On October 14, the Agreement between Spain and Paraguay to avoid double taxation and to prevent tax evasion or avoidance in matters of income taxes will come into force.
The objective of this Agreement, published on July 29 in the Official State Gazette (BOE9), is to promote economic relations, stimulate investments and strengthen bilateral cooperation in tax matters between both countries, without generating opportunities for non-taxation or reduced taxation through tax evasion or avoidance, including avoidance strategies through the abusive use of agreements by third parties.
The Agreement establishes the criteria relating to taxation on real estate income, business profits, maritime and air transport, associated companies, dividends, interest, royalties, capital gains, dependent personal services, remuneration as directors and directors, income from artists and athletes, pensions, public functions, students and other income. The text incorporates the standards of the Organization for Economic Cooperation and Development (OECD).
The negotiation of this Agreement began between 2013 and 2014 and, since then, some of the most relevant steps have coincided with official visits by the presidents of Paraguay to Spain.
For example, the final agreement was reached in the third round of negotiations, held in Madrid on November 7, 2022, three days after the official visit to Spain of the then president of Paraguay, Mario Abdo Benítez. During that visit, the Paraguayan president highlighted “the relevance of Spanish investments for the economic development” of his country and referred, precisely, to “the upcoming implementation of a bilateral agreement to avoid double taxation” among “the competitive advantages” that Paraguay offers to investors.
The signing of the Double Taxation Agreement between Spain and Paraguay was authorized by the Council of Ministers on February 28, 2023 and the agreement was signed in Santo Domingo (Dominican Republic) on March 25, 2023.
The Council of Ministers sent the text to the Cortes Generales on February 20, when there was barely a week left for the president of Paraguay, Santiago Peña, to make his first visit to Spain since taking office in August of last year.
During that visit, Peña highlighted Paraguay’s potential as an investment destination for Spanish companies and assured, during the Spain-Paraguay Business Meeting, organized by the CEOE and which brought together Spanish businessmen with interests in the South American country, that Paraguay has a “simple” tax regime that helps generate employment and that the Government is not considering increasing taxes.
Likewise, the President of the Government, Pedro Sánchez, highlighted to Santiago Peña the role of Spanish companies in the economic growth of Paraguay, which makes Spain the fifth largest investor worldwide.
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