On June 19th, 2019, the Paraguayan Senate approved a bill that substantially modifies the Paraguayan tax laws. The House of Representatives also approved the bill on July, 10 but some changes were introduced and these changes must be analyzed again by the Senate. Once the changes are reviewed and approved, the bill must be enacted by the Executive Branch and the law will enter into force within 90 days from its enactment.

Below is a summary of the main changes that the bill introduces:

  1. Unification of the Corporate Income Tax, which now comprises the former corporate income tax and the agricultural income tax (“IRE” as per its Spanish acronym)
  • The general tax rate of the IRE is of 10% which is applied over the net income of the fiscal year.
  • Partially replaces the source system currently in force by the worldwide system of taxation.
  • Establishes a simplified assessment regime, depending on the annual turnover of the taxpayer.
  • Introduces transfer pricing rules, as well as rules defining related-party operations.
  • Introduces thin capitalization rules that also is applied to payment of technical assistance and royalties.


2. Creates a new tax on the distribution of dividends (“IDU” as per its Spanish acronym)

  • The IDU rates are the following: (i) 8% over dividends obtained by Paraguayan residents; and (ii) 15% applicable over dividends obtained by non-Paraguayan residents.
  • The effective tax rate for the distribution and remittance of dividends for non-Paraguayan residents is reduced, from 27.32% to 23.50%.
  • Creates a new tax for local shareholders of companies that perform activities which were taxed under the former IRAGRO. The effective tax rate under the IDU is 17.20%.

3. Changes to the Personal Income Tax are introduced (“IRP” as per its Spanish acronym)

  • It taxes: (i) capital income and gains, excluding the income taxed by the IDU; and (ii) income originated by employees or independent services providers in the rendering of personal services.
  • Adopts partially the worldwide system of taxation in connection with income obtained by Paraguay tax residents.
  • Modifies the applicable tax rates are modified and for the following: (i) 8% over capital income; and (ii) 8%, 9% and 10%, depending on the origin and quantity of the net income.

4. A Nonresident tax is created (“INR” as per its Spanish acronym)

  • Applies a tax rate of 15% over the percentages of legally presumed net income, that ranges from 30% to 100% of the gross income from Paraguayan source.
  • Under the INR: (i) the effective tax rate of certain taxable events is increased; (ii) the tax rates applicable to interests originated in loans, leasing and sale of real estate located in Paraguay, as well as related parties’ operations, is decreased; and (iii) operations that were not previously taxed, such as the transfer of stock, are now taxed.

5. Modifications to the Value Added Tax are introduced (“VAT” as per its Spanish acronyms)

  • Introduces definitions such as digital services, operations with financial derivatives and obligations to abstain.
  • Introduces a broader definition of the principle of the source.
  • Exporters of raw agricultural goods will no longer be able to recover VAT credit contained in the invoices for the acquisition of exported such raw materials. All other exports will keep the benefit of VAT credit reimbursement.

6. Modifications to the Selective Consumption Tax (“ISC” as per its Spanish acronyms)

  • The tax rates thresholds applicable to tobacco products are increased.
  • The import of goods such as aircrafts and vessels with a value over USD 30,000 and packaged foods products which calories up to 500 for each 100 grams, are now reached by the ISC.