Paraguay: personal tax guide

What the tax system covers

The ordinary system taxes Paraguayan-source income, with separate regimes for personal services and capital income. Services performed in Paraguay can remain local-source even where the customer, contract and payment account are abroad.

When you become tax resident

Annex Article 2 of Decree 3181/2019 links individual fiscal residence to permanent residence under the migration legislation; Law 6380 Article 49 separately identifies resident individuals within personal income tax. A temporary immigration permission should not be treated automatically as the permanent status named in that regulation. The certificate procedure under General Resolution 65/2020 requires identity evidence and an immigration movement record for the period concerned; taxpayers also need a tax number and compliance with their obligations. The provisions cited here do not establish a universal 120-day residence threshold. Immigration status, the tax certificate and the former country’s residence conclusion should each be documented.

Rates and the tax base

8%, 9% and 10% personal-services bands. These progressive rates apply within IRP to taxable personal-services income. The separate capital-income category uses 8%; source, registration thresholds, deductions and the IDU dividend charge require their own analysis.

Private investment gains and business trading

The IRP capital category taxes covered Paraguayan-source investment gains at 8% of the statutory net base. Asset-sale computations can use the lower of 30% of proceeds and the documented actual gain, subject to the specific rules. This is not 8% of every gross sale, and business income and IDU dividends are separate categories.

Asset cost basis on arrival

The arrival cost-basis treatment for this country has not yet been established in this comparison. Do not assume either an arrival-value reset or retention of original cost.

• The treatment needs to be checked separately for ordinary shares, funds, property, business interests and assets acquired by gift or inheritance.

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.

Personal-service tax uses progressive bands

Article 69 applies 8% to the first Gs. 50 million of net service income, 9% to the next band through Gs. 150 million and 10% above that. These are marginal slices. The law separately says no payment is due where gross personal-service income does not exceed Gs. 80 million in the fiscal year, while specified formal obligations remain.

Keep the distinction between gross receipts, allowable costs and net taxable income. Personal capital and service categories are calculated separately under article 53; expenses and results cannot simply be shifted from one category to the other. Accurate records determine the practical value of the rates.

Separate company tax, distributions and personal services

Law 6380 sets the general IRE business-income rate at 10% of net income. Distributions subject to IDU have a separate 8% rate for resident recipients or 15% for nonresident recipients. A company’s ten-percent headline therefore does not describe every owner’s final tax burden.

Personal capital income and gains have an 8% statutory rate on the applicable tax base. Personal-service income uses progressive 8%, 9% and 10% bands, with a separate gross-income payment threshold and formal obligations. Classify both the earning person and the income category before comparing the outcome with another country.

Work location matters for a remote business

The personal source rule covers activities performed in Paraguay, property there and rights used economically there. It also expressly extends to certain services performed outside the country by resident taxpayers for IRE or IRP taxpayers. Payment from an overseas bank does not answer those tests.

An owner working from Paraguay should map services, company contracts, customer delivery and local personnel. A passive foreign portfolio and a locally performed consulting business are materially different. The same review should establish whether the old home country still regards the person or a company as resident.

Obtaining a residence certificate for the relevant period

General Resolution 65/2020 allows an individual, entity or legal structure to request a certificate for the relevant tax period. A current taxpayer must provide a tax number, be up to date with obligations and submit identity evidence. Non-taxpayers and former taxpayers have their own identity-document route. For individuals, the immigration movement record is expressly required; a tax number alone is not the complete application.

The resolution states a ten-business-day issue period after an accepted application and one-year certificate validity from issue. Treat these as the published administrative rule, not a guaranteed processing promise. Incomplete evidence can lead to rejection and a new application after correction. The certificate supports the particular period and purpose; it does not settle an overseas tax authority’s separate residence claim.

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.