Paraguay may not be the most common place in Latin America to start a business. However, the country has major benefits for investors, including low taxes and a simple immigration system that makes it easy to acquire residency. As a result, starting a business in Paraguay is an easy way for investors to expand into a new market.
If you are looking to enter Paraguay but do not want to incorporate a company, you may choose to hire using an employer of record (EOR) in Paraguay. Depending on your business needs, this may be a simpler step forward than full company incorporation.
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In the past decade, Paraguay averaged four percent yearly GDP growth. The main drivers of its economy are agriculture, livestock, retail, and construction. Paraguay has a low tax burden and low public debt, and strong trade relations with its neighbors, especially Brazil and Argentina. Paraguay has membership in the Mercosur trade bloc and exports hydroelectricity generated by the Itaipú dam, co-owned by Paraguay and Brazil.
Known as “the Heart of South America”, Paraguay has experienced fast economic growth over recent decades. GDP reached an impressive $39.5 billion in 2021 and gross national income (GNI) reached $ 5,891 per capita (all figures in USD). This makes Paraguay 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 to $207 million (USD). Despite being a landlocked country, it is in a strong position for trade due to its proximity to Brazil and Argentina. These two countries have the region’s largest and third-largest economies, and gaining access to their markets is a strong reason for starting a business in Paraguay.
Paraguay is one of the four founding members of the Southern Common Market (Mercosur) -along with Brazil, Argentina, and Uruguay- a free trade initiative that recently celebrated its 30th anniversary. Paraguay has several bilateral free trade agreements (FTAs), including a major one with Chile.
If you want to incorporate a company in Paraguay and need help navigating the legal requirements, your best bet is to align yourself with a local partner. Contact us now to discuss your business options.
What are the minimum requirements to incorporate a Company in Paraguay?
To incorporate a Limited Company (Sociedad Anónima) in Paraguay, you’ll need to adhere to certain legal requirements and follow specific procedures. Here’s an overview of the minimum requirements:
Shareholders: A minimum of two shareholders is required to form a Limited Company. Shareholders can be individuals or legal entities, and they can be of any nationality.
Capital: There is no minimum capital requirement stipulated by law, but you must define the initial capital in the company’s bylaws.
Articles of Incorporation: Draft and notarize the company’s Articles of Incorporation (Estatutos Sociales), which should include details such as the company’s name, objectives, address, duration, capital structure, and governing bodies.
Registered Address: Provide a physical address in Paraguay where the company will be located. This can be a commercial office or the address of a legal representative.
Legal Representative: Appoint a legal representative who must be a resident of Paraguay. This individual will act on behalf of the company and can be held responsible for legal matters.
Tax ID: Obtain a Tax Identification Number (RUC – Registro Único del Contribuyente) from the Paraguayan tax authorities (SET – Secretaría de Estado de Tributación) for the company.
Publication of Incorporation: Publish a notice of the company’s incorporation in a local newspaper for legal purposes.
Registration: Register the company with the Public Registry (Registro Público) and obtain a registration certificate.
Starting a Business in Paraguay: Some Considerations
Some considerations to take into account when starting a business in Paraguay include:
Choosing 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 is a resident of Paraguay and is not otherwise barred from such a role. However, you will ideally want to appoint someone with a good understanding of the country’s corporate legal framework.
Entity type: the type of entity you choose when starting a business in Paraguay depends on the desired enterprise structure, your liability acceptance, and capital investment. Foreign investors can choose from various entity types, including limited liability companies (Sociedad de Responsabilidad Limitada — SRL) and stock companies (Sociedad Anónima — S.A), based on their business goals and capital investment. Please bear in mind that in Paraguay we need to push the client focus on an specific type of entity which is EAS (Empresas por Acciones Simplificadas).
Economic activity: it is essential to correctly identify your commercial activity and all sources of revenue to ensure compliance with local regulations and taxation requirements. When you register a company in Paraguay, it is highly recommended you work with a reliable corporate lawyer who can guide you on properly defining your operations in the official documentation.
4 Steps to Starting a Business in Paraguay
- Step 1: Draft the company’s bylaws
- Step 2: Obtain a VAT ID and certificate from the Chamber of Commerce
- Step 3: Open a corporate bank account
- Step 4: Make an initial investment
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
Begin by preparing your company’s bylaws. You must include information on the subscribed capital, fiscal address, and legal representative. Please note that this process may take up to 12 weeks.
Step 2: Obtain a VAT ID and Certificate from the Chamber of Commerce
Register with the local authorities to obtain a VAT ID and registration certificate. Depending on the type of legal entity you choose, you may need to declare the final beneficiaries. If you are hiring local employees, you will need to register at the Labour Ministry.
Step 3: Open a Corporate Bank Account
Open a corporate bank account for your company. A Paraguay-based legal representative can suggest the ideal corporate bank account provider for your business based on type and location.
Step 4: Make an Initial Investment
Once your company is registered with the appropriate government agencies and a corporate bank account is open, you can make your initial investment. This completes the process of starting a business in Paraguay.
Steps for EAS Formation in Paraguay:
- Company name reservation
- Draft the bylaws
- Registration of EAS
- Tax registration
Common FAQs when Forming a Company in Paraguay
Here are some answers to some of the most common questions we get asked by our clients.
1. Can a foreigner own a business in Paraguay?
Yes, a business can be 100% foreign-owned by either legal persons (“legal entities”) or natural persons (“individuals”).
2. How long does it take to register a company in Paraguay?
Registering a company in Paraguay takes 8 weeks.
3. What does an S.A. company name mean in Paraguay?
The S.A. in a company name in Paraguay refers to a “Sociedad Anónima,” which translates to a “Joint Stock Company.” This legal framework establishes the company as a separate entity from its shareholders, with each shareholder possessing shares that represent their ownership stake. Importantly, the financial responsibility of shareholders is confined solely to the value of their shares, crafting a safeguarded boundary. The S.A. structure holds substantial prominence in Paraguay due to its exceptional adaptability and flexibility, rendering it the favored option for a diverse range of business ventures.
4. What does a S.A.S. company name mean in Paraguay?
In Paraguay, S.A.S means “Sociedad por acciones Simplificada”, which translates to “Joint Stock Company.” This is a type of commercial company with legal personality and assets independent from those of its owners. Shareholders are liable only up to the amount of their respective contributions corresponding to the integration of the shares they subscribe to or acquire. Shareholders are not liable for labor, tax, or any other type of obligations incurred by the company beyond its contribution, except if the legal personality of the company is declared unenforceable.
5. What entity types offer Limited Liability in Paraguay?
In Paraguay, both “S.A.S” (Sociedad por Acciones Simplificada) and “S.A” (Sociedad Anónima) are limited liability entity types.
6. What are the main differences between a S.A.S. and an S.A in Paraguay?
Number of shareholders: A S.A.S can have from one to an unlimited number of shareholders, while an S.A must have at least two shareholders.
Responsibility of the shareholders: In both legal vehicles, Shareholders are not liable for labor, tax, or any other type of obligations incurred by the company beyond its contribution
Incorporation process: The S.A.S can be incorporated in 15 days while the S.A requires the approval of the Internal Audit (Sindico).In any case, the S.A can act as “in formation” until it completes the formalities.
Object of the company: In the S.A, one or more specific objects or lines of business must be established in the bylaws, while in the S.A.S, any lawful commercial activity can be established in a general way as an object.
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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