Paraguay personal income tax (Impuesto a la Renta Personal - IRP) rate is 10% if the income exceeds 120 times the minimum wage; otherwise, the tax rate is 8%.
Basis - Tax is levied on Paraguayan-source (net) income from services and certain investments, provided the taxpayer's income exceeds the monthly minimum wage by a certain amount (i.e.120 times for 2010, to be reduced by 12 per year until the factor reaches 36 in 2017). The personal income tax was suspended until 1 January 2010.
Residence - An individual is resident in Paraguay if he/she is in the country for more than 120 days in a calendar year or in the previous 12-month period.
Tax Filing status - Joint tax filing is not permitted. Each person is subject to tax if his/her individual income exceeds the relevant threshold.
Taxable income - Income from services and certain investments are taxable. These items include: personal services income; benefits in kind; dividends, profits and share price surplus (50% if derived from a resident company/enterprise subject to corporate or agricultural income tax and 100% if the resident company/enterprise is not subject to corporate or agriculture income tax); certain capital gains (see under "Capital gains"); and interest, commissions and other income that has not been subject to the corporate or agriculture income tax. Nonresidents deriving business or professional income in Paraguay are subject to withholding tax at an effective rate of 15% (30% of 50%) on the gross amount.
Capital gains - Capital gains from the disposal of real property located in Paraguay and shares of Paraguayan companies are subject to individual income tax if they are occasional; otherwise, they are subject to the corporate, agricultural business tax or small business tax. Capital gains derived by nonresidents are subject to tax at an effective rate of 15% (30% of 50%) on the gross amount.
Tax Deductions and tax allowances - If directly related to the taxable activity generating domestic-source income, both domestic and foreign-source expenses are deductible. The taxpayer and his/her dependents are also entitled to personal deductions (education, health, clothing, recreation, charitable, etc.). A deduction of 15% of annual gross income is allowed if invested in certain entities where the taxpayer does not contribute to the social security system.
Other taxes on individuals:
Real property tax - Real property is subject to an annual tax collected by the local authorities at a rate of 1% (0.5% for certain rural property) of the cadastral value. Various real estate surtaxes also apply to specific types of property and there is a 0.3% tax on the transfer of immovable property (calculated on the higher of the transaction price or the cadastral value of the property).
Capital duty - No
Stamp duty - No
Capital acquisitions tax - No Capital acquisitions tax
Inheritance/estate tax - No Inheritance tax / estate tax
Net wealth/net worth tax - No Net wealth tax / net worth tax
Social security contributions - The employee contribution is 9% (3% applicable to pension and retirement), based on total remuneration (including bonuses, premiums, etc.) and is withheld by the employer.
Administration and compliance:
Paraguay Tax year - Paraguay tax year is the calendar year
Tax Filing and tax payment - The annual income tax liability must be paid when the annual tax return is filed (i.e. in June of the year following the tax year).
Penalties - Penalties range from 4% to 14% of total tax due, plus monthly interest at 1.5%.
Paraguay corporate tax rate is 10%.
Residence - Residence is determined in order of priority according to: (1) the place of a company's management or direction; (2) the place where its main activities are carried out; and (3) the location of its representative address.
Basis - Corporate income tax is levied on a territorial basis. Tax is due, with some exceptions, on business income derived from activities performed, property situated or economic rights used, in Paraguay, regardless of the nationality, domicile or residence of those participating in the operations or where the contracts are concluded.
Taxable income - Taxable income is the difference between total earnings from commercial, manufacturing and service activities less expenses incurred to derive the income.
Taxation of dividends - Dividend distributions are subject to a 5% corporate income tax.
Capital gains - Capital gains derived from the sale of fixed assets, immovable property and securities are taxed as ordinary income at the standard corporate rate.
Losses - The carryforward and carryback of losses is not permitted.
Surtax - No surtax
Alternative minimum tax - No Alternative minimum tax
Foreign tax credit - No Foreign tax credit
Participation exemption - No
Holding company regime - No
Tax Incentives - Companies operating in free zones benefit from reduced taxation. A maquiladora regime also exists.
Dividends - Dividends distributed to nonresidents are subject to a 15% withholding tax.
Interest - Interest paid to non-residents are subject to a 30% withholding tax, which is imposed on 50% of the payment, resulting in an effective rate of 15%. The rate on payments to financial institutions is 6%.
Royalties - Royalties paid to nonresidents are subject to a 30% withholding tax imposed on 50% of the payment, resulting in an effective rate of 15%.
Branch remittance tax - Profits remitted to a head office are subject to a 20% withholding tax, in addition to the 10% corporate tax, resulting in an effective rate of 30%.
Other taxes on corporations:
Capital duty - There is no capital duty per se, but certain fees apply (e.g. registration and publication) upon the formation of a company.
Real property tax - Real property is subject to an annual tax collected by the local authorities at a rate of 1% (0.5% for certain rural property) of the cadastral value. Various real estate surtaxes also apply for specific types of property, and there is a 0.3% tax on the transfer of immovable property (calculated on the higher of the transaction price or the cadastral value of the property).
Social security contributions - The employer's contribution to social security is 16.5% of an employee's total salary (including bonuses, premiums, etc.). The employer also must withhold the employee portion (9%).
Payroll tax - No payroll tax
Stamp duty - No stamp duty
Transfer tax - No transfer tax
Other - Some small and agricultural businesses fall under special regimes other than the corporate income tax.
Transfer pricing - No
Thin capitalisation - No
Controlled foreign companies - No
Disclosure requirements - No
Administration and compliance:
Paraguay Tax year - Paraguay tax year generally coincides with the calendar year, but certain industries are required to use specific tax years.
Consolidated tax returns - Consolidated tax returns are not permitted; each company must file a separate return.
Tax Filing requirements - A company must make 4 advance payments based on the previous tax year's liability. A return and balance sheet, at a minimum, must be filed for corporate income tax purposes. In general, the return is due within 4 months of the end of the taxpayer's tax year, but the taxpayer's identification number determines the exact due date.
Penalties - Penalties range from 4% to 14% of the total tax due, plus monthly interest at 1.5%.
Rulings - Taxpayers may request a ruling from the tax authorities on the tax consequences of a proposed transaction.
Principal business entities - Principal business entities in Paraguay are the corporation, limited liability company, partnership and branch of a foreign corporation.
The standard rate of VAT in Paraguay is 10%, with a lower 5% rate applying to supplies of basic foodstuffs, pharmaceutical products, interest and commissions on loans, and the transfer of the right to use goods or immovable property. Exports are zero-rated. Exemptions include raw farm products, some fuels,
foreign currency, books and newspapers.
Taxable transactions - VAT is levied on the supply of goods and services, and the import of taxable goods and services.
VAT Registration - VAT registration is compulsory for all companies and unincorporated businesses whose taxable turnover exceeds a certain amount.
Filing and VAT payment - VAT filing and payments are due monthly, with the due date determined according to the taxpayer's registration number.
Income Tax Rate
Corporate Tax Rate
Sales Tax / VAT Rate
Last Update: Nov 2010
ANTIGUA & BARBUDA
BOSNIA & HERZEGOVINA
BRITISH VIRGIN ISLANDS
CENTRAL AFRICAN REP.
CONGO, DEM. REPUBLIC
CONGO, REPUBLIC OF
ISLE OF MAN
PAPUA NEW GUINEA
TURKS AND CAICOS
UNITED ARAB EMIRATES
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