Paraguay’s tax system is straightforward, territorial, and business-friendly. With low corporate and personal income tax rates capped at 10% and no inheritance, gift, or wealth taxes, it appeals to local and international investors. While income taxation primarily focuses on Paraguayan sources, recent reforms have broadened its scope to include certain types of foreign financial income. Supported by a few Double Tax Treaties (DTTs) and investment protection agreements, Paraguay offers an attractive tax environment for those seeking simplicity and stability.
Paraguay’s Tax System overview
| Corporate Income Tax: | 10% |
| Personal Income Tax: | 10%, progr. |
| Inheritance Tax: | None |
| Gift Tax: | None |
| Wealth Tax: | None |
Territorial Tax Regime
Corporate Income Tax
Corporations are taxed on Paraguayan source income only at a rate of 10%. As part of the 2020 tax reform, the source rules of the territorial regime were expanded, inter alia, to tax Paraguay corporations on certain types of financial income on assets deposited abroad with foreign financial institutions, and dividends and profits obtained from foreign entities.
Personal Income Taxation
Individual residents of Paraguay are subject to tax on local source income at progressive rates up to 10%. Paraguay does not impose wealth tax, gift tax or inheritance tax.
Anti-Avoidance Rules
Paraguay has no General Anti-Avoidance Rules (GAARs). Paraguay has Transfer Pricing rules, and Thin Capitalization rules, but no Controlled Foreign Corporation (CFCs) rules.
Double Tax Treaties (DTTs)
International Investment Protection
OECD Multilateral Convention
Common Reporting Standard (CRS)
FATCA
Paraguay’s tax regime stands out for its low rates and territorial focus, making it a favorable option for businesses and individuals with domestic income. The absence of wealth, gift, and inheritance taxes adds to its appeal, though limited global tax agreements may require careful planning for international stakeholders. With its business-friendly structure and investor protections, Paraguay continues to be an attractive destination for growth and investment.
