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Which are the most popular types of banking finance in your jurisdictions? Paraguay's most frequent types of banking finance for corporate bodies and businesses are: Corporate credits, for investments in investments (through option notes, pledges, mortgages); overdrafts; business loan credits; business loan notes; cheque clearing and document delivery; factors; finance and industrial leases; internationals: stand-by letter; imported loan notes; foreign loan notes; overnight funds certifications (interfinancial talks between banking and finance institutions, including short-term loans); bond issues; issue of junior debt; the most popular types of private banking finance are:
Private credits (unsecured credits, face-to-face surety credits, name credits, mortgages or credits against other types of guaranties, as well as trustee guarantees); overdrafts on checking balances; credits card; discounting of cheques and documentation. Is it necessary for a government or federal banking registry or permit for a non-resident creditor (who is a creditor not located in your jurisdictions or operates through a subsidiary or bureau outside your jurisdictions) to grant a loan to a debtor in your jurisdictions?
In Paraguay an overseas creditor granting a loan to a borrower in Paraguay is not subject to registration or approval by any government or issuer of securities under the laws of that state. Banks and finance companies that are part of the domestic finance system may not, however, have corresponding relationships or links with non-resident finance companies in their relationships with them.
Actual attendance means a permanent location at which the non-resident institution is entitled to conduct its business and the location at which it is subjected to inspection by the supervisory and supervisory bodies issuing the operating license. Is there any FX regulation that restricts the registration or approval of a debtor in your jurisdictions by the government or CB to enter into commitments in a FX or to transfer money abroad?
Paraguay's central bank may request that it be notified in written form of the conduct of certain currency swaps by means of previously provided documentation from the Centre in order to check the source and legitimacy of such swaps; in this way, the national central bank must precisely and specifically identifies the currency swaps concerned by the above undertaking.
Note also that commitments in other currencies may be secured by the entry of pledged assets, mortgage loans, option certificates or other types of security in the amount denominated in the denomination of the commitment and must be entered in the competent public register (public archives), indicating the amount of the commitment and the security.
Banks and institutions supervised by the Central Bank of Paraguay and carrying out lending activities abroad must inform the Central Bank, with the exception of those deemed normal bank activities. In Paraguay, there is no statutory requirement which would prevent a creditor from transferring money abroad to meet a liability incurred in a given denomination other than that which must be respected in relation to the applicable fiscal provisions related to VAT and corporation taxes known by the abbreviation IRACIS, as it covers revenues from business, industry and non-personal service activities, as set out in the reply to Q8.
Is there any government or centrally held banking registration or authorisation necessary for advance payment of foreign loan? No government or CB registration or approval is necessary for advance payment of foreign loan. With regard to lending transactions carried out in the Paraguayan territories as security for the debtor, the following information must be provided as a minimum: the amount of interest, the interest to be calculated, the interest per annum or per month and the penalty interest; any fees payable in the form of fees, administration expenses, tax, etc.; the number of instalments to be paid and their incidence; the right and obligation of the contracting party to make payment before an occurrence of delay.
Is it necessary to have compulsory government or corporate banking deposit from credit funds? Paraguay's Federal Banking Act provides that a statutory provision may be established for the granting of a loan in a particular denomination of another country's denomination. To date, however, there has been no decision that provides for a statutory minimum reserves obligation for overseas currencies.
Outline any government action that can be taken to impose a suspension on the credit commitments of individual businesses. No government action exists to impose a moral hazard on the credit commitments of individual businesses, and if a moral hazard is desired on such commitments, Congress should adopt a bill to that effect.
Explain all environment obligations and all other areas of creditor responsibility that may arise from the activity of a debtor or the realization of a collateral right. Do interest or credit charges have to be taxed at source? Yes, this kind of business is taxed at source in Paraguay, even if the creditor is a non-resident Paraguay corporation.
Pursuant to the rules on value added taxes (VAT), supplies of goods and provision of a service are deemed to have been made in the territory of Paraguay if they are used or applied in Paraguay, pursuant to Art. 81 of Law 125/91, amended by Law 2421/04. As regards value added taxes, the debtor/payer should levy the retention at a 10 % level, which will be applied to interest, commission and all costs other than principal repayments.
For IRACIS, the applied percentage is 30 per cent, however, the basis of assessment can be between 20, 50 and 100 per cent of the amount of interest, commission s and concepts other than repaying principal, so we get the following immediate taxes: 6, 15 and 30 per cent. 3.
In the case of a bankrupt or a finance undertaking or another institution known on the internal finance markets or a multilaterally organised institution, a prime interest shall be charged at a prime interest of 6 %. A number of different interpretation have been made of the requirements that the lender must be'known in the global finance market', bearing in mind, on the one side, that the rules are not clear and, on the other side, that the tax administration does not regulate this requirements and, on request during the usual consultation, has merely declared that this requirements are satisfied if the lender is accepted as such in the jurisdictions of its registered office.
We do not consider the above requirements to be necessary for banking or finance institutions as a company with a recognized history; they are only necessary for "other lenders". If so, what other tax or duties, such as those on operations, registrations or documentation, must be paid on loans? We do not have any other relevant domestic and/or local tax.
Is there a difference in tax between a loan refundable to a lender in your jurisdictions and a loan refundable to a lender in a non-resident jurisdictions? Tax on loan repayments to Paraguay resident creditors and on loan repayments to creditors in a non-resident country are taxed at the same rates as value added tax and IRACIS.
5 per cent: if the entity chooses to pay a dividend, and 15 per cent: if the entity pays a dividend to a shareholder not resident in Paraguay. In the event that the Corporation has resident stockholders, 50 percent of the earnings of such stockholders are liable to personal tax, IRP, at rates of 8 percent and 10 percent, respectively.
Does your state have a tax treaty that reduces the tax that borrower have to pay on foreign loans? State of Paraguay signs two OECD Model agreements to prevent income tax and wealth tax on income: a. with the Republic of China (Taiwan), authorized by Law 3972/2010: It states that interest accrued in one treaty state, e.g. Paraguay, and received by a citizen of another treaty state, e.g. the Republic of China, Taiwan, may be subject to tax in that other state.
10% of the total amount of interest on credit facilities provided by banking and insuring institutions, as determined by the law of each individual jurisdiction; 15% of the total amount of interest in all other cases. Please describe any restrictions on interest rates or the possibility for creditors to calculate interest on arrears from credit contracts.
Paraguay's Central Bank provides that the interest rates for equalisation interest on lending or borrowing operations in either domestic or non-domestic currencies shall be fixed according to the free movement of funds between sources of funds and demands for funds within the limits laid down by law. The Act states that compensation interest shall be transformed into interest on late payment on the basis of the delay and shall be calculated at a level not higher than the level initially fixed.
Interest on arrears shall be computed on the amount due and interest on principal shall not be added to interest on arrears or penalty interest. In addition, the creditor may obtain a penalty interest not exceeding 30 % of the charges to be imposed as penalty interest. If necessary, penalty interest will only be invoiced on the net amount of the arrears.
However, the central bank shall regard the compensation and penalty charges whose actual interest rates are higher than 30 per cent ofthe median compound interest rate as extortionate interest rates. Central banks set the credit, conditions and currency rates of consumers used to calculate interest rates and publish them in two papers with domesticditions.
Explain any limitations that may be imposed on the choices, such as whether a New York or British selection is recognized and enforceable in your jurisdictions. On the basis of the authority of will, individual persons and juridical persons in Paraguay can reach an agreement that in case of dispute and controversy it is possible to appeal to international laws, arbitral tribunals and tribunals.
In fact, the Organic Law of the Central Bank provides that in the case of internationally concluded commercial or monetary treaties to which the Central Bank of Paraguay is a contracting partner, it may be governed by non-national law or by court or arbitration procedures. Generally, describe the conditions for the enforcement of a court judgement of a court in your country in relation to an overdue loan.
Judgments handed down by non-national jurisdictions are executable under the conditions of a treaty concluded with the home state. in the case of a final judgement in the State in which it was given by a tribunal having jurisdiction at supranational jurisdiction and resulting from the filing of a claim or an actual claim in respect of movable goods, if it has been transferred to that State during or after the period in which the proceedings have been held and dealt with abroad; in the case of a claim (action) brought before a tribunal of the Republic of Paraguay on the same cause of affair and between the same persons;
that the sentenced person, residing in the Republic of Paraguay, has been legally and lawfully quoted and must have been legally and properly represented and found guilty at the hearing or under the legislation of the State in which the proceeding was conducted; that the commitments to be sentenced are governed by the legislation of Paraguay; that the decision does not contain any provision contrary constituting domestic policy; that the decision satisfies the standards to be regarded as such at the place where it was given and the authentication criteria laid down by domestic legislation; and that the decision does not conflict with the rules of the applicable legislation; that the decision is not incompatible with the rules of the courts in the State in which it was given; that the decision is not incompatible with the principles of the protection of personal data and of the rights of the person concerned; that the decision is not binding on the State in which it was given.
In order to properly substantiate and enforce a judgement of a non-national jurisdiction, a formal request will be made to a trial magistrate of the first instance to process it, accompanied by a legalized and transliterated certificate and certificates of the stages taken to show that it has become definitive and that all other requirements have been fulfilled, unless included in the judgement.
What legal procedure (enforcement formality, certification, enrolment, entry, registration or submission ) must be followed when taking out a loan to make sure that a loan contract or equivalent judgement is legally valid in your area? In order to make sure that a loan contract is legally valid in Paraguay when it is not in Spanish, it requires an officially certified Spanish language interpretation of the various documentation related to the loan contract, a legalized and certified witness statement, testimonials of the actions showing that it has become definitive and all other conditions have been fulfilled, and paying a application tax.
The Central Bank states that preferential treatment for payments or commitments in third countries in respect of the right of third persons in respect of third persons in respect of payments in third countries will be finally established in the domestic language (Guarani) in the amount of the last instalment made in the context of the implementation of a judgement. In the event that such preferential or privileged payments must be established in legal proceedings instituted by third persons, the court shall order that the revenue from the legal sales of the goods sold by auction be used to acquire the amount of the alien holding the benefit of the preferential or privileged right to in the course of the auction on the international financial markets and shall order the opening of a legal bank accounts with the Central Bank in which the amount of the alien holding is lodged.
Must a loan contract be English translation or registration in a country to be legally valid in your jurisdictions? Does a non-resident financial institution need to be incorporated in your jurisdictions in order to assert its credit documents? Does the enforcement of credit documents before the jurisdictions of your home country treat overseas creditors differently from them?
In order to assert a loan in your jurisdictions, the loan must be proven by a borrower's note or some other type of executory deed? In order to be able to assert a loan in Paraguay more quickly, it is preferable that the loan be formalized by a borrower's note or another claim by the state. A loan may, however, be enforceable in this jurisdication by other documentation which may not necessarily be regarded as executional.
It is not only borrower's drafts that are deemed executable, but also other executory documents are: bills of Exchange; authentic documents; personal documents that have been duly executed and confirmed by the borrower, validly recognised or notarised, with the borrower's involvement and entry in the relevant register; admission of cash and receivable claims before a court of jurisdiction; attested invoices; among other things, that are executable under a statute.
In order to assert a warranty (Aval) in your jurisdictions, is it necessary that the warranty is proven by a warranty arrangement or any other type of execution precedent tortulo? Is there a limitation on lending to more than one borrower or on guaranteeing a loan to an affiliate? Is it possible for a counterparty to provide a secure or uncovered security for a loan to an unrelated third person?
A distinction is made between natural and juridical persons. An individual may provide a guaranty, whether covered or not, in relation to a loan to a third who is not related, and if the guarantor is unmarried or married but sharing the matrimonial assets, there is no defence against the provision of the guaranty; however, if the guarantor is matrimonial and has joint ownership, the agreement of the guarantor's partner is required to provide such a guaranty and to acquire the joint ownership.
Juridical persons: In the event that the Claimant (legal entity) attempts to give a warranty that is or is not covered by insurance in respect of a loan to a third person who is not related, the consent of the Director (Board of Directors) or the General Assembly (consisting of members or associates), as provided in the Articles of Association of that Claimant, is required to give such warranty, whether covered by insurance or not, making an explicit declaration in writing to that effect (i.e. to prevent a claim from going beyond the control of the Claimant).
Was there a difference between the grant of a lien and the improvement of a lien? Also in the fiduciary area, a statutory process must be heeded. Regarding the basic safeguarding of mortgages (real estate, aeroplanes and vessels with more than six tonnes GT ), we will briefly explain some issues (form conditions) to be considered:
Regarding the real collateral of the lien (furniture or loan title), we will briefly explain some issues (form conditions) to be considered: If the trustee transaction is to be perfected under Paraguayan law, the juridical character of the trustee's assets should be taken into consideration, since the trustee transaction, which does not include the assignment of proprietary rights to goods, is not dependent on the observation of any particular ceremony or formalities for its execution and enhancement.
Insofar as the trustee's exclusive purpose is the assignment of title to movable goods, this trustee activity shall be completed by the simple agreement of the contractual partners, which shall be reflected in a signed agreement, and the supply shall be carried out by the actual surrender of the same; where the assignment of title to the trustee goods is notifiable, the trustee's activity shall be set out in authentic documents to be entered before the Office of Civil Registry in which the trustee's estate is registered.
The fiduciary transaction is not completed until the official document has been completed and the land has been registered with the Office of Registration of the People. In practice, the Office of Registration of the General Information shall determine the method of acquiring proprietary titles in fiduciary transactions. Which is the most frequent way of providing and improving a right of collateral for movable goods?
Hypothecation is the most commonly used way of providing and improving a right of lien on movable property. Even though airplanes and vessels are both movable goods, they can be pledged. Which is the most frequent type of grant and improvement of a right of safety in real estate? Most commonly used way of providing and improving a right of lien on real estate is establishing a land charge on a real estate property.
Which is the most frequent way of providing and improving a right of collateral for claims and bank account balances? In the most customary way of providing and improving a right of lien on claims and bank account balances, a lien is created or the law of confidence is applied, either by means of a trustee activity for the purpose of transferring property or by means of a trustee administration without a property deed.
Do your jurisdictions accept the assignment of an asset to a trusts for the account of a creditor as a means of providing a surety for such asset? Yes, Paraguay recognizes this kind of transference. To this end, the law defined the escrow agreement as the escrow transaction in which the settlor grants the settlor irrevocable title to a right or title in one or more specified goods in order to secure performance of certain present or prospective liabilities created or created under his or her own control or that of a third person to whom the settlor intends to act as surety and, for one or more beneficiary lenders, the object of which is to secure credit facilities by the escrow agreement through the selling (realisation) of the escrow agreement in the event of non-performance by the obligor.
The settlor uses this procedure to assist the commitment entered into if it cannot be and will not be performed in a timely fashion in the foreseeable future, bearing in mind that the transferor is not the person who would assign the pawn, but a third person, the settlor, in accordance with the trustee's directions in the deed.
Fiduciary guarantees demonstrate the clear and definite payment intent of the borrower, who in most cases will be the settlor, who has carried out joint fiduciary asset sale arrangements arranged with the fiduciary in order to settle outstanding claims that are not settled on time. This is without doubt an act of good will which leaves aside any circumstance in which the confidence of guarantees behaves like a betrayal of the rule of Law, does not in itself constitute a breach of it or, in particular, does not contravene the provisions of the Civil Code which forbids the use of the term "Pignorative Pact" or "Realisation Pact", taking into account the following points:
i) the settlor is not the holder; ii) the payee believer has a charge over the escrow; iii) the payee believer is not the party that provides (sells) escrow guarantees in its favor; and iv) the settlor discharges a constructive duty by settling the liability. Do your jurisdictions accept the escrow assignment of an asset (e.g. alienação fiduciária) to a loan provider as a means of providing a surety for such asset?
Is there any type of property that cannot be mortgaged as securities under the law of your jurisdictions? Please describe any limitations in enforcing safety. E.g. all legal regulations which suspend the execution of the securities or stipulate that the execution is restricted to the official selling by the court.
If there are hypothecated property items, proceedings are instituted against them and not against other property items, and the ban is imposed on them; and after the sale of such property items only an outstanding account is left, then the other property items of the borrower are taken over. However, if hypothecations and liens are granted in favor of a finance institution properly entered in the Commercial Register, and if liens are pledged without assignment, they remain in force for all legitimate reasons until the termination of the commitment secured by a 20 year term from the date of entry, a re-enrollment must be carried out before the end of the statutory term; however, the lender may release the borrowers from the securities of the real estate affected by the outstanding amount of the commitment, provided that they have written off more than 50 per cent-of the latter;
In the case of mortgages or mortgages in favor of finance companies, this provision may also be based on the legal disposal of the real -estate object, either together or in batches, if the value of the real -estate object, the value of the indebtedness, interest and expenses, would not have been determined in written form by the contracting partners without an expert opinion.
If no bidder in the first sale calls for a new sale at 25 per cent or awards the bidder two-thirds of the new sale; mortgages and pledges sponsored by companies in the finance system may not be collected in the event of the borrower's demise in the principal proceedings and may only result in the successor property receiving the value of a profit after payment of principal, charges and outgoings.
Lastly, there is no obligation for banks in the enforcement process to give collateral if the law so requires. Outline any other pertinent regulatory consideration related to a loan to a borrowing entity in your jurisdictions.