Paraguay: Taxes and Costs

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Moderate effective tax rates in Paraguay

Rental Income

Income earned by nonresidents from leasing property is taxed at the standard nonresident income tax rate of 35%. The taxable income is deemed to be 50% of the gross rent. No other deductions are allowed. Consequently, the effective tax rate is 17.5% on the gross income.

Strictly speaking, Paraguay does not have a personal income tax (though one is now being introduced). The single most important tax is Value Added tax (VAT), and its rate is low at only 10%. Services, such as the lease of real estate, are VAT exempt. In July 2004 the new Duarte government’s Tax Reform Law (Ley No. 2421/04) was approved, but is not yet in force.

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.

Capital Gains Tax

Capital gains earned by nonresidents from the sale of property are taxed at a flat rate of 35%. The taxable gain is 50% of the gross gain. No other deductions are allowed. The effective tax rate is therefore 17.5% on the gross gains.

Paraguay - more data and information

• Guide to buying houses and registering property sales in Paraguay

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