In accordance with the Paraguayan Government’s economic approach that aims to assist companies in keeping as much cash as possible to face the economic difficulties generated by the health measures adopted against the Coronavirus pandemic (Covid-19), the Executive Branch and the Tax Authority (“SET”) regulated the tax implications of Article 16 of the recent Law No. 6524, dated March 26, 2020, of Health Emergency (the “Emergency Law”), to which effect they issued Decree No. 3506, dated March 31, 2020, and SET General Resolution No. 49, dated March 31, 2020, respectively.
Under the usual payment regime of the Tax on Dividends and Profits (the “IDU”) for commercial entities and other entities generating dividends, profits or income (the “EDGUR”) that are required to hold meetings (the “EDGUR-COA”), outlined by SET General Resolution No. 31, dated December 27, 2019, the IDU Withholding Tax Voucher must be issued in the calendar month in which the meeting that decided on the distribution of the benefits subject to taxation was held, on or before the last day of the month; or on the date of payment of the benefits, if this occurs during such period of time. The IDU must be then paid on the first 13 days of the following month, whether or not cash is available to pay the taxed benefits.
These rules change for EDGUR-COA that (i) have chosen to distribute their profits as dividends or other IDU-taxable benefits, but (ii) have not paid or remitted them prior to August 1, 2020, as it provides for them to defer the issuance of the IDU Withholding Tax Voucher to the date they choose from August 1 to August 31, 2020, or to the date of payment of benefits, if this occurs during that time, so that they may also defer payment of the IDU to the first 13 days of September 2020.
However, if in any of the months in which the deferral is in effect (March 27 to 31, and all of April, May, June and July 2020) those benefits taxed after the meeting are paid or remitted, such payment or remittance automatically generates the obligation to issue the IDU Withholding Tax Voucher, on the date of that act and for the amount affected therein, which may mean all or part of those benefits. Thus, the IDU must be paid to the SET the following calendar month, between the 1st and 13th.
For a better understanding, all of the above can be illustrated with the following examples:
– In Apr-20 the assembly is held in which it is decided to distribute the taxed benefits, but they are paid or remitted after Jul-20:
The withholding check can be issued until Aug 31, 20, or on the date of payment or remittance of the same during Aug 20, and the IDU must be paid from Sep 1 to 13, 20.
– In Apr-20 the meeting is held in which it is decided to distribute the taxed benefits in the amount of 100, and they are paid in full in May-20:
The withholding voucher must be issued for all benefits paid or remitted on the date this occurs in the month of May-20, and the IDU must be paid from June 1 to 13, 20. From that moment on, the extension loses its meaning for that EDGUR-COA.
– In Apr-20 the assembly is held in which it is decided to distribute the taxed benefits for a value of 100, of which 30 are paid or remitted in May-20; 30, in Jun-20, and the remaining 70 are paid or remitted after Jul-20:
The withholding voucher must be issued for the 30 paid benefits or remitted on the date this occurs in the month of May-20, and the IDU must be paid from June 1 to 13, 20. The same applies to the 30 paid benefits or remitted in the month of June 20, except that here the IDU must be paid from July 1 to 13, 2010. For the remaining 70 of benefits, the withholding slip must be issued from Aug 1 to Aug 31, or at the time of payment or remittance that occurs during that period, in order to pay the IDU from Sep 1 to Sep 13, 20.
This measure is accompanied by the extension of the annual period so that all EDGURs can inform, through the informative sworn statement to be defined by the SET, about (a) the date of their meeting, members’ meeting or applicable instance; and (b) the destination of the taxable benefits corresponding to the fiscal years closed on December 31, 2019, April 30 and June 30, 2020, which has been extended from the sixth to the eleventh month after such dates, according to the perpetual calendar of informative sworn declarations.
For your better understanding, we attach to this article copies of the above-mentioned Resolutions:
If you need any further information regarding the tax measures, please contact Andrés Vera (avera@vouga.com.py).