For years, Paraguay was a temporary tax haven. That is, not intentionally, but his government had simply never taxed the income in a personal capacity. This changed in 2012 after a long-postponed reform, but the good news is that, as a resident without income from the interior of the country, one is not subject to paying taxes on income from abroad and the government is not going to meddle in it. It’s that simple: in Paraguay there is no strong tax culture as there may be in Europe or the United States.
In addition, personal income obtained within the Paraguayan territory is taxed with barely 10%, far from 19% in the lowest income tax range in Spain (and that can reach up to 45%, practically half of the income for pensioners and employees). [The self-employed in Spain, to follow the example, contribute with 15% of the IRPF, but then pay other taxes.]
In any case, the tax reform of 2012 in Paraguay has been more a symbolic measure than anything else and is aimed at taxing the local upper class, which in turn has already structured its businesses to avoid payment anyway.
As we said, this tax does not apply to income from abroad, only for those generated in Paraguayan territory. So if, for example, you own a property in Paraguay and rent it or if you receive a salary from a local company, you must pay this 10%. But if, even residing in Paraguay, you receive a pension from another country, the payment for the rent of a house of your property that you left in Spain or the payment for telematic services that you provide for a European company, then you are exempt from paying any imposed by this income and it is not necessary to present the declaration. If we add to this the low cost of living, the gain that we find is even greater.
In addition, other taxes are very small:
VAT is also 10% for all products compared to 21% overall in Spain (10% and 4% only those reduced and super reduced because they are considered more basic).
If you invest in the interior of the country:
The property tax is between 0.5% and 1% of the annual cadastral value and the tax on the profits produced by these investments (CGT) is 10%.
The return on the sale of shares is taxed at 5% compared to the minimum 19% in Spain. On the other hand, there is no burden on the yield of the bonds, whether they are Sovereign Bonds (that is, issued by the Paraguayan State), or whether they are private.
These are important reasons why pensioners or workers whose tasks can be performed remotely thanks to new technologies, take advantage of this situation. For Europeans, Canadians, Americans and Australians, moving to Paraguay is becoming increasingly attractive.
BRIEF SUMMARY OF THE TAXES WE CAN FIND IN PARAGUAY
IRACIS
This tax is levied on Paraguayan source income from commercial, industrial and service activities that are not of a personal nature, with the exception of livestock and agricultural activities.
The general rate is 10% and is applied, for example, if you are a private individual who habitually buys / sells real estate.
IRAGRO
This tax is levied on income from agricultural activity carried out in the national territory. P.e. if it is dedicated to the production of wool and leather for the textile business.
The general tax rate will be 10%.
The parent companies, partners or shareholders domiciled abroad must pay the tax corresponding to the profits or dividends credited by the branches, agencies or establishments located in the country, applying the 15% rate on the net amounts credited, paid or remitted, of them the previous one.
IRP
This is the personal income tax and applies to some simple companies as well as to all individuals.
Revenues must occur in Paraguayan territory, that is, if an income comes from an activity that took place outside the country, it will not be taxed.
The general rate is 10% and does not apply for the following cases:
- Obtaining dividends and profits received by shareholders or partners domiciled abroad.
- Obtaining capital gains that are part of the assets of a sole proprietorship.
- Income from games of chance regulated by the Law.
- Legacies and inheritances.
- The adjudication of assets as a result of a marital dissolution.
VAT
It is exactly like the Spanish VAT, taxes the consumption, only that in this case it is limited to a maximum 10% and 5% for several very interesting exceptions, e.g. contracts for the rental of goods or the sale of real estate.
ISC
It means “selective tax on consumption” and is a specific tax on specific goods and applies both to commercial transactions made with them within the territory and to importers who introduce them into the country.
