How income tax works in Paraguay
Paraguay's personal income tax is territorial. Individuals resident in Paraguay or abroad are taxed on Paraguayan-source income, which includes personal services performed in Paraguay and capital gains that are within the IRP base.
Personal-service income is taxed at 10% under IRP once gross taxable service income exceeds PYG 80 million during the year. Capital income and capital gains use the separate 8% IRP category.
Capital gains are taxed separately at 8%. Foreign tax credits are not available for income taxes paid abroad, so foreign-source income usually needs a separate home-country review.
Employees also need to model payroll social security. Standard monthly contributions are 9% employee / 16.5% employer for commercial entities and 11% / 17% for financial entities.
Income tax brackets in Paraguay
| Bracket | Rate | Notes |
|---|---|---|
| Gross taxable service income up to PYG 80,000,000 | Outside IRP service-income scope | The IRP service-income obligation starts once the annual threshold is exceeded. |
| Gross taxable service income above PYG 80,000,000 | 10% | IRP rate on net taxable service income after permitted deductions. |
| Capital income and capital gains | 8% | Separate IRP RGC category; IDU distributions are excluded. |
Tax rates at a glance
- Personal service income
- 10%IRP
- 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%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
EmployeesFreelancersExpatsConsultantsRemote workers
Watch out for
- Paraguay taxes Paraguayan-source income, so foreign-source income usually does not fall into IRP, but source rules should still be checked carefully.
- If you are an independent director, manager or similar office holder, social security can be optional in some cases, but payroll treatment should be confirmed before you assume that.
- Annual filing is due in March, and taxpayers should keep clean records because the tax authority focuses heavily on properly documented expenses and withholding.
Frequently asked questions
Do expats pay income tax in Paraguay?
Expats can be taxed on Paraguayan-source income, but Paraguay does not generally tax foreign-source income under IRP. The practical result depends on where the work is performed and how the income is sourced.
What is the income tax rate in Paraguay?
Personal service income is generally taxed at 10% once the IRP threshold is crossed. Capital income and capital gains are generally taxed at 8% under the separate IRP category.
When is the Paraguay income tax return due?
The annual personal income tax return is due in March, with payment also due in March according to the taxpayer ID schedule.