Until such date, the Regulated Entities already registered under Resolution SEPRELAD No. 218/11 will be exempted from paying the registration fee.

It is worth mentioning that, according to the provisions of the aforementioned resolution, all the registration certificates of the regulated entities under Resolution SEPRELAD No. 218/1, which is repealed, will become null and void as from July 1, 2023.

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py), Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact.

On April 28, 2023, the Secretariat for the Prevention of Money or Asset Laundering (Secretaría de Prevención de Lavado de Dinero o Bienes - SEPRELAD, by its Spanish acronym) issued Resolution No. 146/23, by which it established that the following regulated entities must submit their Suspicious Transaction Reports (STRs) as well as their negative STRs through the Integral Operations Reporting System (Sistema Integral de Reporte de Operaciones - SIRO, by its Spanish acronym): (i) real estate companies; (ii) stock exchange; (iii) mutual investment and retirement fund administrators; (iv) individuals and legal entities that carry out activities of transportation or storing of securities or cash; (v) companies which main activity is development or exploitation of electronic payment systems (Entidades de Medio de Pago Electrónico - EMPEs, by its Spanish acronym); (vi) individuals and legal entities that carry out activities associated with virtual assets (Proveedores de Servicios de Activos Virtuales - PSAV, by its Spanish acronym); (vii) individuals and legal entities engaged in activities related to the trade of jewelry, precious stones and metals; (viii) pawnshops; (ix) non-profit organizations (NPOs); (x) individuals and legal entities engaged in activities related to the operation of games of chance; and (xi) individuals and legal entities that provide safe deposit box rental services.

To correctly implement and make the necessary adjustments in the operating process of the SIRO for such regulated entities, this resolution establishes a review and contingency management period of 90 calendar days as from its effective date. Within such period, the regulated entities must communicate to the National Directorate of Information Technology and Innovation of SEPRELAD all contingencies, errors, or problems in the use of the SIRO within 72 hours from the moment in which they are identified.

The resolution also establishes that delays or errors in the production and uploading of reports through the SIRO during such period, resulting from contingencies notified by the regulated entities, will be exempted from the eventual responsibilities and sanctions that could be applied to them and their compliance officers.

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py), Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact.

On April 30, 2023, the Secretariat for the Prevention of Money or Asset Laundering (Secretaría de Prevención de Lavado de Dinero o Bienes - SEPRELAD, by its Spanish acronym) issued Resolution No. 112/23, approving the procedures and requirements for registration in the SEPRELAD Registry of regulated entities in the pawnshop sector through SEPRELAD´S Integral Operations Reporting System (Sistema Integrado de Reporte de Operaciones - SIRO, by its Spanish acronym), and annexing the procedures and requirements for such registration.

Likewise, Resolution No. 112/23 urges such regulated entities to register or re-register, in case they are already registered, through the SIRO, establishing a registration or re-registration update period for regulated entities already registered under Resolution SEPRELAD No. 218/11, until June 30, 2023.

Additionally, it renders ineffective all the registration certificates of such regulated entities within the framework of Resolution SEPRELAD No. 218/11 as of July 1, 2023.

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py), Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact.

Last April 27, 2023, the Central Bank of Paraguay (Banco Central del Paraguay - BCP, by its Spanish acronym) issued Resolution No. 40 Minute No.21, approving the Regulation for Loan Portfolio Purchase Transactions (the Regulation), abrogating BCP Resolution No. 14, Minute No. 18 dated March 22, 2018, as amended by Resolution No. 15, Minute No. 24 dated April 17, 2018.

The purpose of the Regulation is to establish the rules and requirements to be complied with by supervised financial institutions for the purchase of loan portfolios of any nature from individuals or legal entities, whether or not they are supervised by the BCP. The Regulation also provides that its provisions are applicable to financial intermediation entities supervised by the BCP that are subject to Law No. 861/96 as amended, as well as to other entities supervised by the BCP according to its special laws, such as the Development Finance Agency (Agencia Financiera de Desarrollo) the Retirement and Pension Fund for Bank and Related Employees (Caja de Jubilaciones y Pensiones de Empleados de Bancos y Afines), the Agricultural Allotment Credit (Crédito Agrícola de Habilitación) and the Livestock Fund (Fondo Ganadero).

According to the Regulation, the purchase of loan portfolios may be with recourse or without recourse. The purchase with recourse implies that the seller guarantees payment of the loan through a joint and several liability of the debt; consequently, in the event of default, the seller remains at risk for the supervised entity. In the case of a non-recourse purchase, the supervised entity assumes the risk of non-payment of the loan and everything related to its collection.

In order to carry out a loan portfolio purchase operation, every supervised entity must comply with certain requirements, such as including the loan portfolio purchase operation in its Credit Policies and Procedures Manual, including the intention to carry out portfolio purchase operations in its Business Plan, possessing the technical capacity and administrative and technological infrastructure necessary to carry out a technical analysis of the portfolio to be acquired, employ adequate internal control systems and procedures, request the documentation required by the Secretariat for the Prevention of Money or Asset Laundering (Secretaría de Prevención de Lavado de Dinero o Bines -SEPRELAD, by its Spanish acronym) from the assignor, ensure that the credit assets to be acquired do not correspond to loans from debtors that have been sold by the same supervised entity in the last twelve months, among others.

Likewise, the supervised entity shall have the original settlement of the acquired operation, maintain the original structure and conditions of the loan, not establish portfolio return clauses for periods exceeding forty-five days, and ensure that the portfolio to be acquired hast not expired, with no payment in arrears or default whatsoever.

On the other hand, it establishes the minimum content that loan portfolio purchase agreements shall contain, namely, basic information on the parties involved, the type of transaction (with or without recourse), precise identification of the loans acquired, price and form of payment, prohibition for the seller to carry out collection actions, the seller's obligation to notify the assigned debtor and deliver the corresponding documentation, alternative security mechanism if agreed upon and guarantees, if any.

Likewise, it establishes the requirements to consider valid the documents evidencing the existence and ownership of the credits, such as that they are freely available to the seller, that they represent non expired credits, that they have as a genuine source the business or productive activity of the seller and that they are transferable by endorsement or by any other form permitted by financial laws

It also establishes the seller's obligation to notify the assigned debtor of the assignment made and the identity of the new creditor, in accordance with the provisions of the Paraguayan Civil Code. In addition, the buyer must ensure that the debtors have been properly notified and must assume the management of the collection of the acquired credits from the moment it assumes the credit risk.

In addition, the Regulation establishes rules and requirements that must be complied with by the parties involved in the purchase of loan portfolios to prevent money laundering and financing of terrorism. In this sense, it establishes that the parties must apply the prevention rules issued by SEPRELAD and the related provisions issued by the BCP or the Superintendency of Banks. In addition, when the purchase of loan portfolio is formalized among related companies, these must obtain prior authorization from the Superintendency of Banks and consider the required legal limits.

Finally, specific rules are included for the accounting recording of portfolio purchase transactions, the purchase of portfolios in resolution process and renewals, refinancings and restructurings of purchased loans, and warns that supervised entities that do not comply with the Regulations will be subject to the sanctions provided for in Law No. 489/95 "Organic Law of the Central Bank of Paraguay".

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py) or Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact.

On February 9, 2023, the new Paraguayan General Securities Market Regulation (the New Regulation) was issued, which brought with it important modifications and incorporations that reflect the advances in the area during the last few years. In addition to the New Regulation, the competent authority, the National Securities Commission (Comisión Nacional de Valores - CNV. by its Spanish acronym), has issued, through subsequent circulars, clarifications, extensions of deadlines and model contracts to be used by regulated entities.

Below, a summary of the key modifications and additions made by the New Regulation and the circulars:

1. Stock exchange

Significant modifications can be found in the chapter referring to stock exchanges; namely, (a) market makers, and (b) direct market access (DMA).

(a) What is a market maker?

A market maker is an intermediary company that assists in maintaining liquidity in the financial market. These entities are in charge of buying and selling financial assets (i.e. stocks, bonds, etc.) in a given market, and establishing the selling and buying prices for these assets. Their main objective is to ensure that there are always buyers and sellers for the financial assets that are traded, in order to maintain liquidity in the market.

The New Regulation establishes that, in order to act as market makers, brokerage firms must have the corresponding authorization. Likewise, the New Regulation establishes the minimum standards that the stock exchange must follow to regulate the operation of the market makers through the Electronic Trading System (Sistema Electrónico de Negociación -SEN, by its Spanish acronym).

(b) What is the Direct Market Access?

The DMA is a way for investors to send buy or sell orders directly to the trading systems of the stock exchanges, without the need to use intermediaries such as brokers or brokerage houses. This allows investors to have greater control and speed in the execution of their orders, in addition to reducing costs and improving transparency in operations.

While clients will be able to send their orders directly with the DMA, brokerage firms will still be responsible for ensuring that the necessary requirements are met in order to execute trades and must make their best efforts to protect and look after the interests of their clients. In addition, only securities that are registered with, and authorized by, the CNV and the stock exchange can be traded through the DMA.

As for implementation deadlines, when the stock exchange (the Bolsa de Valores de Asunción BVA by its Spanish acronym)) enables the DMA, brokerage firms will have 120 days to start offering it to their clients. To this date, such authorization by the BVA has not yet occurred.

2. Brokerage firms

The section of the New Regulation referring to brokerage firms incorporates several changes and inclusions, the most relevant of which refer to (a) shareholding and new payments of corporate capital, (b) disqualification to be a shareholder and (c) appointment and removal of operators, as summarized below:

(a) Shareholding and new payments of corporate capital: Brokerage firms must submit an affidavit certifying that they have performed their due diligence under the expanded regime with respect to those shareholders who own a percentage equal to or greater than 10% of the shares, both at the time of registration and periodically, each time there is any change that presents a share ownership equal to or greater than 10%. In addition, capital payments must be made through authorized accounts in banks and financial institutions regulated by the Central Bank of Paraguay (Banco Central del Paraguay - BCP, by its Spanish acronym). These payments may not be made with securities issued by related entities and must be made with securities rated A, similar or higher.

(b) Disqualification to be a shareholder: The New Regulation establishes that the bylaws of brokerage firms must contemplate that those who are included in the lists of financial sanctions related to terrorism and the proliferation of weapons of mass destruction indicated in the regulations of the Secretariat for the Prevention of Money or Asset Laundering (Secretaría de Prevención de Lavado de Dinero o Bienes - SEPRELAD, by its Spanish acronym) may not be shareholders or have voting rights, nor hold positions on the board of directors. This measure is in line with what has been established by SEPRELAD and seeks to prevent the participation of persons linked to illegal activities in the ownership and management of brokerage firms. In addition, the New Regulation establishes that brokerage firms have a period of 6 months from the date of its enforcement to amend their bylaws to expressly include this disqualification.

(c) Appointment and removal of stock exchange operator: The mechanism to appoint and remove operators was modified as regards to the need to have powers of attorney or revocation of powers of attorney registered before the public registries. From now on, it will be sufficient to submit to the CNV the minutes of the board of directors' meeting, notarized before a public notary, evidencing the decision of the board of directors to appoint or remove the operators. This means that the term for the appointment or removal of operators will be significantly reduced.

3. Model of single agreement for stock exchange services

The New Regulation establishes a single service agreement to be used both by brokerage firms in process of registration, as well as by those already authorized and registered prior to the issuance of the New Regulation. The single service agreement may be signed in a handwritten or electronic form. Finally, the New Regulation establishes that any additional or complementary form agreements that brokerage firms enter into with their clients must be sent to the CNV for prior approval.

The form of the single service agreement was released through a circular issued by the CNV and establishes the terms and conditions of services between a brokerage house and a client, detailing the services that the brokerage house will offer to the client. The services include securities brokerage, advice on securities and stock exchange operations, administration and custody of securities, credit or margin, subscription of mutual fund quotas, direct market access and account opening for financial derivative operations, among other provisions.

Regarding the implementation term, the CNV informed that the brokerage firms already authorized and registered have until June 30, 2023, to adopt this single service agreement form.

4. Issuer companies

Regarding the issuer companies (Sociedades Anónimas Emisoras or SAE, by its Spanish acronym, and Sociedades Anónimas Emisoras de Capital Abierto or SAECA, by its Spanish acronym), the New Regulation makes innovative inclusions and modifications for the market, of which the most important are regarding (a) the special regime for small and medium-sized companies (Pequeñas y medianas empresas - PYMES, by its Spanish acronym), (b) the reform of the bylaws of issuer companies, and (c) the automatic suspension of trading, as summarized below:

(a) Small and medium-sized enterprises (PYMES): Pursuant to the provisions of the New Regulation, companies that do not have the corporate type of a Corporation that comply with the requirements established by the Ministry of Industry and Commerce (Ministerio de Industria y Comercio -MIC, by its Spanish acronym) to be classified as PYMES, and have the respective categorization certificate issued by the MIC, will be eligible for the special regime for small and medium-sized companies.

(b) Requirement of bylaw amendments: The New Regulation establishes the text to be included in the bylaws regarding the securities that may be traded depending on whether the company is a SAE or a SAECA.

(c) Automatic suspension: Trading of shares and bonds issued by issuer companies that do not comply with the regular filing of information established in the New Regulation will be automatically suspended in the primary market, unless such companies have obtained an extension of time granted by the CNV. It should be noted that this suspension is not considered a sanction, but a preventive measure.

5. Debt securities

The most significant amendments regarding debt securities are those related to (a) the need to file an affidavit by issuers that do not engage in financial intermediation, (b) issuances secured by security trusts, (c) redemption and call option mechanisms to be included in the prospectus, and (d) elimination of restrictions regarding short-term bonds, as indicated below:

(a) Affidavit of resources to be collected: In the case of issuers that are not authorized by the BCP to carry out financial intermediation activities, in accordance with the provisions of the New Regulation, they must submit a sworn statement in which they undertake not to use the proceeds of the issuance to carry out financial intermediation activities.

(b) Issuances secured by guaranty trusts: The New Regulation establishes that in the event that an issuance is backed by a guaranty trust, the guaranty will be considered to be total if the value of the issuance is equal to the quick sale value of the asset used as security. If the value of the issuance is greater than the quick sale value of the asset, the security shall be deemed to be partial.

(c) Redemption and call option mechanisms to be included in the prospectus: In the event that an issuer allows early redemption or call option by the investor, as established by the New Regulation, all relevant information, including the redemption price and details of the applicable conditions, must be clearly specified in the issuance prospectus.

(d) Elimination of restrictions: Under the New Regulation, restrictions on the amount of short-term bonds that may be issued, and the level of indebtedness allowed are eliminated.

6. Shares

The section dealing with regulations related to shares has undergone minor changes, which are specified below:

(a) Adjustments to the application documents: the New Regulation indicates that in the event that preferred shares are issued that are subject to redemption, the redemption value must be previously specified in the issuance instrument.

(b) Inclusion of requirements for share registries: according to the New Regulation, in order to register the issued and integrated shares and those released from payment with the CNV, it will be necessary to file a general prospectus including a facsimile copy of the shares, a copy of the document authorizing the issuance, and a description of the security measures to be applied in the production of the certificates in question.

7. Investment fund management companies

The section corresponding to the investment fund management companies (Administradoras de Fondos patrimoniales de Inversión -AFPISA, by its Spanish acronym) has been subject to several modifications and additions in the New Regulation, especially those related to (a) corporate capital, bylaw changes and form of agreements, (b) investments of committed equity, (c) investment funds, and (d) mutual funds.

(a) Regarding corporate capital, changes in the bylaws and the single agreement, the New Regulation sets forth the same provisions made in said document for brokerage firms. If the company wishes to enter into other agreements with its clients, in addition to the single agreement, it must have prior approval from the CNV. On the other hand, the AFPISAs have (i) a term of six months since February 11, 2023 to carry out the corresponding bylaw amendments and (ii) until June 30, 2023 to implement the forms of the single mutual fund subscription agreement and the form mutual fund installment placement and redemption agreement.

(b) The New Regulation establishes the conditions under which the AFPISAs may invest within the minimum committed equity, based on the minimum proportion set by the CNV. They are limited to invest in movable and immovable assets that are not destined to the company and in securities that are not traded on the stock exchange, unless permitted by the New Regulation. As for securities eligible for investment, they include term securities issued by institutions authorized by the BCP, as well as bonds, debt securities or securities issued under securitization processes that have a local risk rating of “BBB” or higher and whose issuance is registered in the Securities Registry of the CNV. In addition, notwithstanding the foregoing, the AFPISAs may invest the surplus of their committed equity in real estate, securities and investment assets included in Title 19, Chapter 6, Article 1 of the New Regulation.

(c) The investment funds section includes the terms for (i) the placement and (ii) the subscription of the fund quotas:

• For the first term referred, it cannot be greater than twelve (12) months, unless it is extended by the CNV in accordance with the Law on Equity Investment Funds. In the event that the term expires without extension, the number of installments will be reduced to the number of installments actually paid without the need to convene a quota holders’ meeting.
• For the second term, the New Regulation indicates the time in which the fund must reach the minimum amount of assets indicated in the internal rules of procedures and the minimum number of participants established. This period is of six (6) months from the first subscription. If these conditions are not met, the fund managing company must notify the CNV and has up to one hundred and eighty (180) days to rectify the deficit (this extension may be requested up to two times). If the situation is not resolved, the fund is liquidated. It is also established that until these conditions are met, the fund can only invest in securities issued by the Public Treasury or guaranteed by the fund itself, all of which must be included in the internal rules of procedures, or in securities issued by the BCP, or others determined by the CNV. Likewise, before implementing any change in the internal rules of procedures of a fund, the prior approval of the CNV will be required. Once the approval is obtained, an extraordinary quota holders' meeting will be convened so that they also approve the proposed changes. Finally, the New Regulation establishes the obligation to have specific internal rules of procedures for these funds, which must be previously approved by the CNV.

(d) Regarding mutual funds, the implementation of an account statement was included so that the client can view the types of movements (subscriptions or redemptions), identification number of the requests, number of installments, amount settled, etc.

The inclusions and modifications made by the CNV will be reflected in the Paraguayan market during the next few months, and there may be new modifications through circulars or resolutions of the authority. To date, the authorization of the DMA by the BVA is pending.

For further information please contact Cynthia Fatecha (cfatecha@vouga.com.py), Carlos Vouga (cvouga@vouga.com.py) or Georg Birbaumer (gbirbaumer@vouga.com.py) or your usual Vouga contact..