Tax laws Paraguay
Paraguay's taxation system operates on a territorial basis, meaning that individuals and corporations are taxed only on income sourced within the country. Income earned abroad is generally exempt from Paraguayan taxation.
Individual Income Tax:
Taxable Income: Personal income tax (PIT) applies to income from personal services and capital gains, excluding those taxed under the Tax on Dividends and Profits (IDU).
Tax Rates: Paraguay employs a progressive income tax system with rates ranging from 8% to 10%.
Corporate Income Tax:
- Tax Rate: The corporate income tax rate is set at 10%.
Value-Added Tax (VAT):
- Rate: VAT is applied at a standard rate of 10%.
Recent Tax Reforms:
In September 2019, Paraguay enacted Law No. 6.380/19, aiming to modernize and simplify the tax system. Key changes included:
Dividend and Profit Tax: Introduction of a tax on dividends and profits (IDU) with rates of 8% and 15%.
Corporate Income Tax (IRE): Creation of the corporate income tax (IRE), unifying previous taxes (Iracis and Iragro) under a single rate of 10%.
Personal Income Tax (IRP): Implementation of progressive rates for personal income tax (IRP), ranging from 8% to 10%.
Simplified Regime (Resimple): Establishment of a simplified tax regime (Resimple) for small taxpayers to ease compliance burdens.
Investment Incentives:
Paraguay offers various tax incentives to attract investors, including exemptions from corporate income tax and value-added tax under Law 60/90. Additionally, the Mercosur agreement provides further benefits for regional investors.
Recent Developments:
Paraguay has become an attractive destination for Europeans, particularly Germans, seeking lower taxes and a favorable business environment. The influx of immigrants has raised concerns about impacts on local education and job markets.
Conclusion:
Paraguay's tax system is characterized by its territorial taxation approach, competitive rates, and ongoing reforms aimed at simplification and modernization. These features make it an appealing destination for both individuals and businesses seeking favorable tax conditions.
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