The Presidency of the Republic issued a decree allowing the partial deduction of VAT on supermarket purchases, office rentals, essential services, health and other items.
The strict VAT deduction rule will incentivize formality for consumers and businesses.

The decree details that for purchases of food and non-alcoholic beverages, the deduction can reach up to 30% of the total value of VAT, according to the La Nacion.

On the other hand, the deduction of 50% of the office rental payment will be allowed when the taxpayer works within the rented house. The essential services of electricity, water, sewage, garbage collection and telecommunications services may deduct VAT up to 50% when these are part of the taxed service.

The essential services of electricity, water, sewage, garbage collection and telecommunications services may deduct VAT up to 50% when these are taxable.

On the other hand, personal health expenses, including medications and treatments, training related to services provided, maintenance, remodelling and refurbishment, supplies, furniture and office equipment, may also deduct the Value Added Tax.

The economic sectors, analysts, specialists and accountants’ associations debate the benefits or disadvantages of the pending enactment of the law that seeks 100% deductibility of the Value Added Tax (VAT) for personal purchases and food consumption.

And among the series of pronouncements from the Accounting Resistance of Paraguay, Lilian Torres, a member of the union, reiterated that the promulgation of the regulation will inevitably be positive since it will lead to the formalization because it will act as an incentive for both consumers and shops.

“This is going to be an incentive for people and businesses to reach formalization,” said the specialist in contact with 1020 AM. Torres mentioned that according to deputy Hugo Ramírez, who had presented the project that modifies articles 88 and 89 of Law No. 6380/2019, “Modernization and simplification of the national tax system”, the President of the Republic would be in favour of the enactment, so it is in the hands of the Executive Power.

Clothing is also included in this decree when it is related to the exercise of the profession.

Other items that may be deducted are the hiring of advertising and marketing services, subcontracting of professionals assigned to provide the taxed service, spare parts, lubricants, maintenance, repairs and insurance of the vehicles intended for the provision of the service.

Please, note that legislators are searching for solutions to create a modern system where 100% of the VAT may be deductible, according to Paraguay.com 

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