Taxes and Tax Schemes in Paraguay | What You Need to Know in 2025

Paraguay, a landlocked country in South America known for its agricultural exports, low cost of living, and business-friendly environment, operates a comprehensive tax system that affects both residents and non-residents. Located in the heart of South America, Paraguay combines a growing economy with a relatively low tax burden, making it an attractive destination for international professionals and businesses.

Paraguay's economy, driven by sectors like agriculture, hydroelectric power, and manufacturing, has shown resilience despite global economic challenges. The country's tax system is designed to support economic growth while maintaining simplicity and efficiency. Recent reforms have focused on enhancing digital tax filing and introducing incentives for foreign investment.

The expat community in Paraguay is growing, with many professionals drawn to sectors like agriculture, manufacturing, and trade. The tax system, known for its low rates and simplicity, offers various benefits and deductions that can significantly impact an expat's financial planning.

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Paraguayan Income Tax

Paraguay employs a progressive income tax system with rates ranging from 8% to 10%. Resident taxpayers are subject to taxation on their worldwide income, while non-residents are taxed only on Paraguay-sourced income. The system includes social security contributions, which fund public services like healthcare and pensions.

Tax residents face the following income tax brackets (as of 2025):

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Additionally, social security contributions are generally calculated at around 9% of gross income for employees and 16.5% for employers.

If you want to have a better understanding of the taxes you should pay on personal income in Paraguay, you can use the personal tax calculator in the Taxation section of the Paraguay page.‍

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Paraguayan Tax on Overseas Income‍

Paraguay's treatment of foreign income depends on residency status. The country recognizes two main categories of taxpayers:

1. Residents: Taxed on worldwide income
2. Non-residents: Taxed only on Paraguay-sourced income

This system particularly benefits non-residents, who are only taxed on income earned within Paraguay. However, residents must declare and pay taxes on their worldwide income, with potential relief through double taxation treaties.

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‍Paraguayan Tax on Investments

‍Investment income in Paraguay receives specific tax treatment. Dividends and capital gains from listed stocks are typically taxed at a flat rate of 10%. The system includes:

• Dividends: Taxed at 10%
• Capital Gains: Taxed at 10%
• Interest Income: Taxed at 10%
• Rental Income: Taxed at progressive income tax rates, with deductions for expenses

Real estate investments face both federal and municipal taxes, with potential deductions for depreciation, maintenance, and other expenses.‍

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Paraguayan Corporate Taxation

‍Corporate tax in Paraguay is straightforward and competitive:

• Corporate Tax Rate: 10%
• Value Added Tax (VAT): 10% standard rate, with reduced rates for certain goods and services
• Withholding Tax: Applicable to certain dividends, interest, and royalties paid to non-residents

The effective corporate tax rate typically ranges from 10% to 12%, depending on the company's location. Small and medium-sized enterprises may qualify for certain tax reliefs and incentives.‍

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Special Tax Regimes

‍Paraguay offers several special tax arrangements beneficial to international professionals and businesses:

1. Maquila Regime: Tax incentives for companies engaged in manufacturing and export activities.
2. Foreign Income Tax Relief: Available to prevent double taxation on overseas income for residents.
3. Special Tax Benefits for Key Workers: Tax incentives for qualified foreign professionals working in Paraguayan companies.
4. Investment Allowances: Deductions for investments in certain regions or sectors.

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Regional Comparison‍

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Tax Planning for Paraguay

‍Effective tax planning in Paraguay requires attention to several key areas:

1. Residency Status Management: Strategic planning of residency status can optimize tax treatment of foreign income.
2. Investment Strategy: Utilizing tax-advantaged accounts and long-term holding periods can optimize investment income.
3. Documentation: Maintaining clear records of overseas assets and income sources is crucial.
4. Professional Advice: Engaging with tax professionals to navigate the complexities of the Paraguayan tax system.

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