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Do you want to incorporate in Paraguay? Reading this will help you becoming knowlegeable on the specific tax laws and rates for a LLC which is the most common legal entity in Paraguay.

Paraguay taxes corporate income on a territorial basis. This means that income accrued offshore, from our research, and these things do change, is not subject to taxation. However, income from interest, commissions, and capital gains accrued outside the country, are considered local-source income and subject to Corporate Income Tax. Taxes are low in Paraguay because the income corporate tax rate is 10%. This ranks Paraguay as 34th overall in terms of corporate tax rate worldwide.

The value added tax (VAT) rate is 10.00%, which ranks Paraguay as 47th overall in terms of VAT taxation rate internationally. In terms of other taxation, an employer will contribute 16.5% to the equivalent of a social security fund and an employee will contribute 9.00%. The overall complexity of the tax system is medium. This is measured by average time to comply with a country's labor tax requirements is as it is 96hours. Contributing to this is the number of yearly labor tax payments, which is 1 in PY.

Thin capitalization laws are not in effect. This refers to any sort of laws on companies' debt-to-asset ratios.
Distribution of dividends is subject to a 5% additional tax charged on source. Dividends received are usually not considered taxable income. Stock dividends are not considered taxable income, except when represent more than 30% of taxable income of an investor. Dividends are payments of a company profit, voted on by the board, to shareholders. Dividends can be issued as shares of stock, cash payments, or other property.
Capital Gains are considered business income and therefore taxed at a flat rate of 10%. A capital gains tax is levied on the profits that a corporation or natural person realizes when he or she sells sells a capital asset for a price that is higher than the purchase price.

The interest withholding tax rate is estimated at 15%. This should be interpreted that the taxman expects relevant legal entities to withhold 15% of interests paid abroad. The dividends withholding tax rate is 15%. This should be interpreted that the tax authorities expects LLC's to withhold 15% of dividends remitted abroad. The royalties withholding tax rate 15%. This means that the taxman expects companies to withhold 15% of payments abroad on royalties.
There is no known tax on wealth in Paraguay. There are no inheritance and transfer taxes. There is a real property tax. There are many well known credits for innovation, certain economic activities and free trade areas that include tax exemptions and incentives in Paraguay.

The above is not tax or legal advice for your particular circumstances. We are able to help you to find a tax advisor in Paraguay who can give you the proper advice and help you need. Ready to get started? Click the free consultation button above or press incorporate now if you are in a hurry.

Country details

South America
Spanish (Paraguay), gn

Tax treaties

Country Type Date Signed
Chile DTC  2005-08-30

Tax treaties Map



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