Corporate tax in Paraguay

Summary

Corporate Income Tax Rate (%) 10
Capital Gains Tax Rate (%) 10
Withholding Tax (%)
Dividends 5 / 15*
Interest Paid to Financial Institutions 6
Royalties from Patents, Know-how, etc. 15
Gross Income from Production and
Distribution of Films and Television
Programs
12
Insurance and Reinsurance 3
Personal Transportation Fares, Telephone
Charges and Internet Charges Paid from
Paraguay or Vice Versa
3
International News Agencies 4.5
Freight Charges 3
Assignment of the Right to Use Containers 4.5
Branch Remittance Tax and Other Payments
to Nonresident Principal Shareholders
30
Other Payments Not Specified Above 15
Net Operating Losses (Years)
Carryback 0
Carryforward 0

* The 5% withholding tax is imposed when the decision to distribute dividends to residents and to nonresidents in Paraguay is made by the Paraguayan company. The 15% rate applies to dividends paid abroad to nonresidents.

Taxes on corporate income and gains

Corporate income tax. Tax is levied on Paraguay-source income of corporations and commercial enterprises. Income is consid­ered to be from a source in Paraguay if it is derived from capital, property or rights in Paraguay or from a business in Paraguay. Residence is not relevant. Under Law 2421/04, for companies domiciled in Paraguay, income derived from capital invested abroad is considered Paraguayan-source income and, according­ly, subject to corporate income tax.

Income earned from farming activities in Paraguay is subject to Agribusiness Income Tax under the rules established by Law 5061/13. Farming is the business conducted for the purpose of obtaining primary foods, whether vegetable or animal, by the use of land. It includes, among other activities, breeding or fat­tening cattle; producing wool, hides or bristle; producing crops, fruit or vegetables; and producing milk. Under the law, the tax base is calculated through one of the following methods:

  • Agribusiness Taxpayer method
  • Small Agribusiness Taxpayer method
  • Accounting method

Rate of corporate income tax. Under Law 2421/04, the corporate income tax rate is 10%. Branches are also subject to dividend with holding tax at a rate of 5% and to a 15% withholding tax on remittances to their home offices. Under Law 5061/13, Agri­business Income Tax is calculated at a rate of 10% of the tax base.

The Paraguay incentive tax law provides an exemption from the 15% withholding tax mentioned above if an investment of greater than USD5 million is made in industrial processes.

Capital gains. Capital gains are taxed at the corporate income tax rate.

Administration. The tax year is the calendar year. Returns must be filed within four months after the end of the financial year. Penal­ties are imposed for failure to comply with these rules.

Dividends. A 5% withholding tax is imposed on dividends when the decision to distribute the dividends to residents and to non­residents in Paraguay is made by the Paraguayan company. A 15% withholding tax is imposed on dividends paid abroad to nonresidents.

Determination of trading income

General. Taxable income is based on profits from the financial statements after tax adjustments. Expenses are generally deduct­ible if they are incurred for the purposes of the business and in the production of taxable income.

Inventories. Inventory is valued at the cost of production or ac – quisition. The cost may be calculated under the average-cost or first-in, first-out (FIFO) methods. After choosing a method, a corporation may not change it without prior authorization.

Tax depreciation. Depreciation must be calculated using the straight-line method.

Relief for losses. The tax law does not allow loss carryforwards.

Groups of companies. Paraguayan law does not contain any mea­sures for filing consolidated returns or for relieving losses within a group.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Value-added tax; imposed on goods sold,
including imports, and services rendered
in Paraguay; exports are exempt; in certain
circumstances, payments of royalties are
subject to the tax
Standard rate 10
Basic consumer food items, pharmaceutical
products, and the leasing and sale of real estate
5
Selective tax on consumption, on certain
manufactured and imported goods, such
as cigarettes, liquor and petroleum products
1 to 50
Social security contributions for nonbank
institutions, on payroll; paid by
Employer 16.5
Employee 9

Foreign-exchange controls

The central bank does not control the foreign-exchange market. A free-market rate of exchange prevails.

Tax treaties

Paraguay has entered into double tax treaties with Chile and Taiwan. It has also entered into a tax treaty on international freight with Argentina and tax treaties on international airfreight with Belgium, Germany and Uruguay.