Tax system in Paraguay
Paraguay taxes by source. For individuals and companies, the core rule is that Paraguayan-source income is in scope, while foreign-source income is generally outside the local tax base unless a specific sourcing rule says otherwise.
Individuals generally face 10% IRP on personal-service income once the annual PYG 80 million threshold is crossed, while capital income and gains use the separate 8% IRP category. Companies pay IRE at 10% on Paraguayan-source profits, while profit distributions are taxed separately through IDU at 8% for residents and 15% for non-residents.
The main practical add-ons are VAT at 10% in most cases, a 5% reduced rate for specific items including some real estate sales, payroll social security contributions, and a phased electronic-invoicing rollout.
Tax rates at a glance
- Personal service income
- 10%Territorial
- Wealth tax
- 0%
- Inheritance tax
- 0%
- Capital gains tax
- 8%
- Corporate tax
- 10%
- Dividend tax
- 8% / 15%
- VAT
- 10%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
Local foundersExpatsInvestorsFreelancersHolding companies
Watch out for
- Paraguay is territorial, not tax-free. Paraguayan-source income still faces IRP, IRE or IDU, and VAT can apply at 10% or 5% depending on the transaction.
- Payroll social security is material for employees, and employers need to plan for electronic invoicing and monthly compliance if they operate locally.
- Paraguay has only a small treaty network, so foreign withholding taxes and home-country rules often matter more than the local headline rates.
Frequently asked questions
Is Paraguay a low-tax country?
Paraguay is low-tax for the right fact pattern, but it is not zero-tax. The country taxes Paraguayan-source income, applies 10% VAT in most cases, and still has payroll and dividend withholding costs.
Does Paraguay have wealth or inheritance tax?
No. Paraguay does not have a broad net wealth tax or a standalone inheritance tax, although property, VAT and succession paperwork can still create costs.
Is Paraguay good for founders?
Yes, if the business has Paraguayan substance or if the founder understands the territorial rules, e-invoicing, VAT and social security. It is a cleaner fit for local operations than for pure payment-processing structures.