./.RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/PRY/2
25 November 1998
(98-4733)
Committee on Subsidies
and Countervailing MeasuresOriginal:  Spanish
SUBSIDIES
Replies to Questions from the European Community1
Regarding the New and Full Notification of Paraguay2
The following communication, dated 15 October 1998, has been received from the Permanent
Mission of Paraguay.
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Questions
In Document G/SCM/N/38/PRY of 12 June 1998, Paraguay indicates that it grants no
subsidies which require notification under Article 25.2 of the WTO Subsidies Agreement ("the
Agreement").
The Community would like to know whether Paraguay grants, under any conditions,
reduced or zero rates of corporate income ta x to certain companies in Paraguay, and whether
Paraguay exempts certain companies, under any conditions, from import duties and taxes on
imported machinery and other materials.
The Community would also like to know whether Paraguay grants tax or other benefits
to companies located in certain regions or zones.
If such schemes exist, they would seem to constitute specific subsidies and Paraguay is
requested to describe them and notify them in  accordance with the provisions of Article 25 of
the Agreement.
Replies
In connection with the questions raised, under Law No. 60 of 1990 Paraguay operates a "Tax
Incentive Regime for Domestic and Foreign Capital Investment" which has been duly notified and is
available to Members in the WTO Secretariat.  Chapter III of this Law describes thenon-discriminatory concessions granted to any natural or legal person within the context of this
promotion scheme.
The concessions granted under Law 60/90 include exemption from 95 per cent of the tax on
corporate earnings proportional to the gross sales generated by the investment for a period of fiveyears and exemption from customs duties on capital goods intended for the investment project and
from the Acts and Documents Tax:  Law No. 125/92, Articles 127 and 128, among other taxes.  These
                                                     
1 G/SCM/Q2/PRY/1.
2 G/SCM/N/38/PRY.G/SCM/Q2/PRY/2
Page 2
concessions are granted to those who comply w ith the horizontally applied, objective, economic
criteria and conditions laid down in Article 2 of the Law.
Decree No. 6361 of 26 March 1991, which regu lates the application of Law No. 60/90,
specifies the beneficiaries of the tax exemptions in question and provides broad coverage of theproductive sectors.
In this connection, exemption from value-added tax (VAT) is granted to industrial activities
in the initial installation phase and exemption from 95 per cent of corporate earnings tax to all
industrial, mining and quarrying, and farming activitie s.  Services such as building, transport, grain
silos and processing, storage and warehousing, the hotel  and catering trade, scientific research, health,
and rural and urban telephone systems, which constitute the principal support services for Paraguay'sproductive activities, also benefit from certain tax exemptions.
These provisions are consistent with Article 2(b) of the Agreement on Subsidies and
Countervailing Measures and are not "specific" to certain enterprises as the term is defined in
Article 2(a) and (c).
Article 6 of Law No. 60/90 states that "the term  of the concessions granted under Article 5 of
the Law shall be extended to ten years if the investments derive from repatriation of capital or are
made in priority development areas specified in the plans and programmes drawn up by the Technical
Secretariat for Planning".
In this connection, it should be made clear that the extension of the concessions for
enterprises which invest in priority development areas specified in the plans and programmes drawn
up by the Technical Secretariat for Planning, within the national government's general development
programme, is available without discrimination to all enterprises wishing to invest in those areas.
With these considerations in mind, our Government reaffirms its belief that this investment
incentive programme does not constitute a subsidy, as defined in Article 1.1, which is "specific"
within the meaning of Article 2, so that it does  not need to be notified under Article 25.2 of the
Agreement, being of general application and not being intended to distort the allocation of resources
in favour of particular enterprises or productive sectors.
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