Territorial Taxation
The main feature of the Paraguayan tax system is territorial taxation. This means that any income from outside Paraguay is tax-free for Paraguayan tax residents and does not have to be reported. For this type of income, we can count profits from cryptocurrencies, dividends, rental income from properties abroad, stock sales, digital work performed abroad, and many more. Territorial taxation makes Paraguay a very attractive country for foreigners wanting to become more financially independent and free.
Taxes Inside Paraguay
A person who wants to be economically active in Paraguay must have an RUC number (free for our residency clients), similar to tax identification numbers we know in Europe.
IVA – Value Added Tax
IVA is a tax on the sale of goods and services in Paraguay, similar to value-added tax (VAT) in Europe or sales tax in the US. The standard rate is 10%, with some exceptions like rent or medicine 5% or gasoline 0%.
The positive difference is that any receipt you collect in Paraguay, including personal expenses (buying groceries, eating out in restaurants, buying clothes, or paying for a gym membership…), can be used to offset IRP (Personal Income Tax) and IVA (Value Added Tax) you could pay now or in the future on your income.
IRP – Personal Income Tax
The standard tax rate for personal income in Paraguay is 10%. However, this rate only applies to income above 10,000 US dollars annually. Until 10,000 US dollars is income tax-free in Paraguay.
The IVA (VAT) paid on the products and services you buy in Paraguay can be used to offset this tax.
IRE – Corporate Income Tax
Corporate income is taxed at a flat rate of 10% on net profits.
There are many reasons to become a resident of this beautiful country, including the tax environment. We at New Horizons—Paraguay will gladly assist you in getting your residency. Contact us!