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Paraguay: Taxes and Costs

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High tax rates in Paraguay

INDIVIDUAL TAXATION

Non-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.

Individual 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)

Non-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.

RENTAL INCOME
Rental income earned by non-resident individuals from Paraguayan real property is subject to 30% withholding tax levied on 50% of the gross rent (i.e. 15% withholding tax on the gross 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

• Guide to buying houses and registering property sales in Paraguay

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