Paraguay taxes only Paraguayan income — for people. Companies are another matter, and remote work is Paraguayan income wherever the client sits. Here are the source rules for companies and individuals, the DNIT rulings, residence, dividends, crypto and the beliefs to retire.
Paraguay is sold as a territorial tax country: you pay only on income from Paraguay. For individuals that is broadly true. A resident’s foreign dividends, foreign interest and gains on foreign investments are outside Paraguayan personal income tax, and dividends from Paraguayan companies bear a final 8%.
For companies it is not true in the way most people assume. The 2019 tax law deems several kinds of foreign income to be Paraguayan-source when a Paraguayan company receives them: interest on foreign bank accounts, dividends from foreign subsidiaries, exchange gains, and — through a catch-all rule — profits from activities abroad that were taxed at less than 10%. And for everyone, work done physically in Paraguay is Paraguayan-source, whoever the client is and wherever the money is paid.
This guide sets out the rules for companies and individuals, the rulings that settle the remote-work question, the limits of the “120-day rule”, and the misconceptions that cause most of the trouble.
Law and practice: Law 6380/2019 (tax reform), arts. 6, 8, 25, 48, 56–57, 62 and 134; Law 125/1991 (tax code), art. 152.
The law defines Paraguayan-source income as income from activities carried out in Paraguay, from assets located in Paraguay or from rights used economically in Paraguay. Three consequences follow, and all of them matter more than the label “territorial”.
Place of work decides
A service performed in Paraguay is Paraguayan-source even if the client is in New York and pays into a foreign account.
Place of the asset decides
Rent from an apartment in Asunción or the gain on selling it is Paraguayan-source; the same for a flat in Madrid is not, for an individual.
Who receives it can decide
For companies, the law adds deemed-source rules that look at the Paraguayan recipient, not the place of the income.
The rest of this guide is mostly about the third point: the cases where Paraguay taxes income that is plainly earned abroad because a Paraguayan company receives it.
| Income of a Paraguayan company (IRE, 10%) | Taxed in Paraguay? | Why |
|---|---|---|
| Services performed in Paraguay for a foreign client | Yes | Activity carried out in Paraguay (art. 6) |
| Interest on a bank account abroad | Yes | Deemed Paraguayan-source for resident entities |
| Dividends from a foreign subsidiary | Yes | Deemed Paraguayan-source; no participation exemption |
| Exchange gains on foreign-currency balances | Yes | Deemed Paraguayan-source; part of gross income |
| Profit of a branch or activity abroad | Yes, unless taxed abroad at 10% or more | Catch-all rule, with a foreign tax credit |
| Dividends from another Paraguayan company | No | Already subject to IDU (art. 25) |
The key sentence in article 6 deems Paraguayan-source “interest, commissions, returns or capital gains on capital deposited in banks or financial entities abroad, as well as exchange differences, and dividends or net profits obtained as partner or shareholder of foreign entities, when the investing or beneficiary entity is constituted or resident in the country”. In plain terms: a Paraguayan company’s foreign passive income is taxed at 10%.
Then comes the catch-all. Other income from activities abroad is also Paraguayan-source unless the company paid a foreign income tax at a rate of at least 10%. A Paraguayan company with a branch in a high-tax country is not taxed again; one that routes business through a zero-tax jurisdiction is.
Law and practice: Law 6380, art. 6 (source), art. 8 items 5, 7, 11 and 12 (exchange differences, share sales, interest, dividends), art. 16 item 7 (no deduction of costs tied to exempt or foreign-source income).
Article 134 allows a Paraguayan company to credit foreign income tax paid on income caught by the catch-all rule, up to the Paraguayan tax on that income, and on income covered by a tax treaty. Paraguay has treaties in force with Chile, Taiwan, the UAE, Uruguay, Qatar and Spain.
What the law does not say clearly is whether the credit extends to foreign dividends and interest that are deemed Paraguayan-source under the separate rule. Read literally, it does not, outside treaty cases. We have found no DNIT ruling either way. Until there is one, model foreign dividends from non-treaty countries as fully taxable at 10% with no credit, and treat any credit as upside.
Costs follow income
Expenses tied to foreign-source or exempt income are not deductible; shared costs are prorated.
Losses
Carried forward 5 years, used up to 20% of each year’s net income.
Foreign expenses
Deductible up to 1% of gross income unless non-resident tax was withheld on them.
Law and practice: Law 6380, arts. 15–18 and 134.
Personal income tax (IRP) applies to resident individuals, Paraguayan or foreign, but only on Paraguayan-source income. It has two categories, filed separately: income from personal services (IRP-RSP) and income and gains from capital (IRP-RGC).
| Income of a resident individual | Taxed in Paraguay? | Notes |
|---|---|---|
| Salary or fees for work done physically in Paraguay, even for a foreign payer | Yes, IRP-RSP 8–10% above Gs 80 million a year | DNIT rulings: place of work decides |
| Work done while physically abroad | No, unless the client is a Paraguayan taxpayer | Art. 48 |
| Dividends from a Paraguayan company | 8% IDU withheld, final | No further IRP |
| Dividends and interest from abroad | No | Outside IRP’s source rules |
| Gains on foreign shares or property | No | Unless the shares give rights over assets in Paraguay |
| Interest from Paraguayan banks | Exempt | Art. 56 |
| Rent from property in Paraguay | Yes, IRP-RGC 8% on 50% of rent (4% effective) and VAT 5% | Real net figure optional |
| Sale of property in Paraguay | Yes, 8% on 30% of the price (2.4%) or the real gain | Whichever is lower |
| Unjustified increase in wealth | Yes | Art. 57 |
For investment income, the list of what IRP-RGC taxes is drafted around Paraguay: dividends from Paraguayan entities, interest paid by Paraguayan residents, property in Paraguay, shares giving rights over assets in Paraguay. Nothing in it reaches a resident’s foreign brokerage account, foreign rental flat or foreign company. Exchange gains on holding foreign currency are expressly exempt.
Two qualifications. Personal services performed abroad are taxed if the client is a Paraguayan taxpayer. And unjustified increases in wealth are taxable, which is how the authority can reach income you cannot explain — keep the evidence of where your foreign money came from.
Law and practice: Law 6380, arts. 48–49, 56–57, 59–60, 62 and 69. Rates: IRP-RSP 8% up to Gs 50 million of net income, 9% to Gs 150 million, 10% above; IRP-RGC 8%.
Digital nomads, freelancers and remote employees often assume that work for foreign clients is foreign income. The DNIT has said otherwise more than once. In a ruling on an IT engineer, it held that what matters is where the work is physically performed: work done abroad is not taxed, but “the portion of the work done from Paraguay towards abroad is taxed”. In a 2025 binding ruling on a translator working from Paraguay for foreign clients, it added that the service is subject to 10% VAT, because the VAT law taxes services performed in Paraguay regardless of who receives them or where payment comes from.
Freelancer in Paraguay
IRP-RSP once taxable receipts exceed Gs 80 million a year, plus 10% VAT on fees; register within 30 business days of crossing the threshold.
Remote employee of a foreign company
Salary for work done in Paraguay is Paraguayan-source; IRP-RSP applies above the threshold.
Company billing foreign clients
10% IRE on profit and 10% VAT on invoices, unless it holds a services maquila programme.
Hybrid
Work split between countries is split for tax: keep a travel log.
The good news: IRP-RSP is low (8–10% on net income, after deducting business and personal expenses made in Paraguay) and nothing is due below Gs 80 million a year. The bad news: VAT is the cost people forget, and independent professionals are VAT taxpayers on their fees. Our guide to services export companies covers the structures.
Law and practice: SET/DNIT rulings on services rendered from Paraguay to foreign clients (IT engineer, c. 2023; binding consultation No. 677, 2025); Law 6380, arts. 62–64, 84 and 100–101.
A company is resident if it is incorporated in Paraguay; there is no place-of-management test. For individuals, the 2019 law has no day-count rule. The often-quoted “more than 120 days” comes from article 152 of the 1991 tax code, which presumes a person’s tax domicile is the place of habitual residence when they stay there more than 120 days. It is a presumption for locating the taxpayer, not a treaty-style residence test.
In practice, residence is shown by a Paraguayan identity card, a registered tax number (RUC) and a tax residence certificate issued by the DNIT under General Resolution 65/2020. Individuals must attach their migration movement record, so the days you actually spend in Paraguay are on file. The certificate is valid for one year.
Paraguayan residence does not end residence elsewhere. Spain, Argentina, Brazil and others have their own exit rules, and some treat Paraguay with suspicion; our Argentina guide shows how one neighbour approaches it.
Law and practice: Law 6380, art. 5; Law 125/1991, art. 152; DNIT General Resolution 65/2020.
Profits of a Paraguayan company are taxed at 10% IRE and then at the dividend tax (IDU) when distributed: 8% to residents, final, and 15% to non-residents. An S.A. distributes when the shareholders resolve it; an SRL with no deadline in its bylaws is deemed to distribute in the fourth month after year-end. Loans to shareholders and unexplained cash shortfalls count as distributions.
For a resident owner the combined burden is about 17.2% (10% plus 8% of the remaining 90%). For a non-resident owner it is about 23.5%. Non-residents also pay the non-resident tax (INR) on Paraguayan-source payments to them — 15% applied to a presumed net margin, for example 4.5% effective on certain interest and 10.5% on personal services.
Law and practice: Law 6380, arts. 40–46 (IDU) and 71–79 (INR).
From fiscal year 2026, residents who transact more than US$5,000 a year in cryptoassets, and crypto platforms operating in Paraguay, must file an annual informative return. The first one is due in March 2027, with a fine of Gs 1 million for late filing. The DNIT has not said how gains are taxed. For companies, the general IRE rules apply; for individuals, whether a gain on crypto is Paraguayan-source is unresolved. Claims of “0% on crypto” come from marketing, not from the law.
Law and practice: DNIT General Resolution 47/2026 (announced 11 March 2026).
Paraguay ratified the OECD and Council of Europe Convention on Mutual Administrative Assistance in Tax Matters in 2021, effective from 2022, so foreign tax authorities can ask the DNIT for information. Automatic exchange of bank account data under the Common Reporting Standard is not yet running: the OECD lists Paraguay among jurisdictions committed to first exchanges by 2028.
Enforcement at home is also tightening: the DNIT merged the tax office and customs in 2023, electronic invoicing is mandatory for new companies, employers file information returns on staff payments, and banks ask for evidence of the source of funds. A structure that only works if nobody looks is not a structure.
Law and practice: Law 6656/2020 (approval of the Convention); OECD AEOI commitments list, 30 September 2026; Law 7143/2023 (DNIT).
Case 1: the investor. Ana moves to Asunción with a portfolio of foreign shares and a rented flat in Lisbon. She takes permanent residence and a Paraguayan tax residence certificate. Her foreign dividends, the Lisbon rent and any gain on selling foreign shares are outside Paraguayan IRP. Portugal may still tax the rent, as the country where the property sits. She files nothing in Paraguay on that income, but keeps bank statements showing where it comes from, because her Paraguayan bank will ask and the unjustified-wealth rule exists for people who cannot answer.
Case 2: the freelancer. Marco is a software developer who works from Encarnación for clients in Germany and the US, paid into a Paraguayan account. His fees are Paraguayan-source because he does the work in Paraguay. Once his receipts pass Gs 80 million in a year he registers for IRP-RSP and pays 8–10% on net income after deducting business costs and personal expenses made in Paraguay. As an independent professional he also charges 10% VAT on his fees. If his clients will not absorb the VAT, he can either price it in or join a team that operates under a services maquila programme.
Case 3: the company. A Paraguayan EAS owned by a foreign founder earns consulting income from Brazilian clients and keeps a cash buffer in a US account. The consulting profit is taxed at 10% IRE. The interest on the US account and any exchange gains on dollar balances are deemed Paraguayan-source and also taxed at 10%. When the company pays dividends to its non-resident founder, it withholds 15% IDU. If the founder becomes a Paraguayan resident, that falls to 8%. Holding the cash buffer personally instead of in the company would take the interest outside Paraguayan tax altogether — once the founder is resident.
The pattern across all three: individuals keep their foreign investment income out of Paraguayan tax, work done in Paraguay is taxed wherever it is sold, and companies are the place to run Paraguayan business, not to park foreign portfolios.
| Common belief | What the law says |
|---|---|
| “Paraguay does not tax foreign income” | True for individuals’ foreign investment income; false for companies’ foreign interest, dividends and exchange gains. |
| “Working online for foreign clients is foreign income” | Work done from Paraguay is Paraguayan-source, and the DNIT says it carries 10% VAT. |
| “Exported services are VAT-free” | Only goods exports are zero-rated; services need a maquila programme. |
| “120 days makes you tax resident” | 120 days is a domicile presumption in the 1991 tax code, not a statutory tax-residence test. |
| “Nobody will ever know” | Paraguay has applied the OECD multilateral convention since 2022 and plans automatic bank-data exchange by 2028. |
As a resident individual, foreign dividends and gains are outside IRP; inside a Paraguayan company they are taxed at 10%.
Operating income, local clients, employees.
10% on services performed in Paraguay, unless you qualify for maquila.
Every year, with your migration record.
For banks and for the unjustified-wealth rule.
Paraguayan residence does not switch off your old residence by itself.
For individuals, largely yes: foreign dividends, interest and gains of residents are outside personal income tax. For companies, no: foreign interest, dividends and exchange gains received by a Paraguayan company are taxed at 10%.
Yes, if the work is done physically in Paraguay. It is Paraguayan-source income for IRP or IRE, and the DNIT has ruled that it carries 10% VAT.
Not for resident individuals. For a Paraguayan company they are deemed Paraguayan-source and taxed at 10% IRE.
Personal services income becomes taxable when receipts exceed Gs 80 million in a calendar year; rates are 8–10% on net income.
Not in the 2019 tax law. The 120 days come from a domicile presumption in the 1991 tax code. Residence is shown with an ID, a RUC and a DNIT tax residence certificate.
No. Services performed in Paraguay bear 10% VAT even for foreign clients, except under a services maquila programme.
Not yet. Paraguay applies the multilateral convention on request and is committed to automatic exchange by 2028.
Foreign dividends, IDU, treaties and how neighbours see it.
Residence, low-tax status and transfer pricing.
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