Paraguay taxes on a territorial basis: only Paraguay-source income is taxed, for both individuals and companies. Paraguay has no CFC provisions whatsoever. Paraguay operates a self-assessment system, with the Subsecretaria de Estado de Tributacion conducting post-filing review.
The Paraguayan tax year is the calendar year.
Paraguay's headline corporate income tax (CIT) rate is 10%.
The headline personal income tax (PIT) rate is 10%.
The standard VAT/GST (or equivalent consumption tax) rate is 10% (5% real estate/some medicine/agriculture).
Paraguay operates a territorial tax system under Law 6380/2019: Paraguay-source income is taxed for both individuals and companies; foreign-source income is generally exempt. There is no statutory 183-day day-count test; residency/tax domicile is instead established through a combination of legal immigration residency, obtaining a Paraguayan ID (cedula), and RUC tax registration with the DNIT, alongside a "center of economic and vital interests" test. Since a 2020 rule (General Resolution 73/2020), services performed while physically present in Paraguay are treated as local-source income even if the client is abroad - the trigger is the provider's physical location, not the payer's.
A non-Paraguayan entity has a Paraguay permanent establishment through a fixed place of business or a dependent agent habitually concluding contracts in Paraguay on the entity's behalf, following the OECD Model Treaty definition as applied under Paraguayan domestic law and any applicable tax treaty.
Paraguay has no Controlled Foreign Company regime, and multiple current sources confirm this is not viewed as a near-term legislative priority given the territorial tax structure.
Paraguay has no classic debt-to-equity thin capitalization ratio, but Article 15(23) of Law 6380/2019 imposes a real interest-deductibility restriction on related-party interest, royalty, and technical-assistance payments: the interest rate cannot exceed average deposit rates published by the Central Bank of Paraguay for comparable transactions, applicable withholding tax must be paid, and the total deduction cannot exceed 30% of net income for the year (calculated before the deduction itself) - resolving what earlier appeared to be a genuine source conflict, since different sources were describing this 30%-of-net-income cap ("thin capitalization limits") versus the absence of a classic debt-to-equity ratio ("no interest-deductibility restrictions specifically tailored") without distinguishing the two.
Paraguay does not use an elective check-the-box classification system, though its transparent entity structures (the Empresa por Acciones Simplificada, EAS) can pass income directly to the beneficial owner. Paraguay does not have a comprehensive ATAD2-style anti-hybrid regime.
No foreign bank account or foreign financial asset reporting regime exists requiring residents to separately disclose foreign accounts; consistent with Paraguay's territorial system, foreign-source income falls outside the Paraguayan tax base entirely and is not reported on the annual tax return at all.
Paraguay's territorial system already excludes foreign-source income and capital gains from the domestic tax base entirely (taxed at 0%), functioning as a broader substitute for a conventional participation exemption.
Paraguay's territorial tax system limits the practical role of a foreign tax credit, since foreign-source income is generally outside the Paraguayan tax base to begin with.
Per PwC's Paraguay tax summary, Paraguay has signed double tax treaties with exactly 5 countries: Chile, Qatar, Taiwan, the United Arab Emirates, and Uruguay - a notably limited network reflecting Paraguay's reliance on its territorial system rather than treaty-based double-tax relief. Paraguay has no comprehensive income tax treaty with the United States.