Taxes in Paraguay
Contents
Paraguay keeps coming up in expat conversations for one blunt reason: the tax bill is small and the rules are comparatively easy to follow. There are no wealth taxes, no inheritance tax, and, in practice, most foreign income never gets taxed here at all. This is a plain-English guide to how taxes in Paraguay and the territorial tax system work in 2026. It is general information, not personal tax advice, verified against DNIT, Dirección Nacional de Ingresos Tributarios on 2026-09-05.
The territorial system, in one line
Paraguay taxes income by where it is earned, not by where you live. Money you make inside Paraguay is taxable in Paraguay. Money you make outside the country, a salary from abroad, dividends, rental income on a property in another country, is generally outside the Paraguayan tax net.
That is the whole idea behind a territorial system, and it is why a location-independent earner can become a resident, spend part of the year here, and still owe little or nothing locally. Compare that with the worldwide systems in the US, much of Europe, and elsewhere, where your global income follows you.
The taxes that matter
Personal income tax (IRP) is not one flat rate; it is a progressive scale that applies to two different categories of income:
| Tax | Rate | Applies to |
|---|---|---|
| IRP: personal-services income | 8%, 9% or 10%, by bracket | Paraguayan-source salaries, fees and professional income, above an annual non-taxable threshold |
| IRP: capital income and capital gains | 8% flat | Paraguayan-source investment income, capital gains |
| Corporate profit (IRE) | 10% | Company profits earned in Paraguay |
| VAT (IVA) | 10% (5% reduced) | Most goods and services |
Source: DNIT, IRP, verified 2026-09-05. The exact income bands for the 8/9/10% brackets and the current non-taxable annual threshold are set by DNIT regulation and can change; confirm the current figures with a Paraguayan contador before relying on them for a specific filing.
Corporate tax (IRE) sits at a flat 10% on local profits, one of the lowest business tax rates in the region. If you run a Paraguayan company, that is the rate on its Paraguay-earned profit.
VAT (IVA) is 10% on most purchases, with a reduced 5% band on some essentials like basic food, medicine or rent. It is baked into prices, so you rarely think about it day to day.
What Paraguay does not tax
The gaps matter as much as the rates:
- No wealth tax. Your net worth is not taxed.
- No inheritance or estate tax. Assets pass without a death tax.
- No tax on most foreign-source income. Because of the territorial rule.
- No tax on foreign-source crypto gains. Bought and sold on platforms based outside Paraguay, they follow the same territorial rule as the rest of your foreign income.
- No tax on foreign-source stock market gains. Same logic: a brokerage account or broker based outside Paraguay stays outside the Paraguayan tax net.
- Low property tax. Annual municipal property tax (impuesto inmobiliario) is a small fraction of a percent of the assessed value.
Domicile, tax residency and the "120 days" you'll hear about
This is the part most guides oversimplify, so it's worth being precise.
"120 days" is about domicile, not automatically about tax residency. Under Law 125/1991 (art. 152), an individual's domicile is presumed to be where they habitually reside, and habitual residence is presumed after more than 120 days there in a year. That is a domicile rule, used as one input among several, not a standalone switch that makes you a Paraguayan tax resident the day you cross 120 days.
Getting a Tax Residency Certificate is a separate, documented process. DNIT issues it on request, based on evidence: your ID, a RUC (tax ID number) if you're a taxpayer, proof of address (utility bills, a lease), and, where relevant, your migratory record for the fiscal year. See Resolución General N° 65/2020 for the current rules DNIT applies.
Holding a RUC does not by itself make you a tax resident. A RUC is an administrative tax-ID registration that lets you invoice, file, and operate formally; many new residents register for one, but registering is not the same event as becoming a certified tax resident.
In practice, tax residency in Paraguay rests on a simple combination: a RUC in good standing and active filings, not on the 120-day figure alone.
The most important point, though, is elsewhere. Paraguay has signed very few double-taxation treaties with other countries: if your home country still treats you as its tax resident, there is almost never a treaty in place to settle that conflict for you. Avoiding a tax-residency clash with your home country, by genuinely cutting the ties that still anchor you there (filings, address, center of interests), matters far more than the number of days you spend in Paraguay.
The practical sequence stays simple: first secure your legal residency status, then get your cédula, then handle your tax registration (RUC). Our step-by-step residency guide covers the first part, and the residency cost breakdown covers what the paperwork costs.
A quick, honest caveat
Two things trip people up. First, "territorial" does not mean "invisible": if you keep tax obligations in another country (citizenship-based taxation in the US, or a home country that still considers you resident), those do not vanish because Paraguay is light. Second, the rules have edges, and the treatment of foreign dividends or a foreign company you control can get technical.
This is where a local accountant (contador) earns their fee. Before you make decisions on the strength of a low headline rate, get the specifics checked for your situation. The territorial system is genuinely one of Paraguay's strongest cards, and it is best played with proper advice.
For the bigger picture on becoming a resident in the first place, start with the residency in Paraguay guide.