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1. EQUAL POLICIES FOR NATIONAL AND FOREIGN INVESTMENTSThere are no restricted areas, no discrimination and no limitations. The only difference betweenforeign investments and those made by Paraguayan nationals lies on taxation on net earnings, asforeign investments are subject to a five percent additional tax on remittances or credits in favor ofbeneficiaries, who are not residents of this country. Said profits or dividends are taxed 5% (the generalrate of tax is 20%, adding a 10% if incorporated as foreign branches). If these funds are reinvested inthe improvement of installations, renewal of the capital assets or destined to cover the costs ofplanting, forestation and reforestation in rural areas, then this additional tax is not levied. The profitsand dividends are exempt from taxation for a period of five (5) years if the investment is benefited byAct 60/90, paragraph (h), of article N° 5.2. INVESTMENT ACTThe Investment Act promulgated in late 1991 as Act 117/1991 guarantees a framework of equalconditions for local and foreign investment aiming to promote Paraguay’s social and economicdevelopment. This Act allows investors to obtain investment insurance locally or overseas. It also setsthe requirements for the establishment of joint ventures.3. INVESTMENT PROMOTION ACTInvestment Promotion Act 60/1990, promulgated on March 26, 1990, establishes a special tax systemoffering incentives for foreign investment projects. Companies falling under this legislation enjoy totalexemption from all kinds of taxes on certain aspects of the investment project, such as taxes on theincorporation or recordal of companies, capital increase, exchange operations and the import ofcapital goods. Additional benefits are applicable on investments of at least US$5 million.The procedure for obtaining benefits include the submission of a feasibility study to the InvestmentCouncil, based on information required by legal provisions; the Investment Council’s approval of theproject; and a joint resolution by the Ministry of Finance and Ministry of Industry and Commercegranting the respective fiscal benefits.The recent fiscal reform introduced a reduction of the income tax rate in contrast with our previoustax Act from 30% to 20% in 2006, dropping to 10% the following year.134. INVESTMENT GUARANTEESBerkemeyer Attorneys and Counselors | Asunción - Paraguay