Global Property Guide

Financial Information for Residential Property Buyers


High tax rates in Paraguay

November 15, 2017

INDIVIDUAL TAXATION

Nonresidents 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.

Paraguayan-source taxable income occasionally derived by nonresident individuals is subject to withholding taxes.

RENTAL INCOME
Rental income earned by nonresident individuals from Paraguayan real property is subject to 20% withholding tax levied on 50% of the gross rent (i.e. 10% withholding tax on the gross income).

VALUE ADDED TAX (VAT)

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

CAPITAL GAINS
Occasional capital gains realized by nonresidents from selling Paraguayan property are taxed at the standard withholding tax rate of 20%. Taxable capital gains are generally 50% 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.

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. The cadastral value is gradually adjusted to the market value over a period of five years subject to certain limitations.

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.

Surtax (impuesto adicional al inmueble de gran extension)

Surtax is levied on rural estates. The tax base is the cadastral value of an estate larger than 10,000 hectares (in the Eastern region of Paraguay) and 20,000 hectares (in the Western region of Paraguay). The surtax is levied at progressive rates, from 0.5%, to 1.2%.

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