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Paraguay: Living There - Tax Issues

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Living There

INDIVIDUAL TAXATION

Residents are taxed on their income sourced from Paraguay. Married couples are taxed separately. For couples married under the marital community property regime, each spouse must declare 50% of the income.

INCOME TAX

Taxable income is gross income less income-generating expenses, personal and family expenses, and investments.

Personal Income Tax (impuesto a la renta del servicio de carácter personal, IRP)

Personal income tax is levied at 10% on the income exceeding the annual threshold amount. The threshold amount for 2009 is 96 times the monthly minimum wage or approximately US$22,250.

The threshold amount is based on the monthly minimum wage, which is approximately US$234.58. The target threshold amount for 2014 is 36 times the monthly minimum wage, so the threshold amount will be reduced by 12 monthly minimum wages per year. In 2009, income is taxable if it exceeds the 96 times the monthly minimum wage threshold.

Income Tax on Small Business
(impuesto a la renta del pequeño contribuyente, IRPC)

Residents may be liable to income tax on small business instead, levied at a standard rate of 10%. The taxable income is the lower of the actual net income or the presumed net income.

Residents may deduct personal and/or dependent expenses and investments, i.e. expenses related to maintenance, education, health, housing, clothing, recreation, etc.

Family dependents are the spouse, minor children, children studying at educational institutions and any person economically dependent with respect of whom there is a legal obligation to pay alimony.

Other deductions include:

• 15% of annual gross income in the case of individuals that do not contribute to a social security system, provided that those amounts are invested in local financial entities, private pension funds or open joint-stock companies; and
• Gifts to central and local governments, recognized religious and charity entities, but limited to 10% of annual gross income

Non-deductible expenses are individual income tax, tax penalties, expenses directly related to non-taxable income, and expenses incurred without any benefit in return.

RENTAL INCOME
Rental income is taxed at the standard income tax rate of 10%. Income-generating expenses are deductible when computing for the taxable income.

CAPITAL GAINS
Occasional capital gains realized from selling Paraguayan property are considered as income and taxed at the standard tax rate of 10%. Taxable capital gains are generally 30% of the sales price.

Taxpayers may calculate the taxable capital gains by deducting acquisition costs from the sales price, if there is a written agreement registered in a public registry.

Otherwise, capital gains are subject to agricultural tax, corporate tax, or small business income tax.

VALUE ADDED TAX (VAT)

Leasing real estate in Paraguay is liable to VAT at the reduced rate of 5%.

PROPERTY TAX

Real Estate Tax (Impuesto Inmobiliario)

Real estate tax is levied annually at 1% of the cadastral value of property, as assessed by the national cadastre service. Assessed property values increase annually according to the consumer price index, but such increases cannot exceed 15% per annum.

This tax rate is reduced to 0.5% for rural properties smaller than five hectares used for small scale farming. In the case of rural properties, improvements or buildings are not computed in the tax base.

Paraguay - more data and information

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