For many people, taxes are the single biggest reason to look at Paraguay. The country runs a territorial tax system with low rates, a combination that is increasingly rare and genuinely valuable for retirees, investors and anyone whose income does not come from activities, property or rights in Paraguay. Here's how it actually works.
What "territorial taxation" means
For individuals, Paraguay taxes Paraguayan-source income: income from activities carried out in Paraguay, from property located there or from rights used economically there (Ley 6380/2019, Art. 48). How foreign dividends, interest, pensions and capital gains are treated depends on the income type; a non-binding DNIT ruling found that an individual's dividends from a foreign company are not taxed under IRP. A Paraguayan company is different: its foreign interest and dividends can be taxable under IRE, the corporate income tax (Art. 6(4)). Confirm your case with a Paraguayan accountant.
The headline rates
Personal income tax (IRP): on income from personal services (salary, self-employment), progressive rates on net income, applied per bracket (Art. 69, Law 6380/2019):
| Annual net income | Rate |
|---|---|
| Up to Gs. 50.000.000 | 8% |
| Gs. 50.000.001 to Gs. 150.000.000 | 9% |
| Above Gs. 150.000.000 | 10% |
- If your gross income from personal services is Gs. 80.000.000 or less in the year, you meet the filing obligations but do not pay the tax (Art. 69, Law 6380/2019).
- Capital income and gains: 8% (Art. 60, Law 6380/2019).
More on IRP, including when and how it is filed: Brazilians in Paraguay: taxes and residency.
Other headline rates:
- Corporate income tax (IRE): a flat 10% (Ley 6380/2019, Art. 21);
- Dividend tax (IDU): when a Paraguayan company distributes profits, 8% if the shareholder is resident in Paraguay and 15% if not (Ley 6380/2019, Art. 43);
- Value-added tax (IVA): 10% standard, with a reduced 5% rate on certain essentials (Ley 6380/2019, Art. 90);
- Property tax (impuesto inmobiliario): 1% a year of the property's fiscal value, collected by the municipality (Ley 125/1991, Art. 61);
- No tax on net wealth and no separate inheritance tax. Assets in Paraguay that you inherit or receive as a gift count as IRP capital income, and for property the tax is due only when you later sell it (Ley 6380/2019, Arts. 57 and 58).
Compared with the higher progressive rates common in North America and Europe, the simplicity and the level of these rates are the main draw.
How residents access it
To benefit, you generally need to become a Paraguayan tax resident: obtain your residency and cédula and establish genuine presence and ties. IRP applies to individuals resident in Paraguay (Ley 6380/2019, Art. 49).
Registering a RUC is a separate step. The RUC is your taxpayer number: you need one to invoice as self-employed, run a business, or once your income makes you an IRP taxpayer. Holding a RUC does not by itself make you a tax resident. A company you set up has its own RUC and pays IRE at 10% (Art. 21).
Important caveats
Tax planning is personal, and a few points matter a great deal:
- Your home country may still tax you. US citizens, for example, are taxed on worldwide income regardless of where they live. Others may remain tax-resident at home until they properly break ties.
- Substance counts. A cédula alone is not a tax strategy; genuine residency and presence matter, and many countries look at where you actually live.
- Reporting obligations such as the Common Reporting Standard mean financial information is increasingly shared between countries.
Is it right for you?
Paraguay's system is most powerful for people who can genuinely relocate and whose income comes from sources outside Paraguay rather than from activities carried out here. Someone who moves to Paraguay and keeps working remotely for foreign clients is carrying out that activity in Paraguay, so under Art. 48 that income is Paraguayan-source and falls within the IRP; their case needs a closer look. Paired with a low cost of living, the math is compelling. But the right structure depends on your nationality, income type and long-term plans.
We work alongside cross-border tax professionals to make sure residency and tax planning fit together. Send us a message for a personalised assessment. Our soft landing service also covers practical steps such as registering your RUC.
This article is general information, current as of 2026, and is not tax or legal advice. Tax outcomes depend on your individual circumstances and home-country obligations. Always consult a qualified tax professional before making decisions.
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