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/ All categories of countries are / Tax Reasons to invest in Paraguay Agriculture

Tax Reasons to invest in Paraguay Agriculture

Post available in: English

In Paraguay, the return on investment is 22%, according to the report of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) in 2014, the second-highest in Latin America. In the first place, Peru has 25%, which in that period had registered high returns in

An entrepreneur who invests his capital in Paraguay can achieve greater profitability compared to Argentina with a return of 10%, Uruguay with 8% and Brazil with 6%.

Paraguay offers capital financiers the lowest taxes in the region and an abundant labour force, with salaries almost as competitive as the Asians, according to the report.

According to the World Bank’s recent “Doing Business Index 2017” published in October 2016, Paraguay ranks 5th among the ten South American countries and ranked 106th out of 190 countries in the world. The top positions in South America are occupied by Colombia, Peru, Chile and Uruguay.

On the other hand, Argentina ranks 116, and Brazil ranks 123. In Paraguay, the return on investment is 22%, according to the report of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) in 2014, the second-highest in Latin America. In the first place, Peru has 25%, which in that period had registered high returns in the mining sector.

An entrepreneur who invests his capital in Paraguay can achieve greater profitability compared to Argentina with a return of 10%, Uruguay with 8% and Brazil with 6%.

Paraguay offers capital financiers the lowest taxes in the region and an abundant labour force, with salaries almost as competitive as the Asians, according to the report.

Paraguay now produces food for approximately 80 million people and can triple that condition with the incorporation of technology and territorial planning.

Some of Paraguay’s agricultural exports are destined for final consumption or for the food industry, while another part is used for the feeding of farm animals, which in turn contribute to consumer food.

The productive factors and the strategic location allow the positioning of Paraguay as a competitive platform in three areas: Center for the production of high-quality food to feed the world, with abundant fertile land and a highly favourable climate. A platform for industrial production for access to the markets of the region and the world, at an advantageous cost. Logistical centre of the region, combining the roads and fluvial networks of high transport capacities.

Tax Advantages of Paraguay

International Tax and Paraguayan highlights:

Compliance for Corporations:
Tax year: The tax year generally coincides with the calendar year, but certain industries (e.g. assurance, beverage and agricultural industries) are required to use specific tax years.
Consolidated returns: Consolidated returns are not permitted; each company must file a separate return.
Filing requirements: A company must take four advance payments based on the previous tax year’s liability. A return and balance sheet as a minimum must be filed for corporate income tax purposes. In
general, the return is due within four months of the end of the tax year, but the taxpayer’s identification number determines the exact due date.


Penalties: Penalties range from 4% to 14% of the total tax due, plus monthly interest at a rate of 1.5%.
Rulings: Taxpayers may request a ruling from the tax authorities on the tax consequences of a proposed transaction.

Personal taxation:
Basis: Tax is levied on Paraguay-source income from services and certain investments, provided the taxpayer’s income exceeds the monthly minimum wage by a certain amount (60 times for 2019, to be reduced by 12 per year un the factor reaches 36 in 2021).


Residence: An individual is a resident in Paraguay if he/she is in the country for more than 120 days in a calendar year on the previous 12-month period.


Filing status: Joint filing is not allowed. Each person must file a tax return if his/her individual income exceeds the relevant threshold.

Taxable income: Income from services and certain investment is taxable. This includes personal services income; benefits in kind; dividends, profits and share price surplus (50% is subject to tax if derived from a resident company subject to corporate or agricultural income tax; otherwise, 100% is subject to tax); certain capital gains; and interest, commissions and other income that has not been subject to the corporate or agriculture income tax.
Nonresidents deriving business or professional income in Paraguay are subject to withholding tax at an effective rate of 10% (20% on 50% of the gross amount).

Capital Gains: Capital gains from the disposal of real property located in Paraguay and shares of Paraguayan companies are subject to individual income tax if they are occasional; otherwise, they are subject to the corporate, agricultural business tax or small business tax. Deductions and allowances: Domestic and foreign expenses are deductible if directly related to the taxable activity generating domestic-source income. The taxpayer and his/her dependents are entitled to personal deductions (education, health, clothing, recreation, charitable, etc.). A deduction of 15% of annual gross income is allowed for amounts invested in certain entities where the taxpayer does not contribute to the social security system.

Tax Rates: The individual income tax rate is 10% if the income tax exceeds 120 times the minimum wage; otherwise, the rate is 8%. Capital gains derived by non-residents are subject to tax at an effective rate of 10% (20% on 50% of the gross amount).

International Tax and Paraguayan highlights:

Withholding tax:


Dividends: Dividends distributed to a nonresident are subject to a 15% withholding tax.

Interest: Interest paid to a non-resident is subject to a 30% withholding tax imposed on 50% of the payment, resulting in an effective rate of 15%. A 6% withholding tax applies to payments made to a financial institution.

Royalties: Royalties paid to a non-resident are subject to a 30% withholding tax imposed on 50% of the payment, resulting in an effective rate of 15%. Technical service fees: Technical service fees, whether paid to a resident or a non-resident, are subject to a 30% withholding tax imposed on the 50% of the payment, resulting in an effective 15%.

Branch remittance tax: Profits remitted to a head office are subject to a 15% withholding tax in addition to the 10% corporate income tax and an additional 5% tax on dividend distributions, resulting in an effective rate of 30%.

Other: Premiums and other income from the insurance or reinsurance os risk related to goods or people located or resident in Paraguay are subject to a 30% withholding tax imposed on 10% of the payment, resulting in an effective rate of 3%. A 10% tax applies on the gross amount received from the carrying out of international freight operations.

Other taxes on Corporations:

Capital duties: There is no capital duty per se, but certain fees apply (e.g. registration and publication) upon the formation of a company.

Payroll tax: Real property is subject to an annual tax, collected by the local authorities, at a rate of 1% of the cadastral value of the property (0.5% for certain rural property). Real estate surtaxes also apply for the specific types of property, e.g. a tax rate of 0.3% on the transfer value of the immovable property (calculated in the higher of the transaction price or the cadastral value of the property).

Social security: The employer is required to pay social security taxes for each employee at a rate of 16.5% on the gross employment income (including bonuses, premiums, etc).

The employer also must withhold 9% of the gross employment income for employee contribution.
Stamp duty: NO
Transfer tax: NO
Other: Special regimes apply to some small and agricultural businesses.

Anti-avoidance rules:
Transfer pricing: Transfer pricing rules apply only to exports of commodities.
Thin capitalization: NO
Controlled foreign companies: NO
Disclosure requirements: NO

Investment Basics:
Currency; Paraguayan Guaraní (PGY)
Foreign exchange control: NO

Accounting principles/ financial statements: Paraguayan GAAP, which is based on IAS/IFRS. Financial statements must be prepared annually.
Principal business entities: Theses are the Corporation, Limited Liability Company, Partnership and Branch of a Foreign Corporation.

• Corporate taxation:

Residence: Residence is determined, in order of priority, according to:

(1) the place of a company’s management or direction;

(2) the place where the company’s main activities are carried out; and

(3) the address of the company’s representative.

Basis: Corporate income tax is levied on a territorial basis. Tax is due, with some exceptions, on business income derived from activities performed, property situated or economic rights used in Paraguay,
regardless of the nationality, domicile or residence of those participating in the operations or where contracts are signed.
Taxable Income: Taxable income is the difference between total earnings from commercial, manufacturing and service activities and the costs incurred to derive the income.
Taxation of dividends: Dividends received by a resident company are exempt if certain requirements are met. Dividends received by a non-resident shareholder are subject to a 15% withholding tax. A 5% tax is levied on the distributing company upon he distribution to shareholders.

Capital gains: Capital gains derived from the sale of fixed assets, immovable property and securities are taxed as ordinary income at the general corporate rate.
Losses: Tax losses may not be carried forward or back.
Rate: 10%
Surtax: NO
Alternative minimum tax: NO
Foreign tax credit: NO
Participation exemption: NO
Holding company regime: NO
Incentives: Incentives regimes include trade zones, a maquila regime and a special regime for local foreign investment in the country.

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