Brazil tax reform: 1 key update — 3 mins
Hey, I’m Douglas, Editor-in-Chief of the Brazilian Tax Reform Portal 🇧🇷.
1) Paraguay: a new strategic destination for Brazilian companies
Paraguay has been consolidating itself as an alternative for Brazilian companies seeking lower operating costs and greater legal certainty. Among the groups that have established production units in the country are Lupo and Estrela (read more)
The movement reflects a growing trend, especially among industries and retailers focused on production and export.
INCENTIVES
According to Daniela Lavin, Chief Tax Officer at Brinta, the factors that weigh most heavily in choosing Paraguay are significant tax benefits, special incentive regimes, and a regulatory environment perceived as more stable:
“Income tax in Paraguay is only 10%, which is extremely attractive compared to other countries in the region,” Lavin says. She adds that the value-added tax (VAT) is also 10%, one of the lowest in Latin America.
MAQUILA REGIME
One of the main attraction instruments is the Maquila Regime, aimed at the production of goods for export. The model provides for significant tax exemptions, provided that projects are approved by the Paraguayan government:
“Companies must meet certain requirements and, once this is approved by the government — since a resolution confirming eligibility is required — they may be exempt from paying income tax and value-added tax,” she said.
Lavin also mentioned other preferential regimes, such as Free Trade Zones, which expand tax benefits for certain industrial and commercial operations.
Daniela Lavin, Chief Tax Officer at Brinta
MOST REPRESENTED SECTORS
Brazilian companies established in Paraguay operate mainly in the textile and fashion retail sectors, such as Lupo and Estrela, but other segments are also expanding in the country.
According to Lavin, the Maquila Regime is particularly attractive for manufacturing activities.
THE REASONS
For Daniela Lavin, the migration of Brazilian companies to Paraguay does not represent an abandonment of the domestic market, but rather a strategic reassessment in light of Brazil’s regulatory environment:
“It has to do with legal uncertainty and the constraints Brazil currently imposes, which lead companies — and also individuals — to rethink where it is best to be located and where it is best to conduct their business,” she says.
Despite acknowledging Brazil’s economic relevance, Lavin highlights that frequent changes in the rules increase risks for business planning. According to the executive, the complexity of tax legislation alone is not the main obstacle:
“I think complexity is a factor, but in my experience, this complexity can be mitigated by the economic opportunities companies have to do business here.”
The most significant impact, she adds, comes from constant changes — especially in the tax field — and from the lengthy transition period of the consumption tax reform, which tends to generate additional costs for companies.
MERCOSUL
“Companies begin to analyze other ways of doing business, such as relocating production — for example, to Paraguay, which offers incentives — and exporting to Brazil, using Mercosur and other tax and fiscal strategies that do not require a physical presence in the country.”
According to Lavin, the combination of legal certainty, more favorable taxation, and dividend tax exemptions has been decisive in corporate planning.
🇧🇷🔍 Brazil is changing. Are you watching closely?
If you found this content helpful, share it with a colleague, your team, or someone from your company. It really helps us grow and reach more people who, just like you, are looking to understand and get ready for Brazil’s tax reform.
