Paraguay: corporate tax guide

What the tax system covers

Business profits and distributions are separate layers. A Paraguayan company must classify the source of its revenue, apply the appropriate business-income regime and then consider the distribution tax when profits reach owners.

When a company becomes tax resident

Law 6380/2019 Article 5 treats as resident entities formed under Paraguayan law and foreign entities that establish domicile in Paraguay, from registration in the relevant public registry. This definition concerns the legal entity. It must be separated from the territorial and deemed-source rules determining which income is taxable, and from any foreign claim based on management or operations. A founder’s address alone is not the foreign-entity domiciliation and registration described in Article 5.

Rates and the tax base

10% IRE general rate. The general business-income regime and SIMPLE use 10%. RESIMPLE and other special regimes have different mechanics. Distribution-level IDU and nonresident-payment taxes are additional to company income tax.

Outbound dividends, interest and royalties

Dividends: 15%. IDU applies a 15% rate to distributions to nonresidents, as distinct from 8% for residents. Classify the distributing entity and distribution correctly; this is separate from the entity’s business-income tax.

Interest: 4.5% qualifying unrelated lending; 15% related lending. The statutory 15% INR rate is applied to a 30% base for covered unrelated foreign lending and a 100% base for related-party lending in the cited ruling. The instrument, lender and relationship need assessment before applying a gross effective rate.

Royalties: 15% on ordinary full-base royalty income. The ordinary INR rate is 15%. Determine whether the contract supplies rights, digital services, personal services or another category, because statutory deemed bases differ; royalty characterization cannot be assumed from the invoice label.

Understand what territorial taxation actually covers

Law 6380 separates business income, personal income and other tax categories. Its personal-income source provision covers income from activities carried out in Paraguay, property located there and rights used economically there. Additional statutory rules can bring specified overseas activities within Paraguayan source.

A territorial description is a starting point, not the conclusion for an online business. A service delivered by someone working in Paraguay may require a different answer from interest on a genuinely foreign investment.

Distinguish the person from the company

Identify who earns the income and under which legal arrangement. A personally delivered service, a local enterprise, a foreign entity with local activity and a passive investment portfolio should not be combined into one generic zero-tax calculation.

The business-income law includes local branches, agencies and permanent establishments of foreign entities. A foreign incorporation does not eliminate the need to assess what the company is doing in Paraguay.

The main rates apply to different tax bases

The general IRE rate is 10% of net business income. Article 43 sets IDU at 8% for distributions to resident recipients and 15% for distributions to nonresidents, including the foreign head office. Whether and when a distribution is treated as made requires the separate article 44 rules.

For personal capital income and gains, article 60 states 8%, but article 59 determines the relevant base. For specified asset sales, the statutory calculation can use the lower of 30% of sale value and the supported actual difference, subject to its documentary conditions. An eight-percent headline does not always mean eight percent of gross sale proceeds.

A foreign invoice is not a source determination

Article 48 includes activities performed in Paraguay and specified services performed outside Paraguay for IRE or IRP taxpayers. The latter is an express source extension. A client’s nationality, invoice currency and payment processor are useful facts, but none individually replaces the statutory classification.

A defensible implementation records who performs the services, where and under what contracts, then determines registrations, invoicing and taxes for that arrangement. Corporate ownership, beneficial ownership, foreign attribution and emigration questions still need their own jurisdiction-specific review; this guide does not infer an absence of rules merely because the general system is source-based.

Foreign companies and income attribution

A comprehensive current foreign-entity attribution review has not been completed; no universal no-CFC conclusion is made.

Departure, migration and continuing obligations

Tax deregistration, retained local income and entity consequences require a separate departure review.