Paraguay: Benefits of the Maquila Regime for foreign business
The topic of today’s article opens up a new avenue of opportunity for businesspeople from across the globe. Maquila, short for maquiladora, is a term that needs unpacking as it will form the principal focus of the information outlined below, and, in short, can be defined as a warehouse or factory that is owned by a business from outside the country where it is located, and has the function of manufacturing goods using the local workforce, before exporting the products to the country of origin of the main business. With this definition established, it is important to understand it in context of the real world, in this case Paraguay, a landlocked country in Latin America exhibiting development in numerous sectors, aided by an expanding cross-border industry and growing community of expats.
All of us have struggled over the past year, and for those of you in positions of ownership with regards to corporations, the economic implications of a pandemic on the scale witnessed with COVID-19 are incomparable with other global disasters. However, business opportunity is beginning to resurface, and one such example is the use of maquilas in Paraguay, especially if you are a business located in either North America or elsewhere in Latin America.
After coming into effect in 1997, Law Nº 1064, businesses of this type have been facilitated and even encouraged within the borders of Paraguay. However, the law is mutually beneficial, as not only are these corporations benefitting from it, said law also established the rules and regulations for the importing and exporting companies, in order to ensure the safety and legality of all processes of this type taking place. We briefly touched on the notion of benefits for this type of corporation, and more specifically, they manifest themselves in the form of exonerations, such as:
1. No national, departmental or municipal tax paid
(Though you must pay the 1% Unique Tax)
2. Import of the materials and goods outlined in the Maquila contract
3. The re-exporting of the goods mentioned above
(Also includes goods which underwent repairs or alterations while in Paraguay)
Other benefits of using this type of corporation in Paraguay include: