Paraguay offers a 10% tax, cheap power and a useful time zone for tech and services exporters — and 10% VAT on services sold abroad. Here is how exported services are taxed, when services maquila pays off, how foreign clients and payments work, and how to set up and hire.
Paraguay has real advantages for a software or remote-services business: a 10% corporate tax, permanent UTC−3 time with good overlap with both the US East Coast and Europe, some of the cheapest electricity in the region from the Itaipú and Yacyretá dams, a young workforce and an EAS that can be formed online in a few days. A growing number of founders run development teams, support desks and agencies from Asunción for clients in the US, Europe and the rest of Latin America.
There is a catch most of them discover late. Paraguay charges 10% VAT on services performed in Paraguay, even when the client is abroad. There is no general zero rate for exported services, and the tax authority has confirmed it in binding rulings. The way around it is the services maquila regime — which brings its own conditions. This guide covers the tax, the structures, getting paid, hiring and the practical setup.
Paraguay’s VAT law taxes services performed in the country, regardless of who receives them or where the payment comes from. Exports of goods are zero-rated and their input VAT can be refunded; services have no equivalent rule. In September 2025 the DNIT applied this to a translator working from Paraguay for foreign clients: 10% VAT, because the service was planned and performed from an operational centre in Paraguay. An earlier ruling on an IT engineer reached the same conclusion for work done from Paraguay, and exempted only work physically done abroad.
What it means
Your invoice to a client in Texas or Berlin carries 10% Paraguayan VAT.
Can the client recover it?
No. A foreign client cannot claim Paraguayan input VAT; it is a real cost to them or to you.
Excess input VAT
Carries forward; there is no general refund right for service exporters.
Industry pressure
Service-sector chambers have asked for an exemption since 2019; none has been granted.
A simple example shows the stakes. A Paraguayan company bills a US client US$10,000 a month for a development team. Under the ordinary regime the invoice is US$11,000 with VAT; the client cannot recover the US$1,000, so either the client pays 10% more than a competitor abroad would charge, or the company absorbs it and its margin shrinks by US$12,000 a year. The company then pays 10% IRE on its profit. Under a services maquila programme the same invoice is US$10,000 with no VAT, and the single tax is 1% of the greater of the invoice or the local value added — a small fraction of the VAT and corporate tax it replaces, with no IRE or IDU on top.
In practice, companies either price the VAT in, negotiate it into contracts, or move into the services maquila regime. Check your exact set-up with a binding consultation if the amounts are significant.
Law and practice: Law 6380/2019, arts. 84, 100–101; DNIT binding consultation No. 677 (2025); EY Paraguay tax alert, September 2025; Decree 3107/2019.
Service income is Paraguayan-source when the work is done in Paraguay, so a Paraguayan company billing foreign clients pays 10% IRE on its profit. Small companies may qualify for IRE SIMPLE (income up to Gs 2,000 million) if their legal form allows it; most foreign-owned EAS use the general regime. Dividends to the owners bear 8% IDU to residents and 15% to non-residents.
Two details matter for tech companies. Exchange gains on dollar balances are taxable for a company, so a business that keeps its earnings in USD will see FX movements in its tax base. And payments abroad for software licences, cloud services or subcontractors carry non-resident tax and VAT obligations for the Paraguayan payer, collected by withholding.
Law and practice: Law 6380, arts. 6, 26, 43, 73–75.
Paraguay’s 2025 maquila law expressly covers services used abroad by a client not present in Paraguay and delivered remotely — BPO, contact centres, help desks, software development. A services maquila programme replaces IRE and IDU on maquila income with a single tax of 1% on the greater of the value added in Paraguay or the export invoice value, and export invoices go out without VAT. Input VAT can be partly recovered, within a cap for services maquilas.
| Ordinary company (EAS) | Services maquila | Freelancer (IRP-RSP) | |
|---|---|---|---|
| Profit tax | IRE 10% | 1% single tax on the greater of local value added or export invoices | IRP 8–10% on net income above Gs 80 million |
| VAT on invoices to foreign clients | 10% | Export invoices without VAT; limited input VAT refund | 10% |
| Dividends | IDU 8% / 15% | Exempt from IDU | — |
| Requirements | Standard compliance | Contract with a foreign principal, CNIME approval, monthly returns, reporting | Registration once over the threshold |
| Suits | Small teams, mixed local and foreign clients | Teams billing a foreign parent or main client | Individuals |
The conditions are real. You need a contract with a principal abroad — often the group’s parent or a main client — approval by the national maquila council (CNIME) on a biministerial resolution, a monthly single-tax return even with no exports, quarterly reports on investment and jobs, and IFRS accounting. Sales to Paraguayan clients are limited and fully taxed. For a team of ten billing one foreign client, the saving is large; for a freelancer with twenty small clients, the regime is usually more trouble than it is worth.
The sector is still small — around 4,000 services maquila jobs and about US$33 million of exports in 2024 — but growing. Details of the regime are in our guide to the 2025 laws.
Law and practice: Law 7547/2025, arts. 3, 11, 18, 37–39; Decree 5714/2026.
US clients
Services performed outside the US are generally foreign-source for US tax, so a US client should not withhold if you provide a Form W-8BEN-E. Paraguay has no tax treaty with the US.
EU business clients
The client accounts for its own VAT by reverse charge; you do not charge EU VAT. Paraguayan VAT on your invoice is still a cost to them.
Spain
Paraguay’s treaty with Spain has been in force since 2024, with 5% caps on interest and royalties.
Latin American clients
Payments from Argentina, Brazil, Chile and others may suffer withholding on services; Chile’s treaty with Paraguay helps for services without a permanent establishment there.
Contracts should say who bears which tax. A clause that prices “plus applicable taxes” is cleaner than discovering the VAT question after the first invoice.
| Payment channel | Status for a Paraguayan company |
|---|---|
| SWIFT transfer to a Paraguayan USD account | Works; most common for B2B |
| Stripe | Not available for Paraguayan accounts |
| PayPal | Reported as still not usable for Paraguayan businesses |
| Wise | Sends to Paraguayan bank accounts; check business-account eligibility |
| Payoneer and similar | Used by freelancers; check terms for companies |
| Foreign entity collecting for you | Common workaround, but creates transfer pricing and residence questions |
Payments are the most common operational headache. Stripe does not support Paraguayan businesses, and PayPal is still reported as unusable. Business clients pay by bank transfer to a USD account at a Paraguayan bank, which works well once the account exists — but opening it can take weeks or months for a new foreign-owned company, with detailed questions about the source of funds and the business model.
Some founders collect through a US or other foreign company and bill Paraguay internally. That can work, but it creates a second company to run, transfer pricing between the two, and a question about where the business is really managed. If the Paraguayan company does the work, it should usually be the one that invoices.
Every legal entity registered in Paraguay since 1 April 2025 must issue invoices electronically through SIFEN. Small issuers can use the DNIT’s free e-Kuatia’i tool, with a free qualified electronic signature; larger ones integrate their own software. Invoices to foreign clients go through the same system, with the client’s foreign details and the VAT treatment that applies to you — 10% for an ordinary company, none for maquila exports. Confirm with your provider how the system handles invoices issued in US dollars.
Law and practice: DNIT General Resolution 21/2024, art. 9; Decree 872/2023.
| Hiring in Paraguay | 2026 |
|---|---|
| Minimum wage | Gs 3,044,000 a month (about US$500) |
| Social security (IPS) | 16.5% employer, 9% employee |
| Extra month | Aguinaldo: one month’s pay, by 31 December, no IPS |
| Working week | 48 hours |
| Contractors | Invoice as individuals under IRP-RSP; watch for disguised employment |
| English | Paraguay ranked 43rd in the EF English Proficiency Index 2025, above the global average |
| Industry | About 300 software companies, mostly staff augmentation; BPO employs over 12,000 people |
Salary data for Paraguayan developers is thin. Remote roles for foreign employers vary widely, and local senior salaries sit well below US or European levels but rise quickly with English and experience. Many companies combine a few employees with contractors who invoice as individuals; that is legal, but a contractor who works fixed hours under your direction for one client looks like an employee, with IPS and severance consequences.
The employer side is simple once set up: register with IPS and the Labour Ministry, pay 25.5% social security in total, the aguinaldo in December and keep the monthly digital labour book. Our compliance checklist covers the calendar.
Law and practice: Decree 6225/2026 (minimum wage); EF EPI 2025; La Nación, 9 February 2026 (BPO and software sector).
Electricity
Hydropower from Itaipú and Yacyretá; in 2026 the government created a special USD-denominated tariff for data centres, AI and cloud for up to 15 years.
Internet
Median fixed download speed about 100 Mbps at the end of 2025; around 83% internet penetration.
Time zone
Permanent UTC−3 since October 2024: same as Buenos Aires and São Paulo, one or two hours ahead of New York, four or five behind Western Europe.
Ecosystem
Small but active: accelerators such as Koga, government programmes for startups, and a growing BPO sector. Venture capital is still scarce.
Law and practice: Decrees 5306/2026 and 5307/2026; Ookla and DataReportal 2026.
The agency or dev shop. A team in Asunción builds websites and apps for clients in several countries, billed per project. Clients are many and varied, some of them Paraguayan. An ordinary EAS is usually the right vehicle: 10% IRE, 10% VAT priced into quotes, simple compliance. Services maquila fits badly, because it needs a principal abroad and limits local sales.
Staff augmentation or BPO. A Paraguayan company provides developers, support agents or back-office staff to one foreign company — often its own parent. This is exactly what services maquila was designed for. Under the ordinary regime the foreign client would pay 10% VAT it cannot recover; under maquila the invoices go out without VAT and the company pays a 1% single tax. With a dozen or more people the difference pays for the compliance several times over.
The software product. A SaaS company sells subscriptions worldwide and keeps its development team in Paraguay. Where the product is sold and who owns the intellectual property become the key questions. If a foreign company owns the IP and sells the subscriptions, the Paraguayan company is a development centre paid by its parent — a good fit for maquila, with transfer pricing on the fee. If the Paraguayan company owns the IP and sells directly, it pays 10% IRE on the profit, charges VAT where the rules require and collects through a foreign payment provider or a USD account. Register trademarks and software with Paraguay’s intellectual property office (DINAPI) if the Paraguayan company is the owner.
Many founders who set up a Paraguayan company also take Paraguayan residence. The personal side then interacts with the company. Salary paid to the founder for work done in Paraguay is subject to IRP-RSP above Gs 80 million a year and to IPS if paid as an employee. Dividends from the Paraguayan company bear 8% IDU, final, once the founder is resident — instead of 15% as a non-resident.
Foreign income the founder receives personally — dividends from companies abroad, interest, gains on foreign investments — stays outside Paraguayan personal income tax. That is a reason to keep a foreign holding or portfolio in the founder’s own name rather than inside the Paraguayan company, which would pay 10% on it. Residence in Paraguay does not end residence elsewhere automatically: check the exit rules of the country you are leaving, and keep the migration record and the annual tax residence certificate. Our territorial tax guide covers the detail, and our residence service the immigration route.
Ordinary EAS, services maquila or freelancing, based on clients, team size and VAT.
EAS online in days; RUC and electronic invoicing from the start.
Start early: USD and guaraní accounts, with documents on the owners and the business.
IPS and the Labour Ministry before the first hire.
Who bears VAT, currency, payment terms, IP ownership.
Contract with the foreign principal, CNIME filing, monthly single-tax returns.
Monthly VAT and withholdings, annual IRE and financial statements, beneficial owners by 30 June.
Yes. Services performed in Paraguay bear 10% VAT even when the client is abroad, as the DNIT confirmed in 2025. Only a services maquila programme lets export invoices go out without VAT.
A regime under Law 7547/2025 for services used abroad by clients not present in Paraguay, such as software and BPO, taxed at a single 1% instead of 10% IRE, with export invoices free of VAT.
10% IRE on profit in the ordinary regime, plus 8% or 15% IDU when dividends are paid.
Stripe does not support Paraguayan businesses and PayPal is reported as unusable; most B2B clients pay by SWIFT transfer to a USD account in a Paraguayan bank.
Generally not for services performed outside the US, if the client receives a W-8BEN-E form.
Yes. Legal entities registered since 1 April 2025 can only issue electronic documents through SIFEN.
Social security is 16.5% for the employer and 9% for the employee, plus an aguinaldo of one month a year; the minimum wage is Gs 3,044,000 a month from July 2026.
Services maquila in detail.
Why work done in Paraguay is Paraguayan income.
Tell us what you sell, to whom and with how many people. We compare an ordinary EAS with services maquila, handle the setup and keep the calendar — fixed quote within one business day.
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