Panama vs Paraguay taxes (2026): territorial tax and corporate tax

Panama vs Paraguay tax rates at a glance

Tax	🇵🇦 Panama	🇵🇾 Paraguay
Income tax	Personal income tax: 0-25% Highest bracket tax: 25% Foreign income tax: 0% Salary withholding: Yes Employee social security: 9.75% Educational insurance: 1.25%	Personal service income: 10% Capital income and gains: 8% Capital gains tax: 8% Foreign-source income: 0% generally Employee social security: 9% / 11% Employer social security: 16.5% / 17%
Corporate tax	Corporate income tax: 25% CAIR minimum: 4.67% State-owned companies: 30% DMTT: 15% VAT / ITBMS: 7%	Corporate income tax: 10% Foreign-source income: 0% generally Dividend distribution tax: 8% / 15% VAT: 10%
Capital gains tax	Capital gains tax: 10% Securities WHT: 5% Real estate transfer tax: 2% Income tax advance: 3%	Capital gains tax: 8% Corporate capital gains: 10% Share gains: 8% Property gains: 8%
Dividend tax	Standard dividend WHT: 10% Exempt / foreign-source: 5% Bearer shares: 20% Payment deadline: 10 days	Dividend withholding tax: 8% / 15% Domestic dividend tax: 8% / 15% Foreign dividend tax: Case by case
Wealth tax	Net wealth tax: 0% Net worth tax: 0% Annual asset tax: 0%	Net wealth tax: 0% Net worth tax: 0% Annual asset tax: 0%
Inheritance / estate tax	Inheritance tax: 0% Estate tax: 0% Gift tax: 0% Probate tax: 0%	Inheritance tax: 0% Estate tax: 0% Gift tax: 0% Probate tax: 0%
VAT / GST / sales tax	VAT / ITBMS: 7%	VAT: 10%
Standard VAT / ITBMS	7%	10%
Standard corporate headline	25%	10%

Who wins on each tax

Personal income taxPanama

Panama generally excludes ordinary foreign-source income; specified passive income of multinational-group entities has a separate economic-substance regime.

Corporate taxParaguay

Paraguay's 10% corporate tax is far below Panama's 25% rate on Panama-source profits.

Capital gains taxParaguay

Paraguay is usually lower for ordinary taxable gains, while Panama commonly uses a 10% capital gains rate.

VAT / indirect taxPanama

Panama's 7% ITBMS is lower than Paraguay's 10% VAT.

Territorial planningPanama

Panama is usually stronger for ordinary foreign-source income planning, subject to the multinational passive-income rules.

The verdict

Panama wins when the income is genuinely foreign-source. Its territorial system generally taxes Panama-source income and leaves ordinary foreign income outside the local net. Specified passive foreign income of multinational-group entities is subject to a separate economic-substance regime, which is why the ordinary territorial treatment must be read with that exception in mind.

Paraguay wins when the business is local or profits are taxable onshore. Its 10% corporate tax and 10% VAT are lower than Panama's 25% corporate tax and 7% ITBMS only on the VAT side, and the overall rate stack is simpler for many operating businesses.

The decision rule is clean: choose Panama for foreign-source income and territorial planning; choose Paraguay for low ordinary rates on local income, company profits and day-to-day operations.

How to read this comparison

Panama and Paraguay are both attractive in Latin America, but for different reasons. Panama is the foreign-source income play; Paraguay is the low-local-rate play.

Which one fits you

🇵🇦 Choose Panama if you're a…

Mobile founders earning outside Panama
Investors who want a strong territorial system
Residents prioritising foreign-source income treatment

🇵🇾 Choose Paraguay if you're a…

Local operators comparing company tax
Residents who want simple low rates
Businesses selling mainly in Paraguay

Frequently asked questions

Is Panama or Paraguay better for tax?

Panama is usually better for foreign-source income and territorial personal planning. Paraguay is usually better for lower local corporate tax, lower ordinary rates and local operating businesses.

Does Panama tax foreign income?

Generally, Panama taxes Panama-source income rather than ordinary foreign-source income. However, Law 926 of 2026 applies an economic-substance regime to specified passive foreign income of multinational-group entities; classification and documentation still matter.

What is Paraguay's corporate tax rate?

Paraguay's standard corporate income tax rate is generally 10%, with separate dividend and withholding rules depending on the payment.