Paraguay Maquila Program 2026
Paraguay's Maquila regime (Law 1064/97) allows companies to produce goods or services for export with a single 1% tax on value added - one of the most competitive export processing regimes in South America.
1%
Single Tax Rate
30,000+
Jobs Generated
45+
Export Countries
3
Maquila Modalities
Quick Answer
The Maquila regime allows any company with Paraguay domicile to produce for export under contract with a foreign entity, paying only 1% tax on value added. All duties on raw materials and inputs are suspended. Income tax, VAT, customs duties, port taxes, and municipal taxes are exempted. Three modalities are available: pure export, idle capacity (export + local), and shelter (intermediation). The program generates approximately 30,000 jobs and exports to 45+ countries.
See Tax Treatment DetailsHow the Maquila Regime Works
Inspired by Mexico's Maquiladora system, Paraguay's Maquila regime (Law 1064/97) creates a framework where a local company (the "Maquiladora") signs a contract with a foreign entity (the "Matriz") to produce goods or provide services for export. The foreign entity can supply all raw materials and inputs from any local or foreign supplier.
The regime is designed to attract export-oriented manufacturing and service operations by virtually eliminating the tax burden on production. The Maquiladora operates "for account and risk of" the foreign entity, while maintaining a Paraguayan legal presence.
There are no ownership restrictions (total or partial foreign, national, or joint venture), no minimum capital, and no minimum or maximum production requirements. Any company form qualifies: EAS, SA, SRL, branch, or individual limited liability enterprise.
Tax Treatment
The Maquila regime provides one of the most comprehensive tax exemption packages available in Paraguay:
| Tax | Standard rate | Maquila rate |
|---|---|---|
| Income tax (IRE) | 10% | Exempt |
| Value-added tax (IVA) | 10% | Exempt |
| Customs duties on inputs | Variable | Suspended |
| Port and airport taxes | Variable | Exempt |
| Departmental/municipal taxes | Variable | Exempt |
| Remittance taxes (Maquila-related) | Variable | Exempt |
| Single production tax | N/A | 1% on value added |
The 1% tax is calculated on the value added in Paraguay or on the invoice value from headquarters, whichever is higher. IVA credits can be recovered for goods and services used in Maquila operations.
Three Maquila Modalities
Pure Maquila
Production or services exclusively for export. All Maquila tax benefits apply. This is the standard modality and provides the maximum tax advantage.
Export only - full benefits
Idle Capacity Maquila
Export production plus local market sales using idle production capacity. Maquila benefits apply to the export portion; domestic taxes (IRE, IVA) apply to local sales. Useful for companies wanting to serve both markets.
Export + local - mixed tax treatment
Shelter Maquila
Intermediation services for export without direct production operations. The Maquiladora acts as an intermediary between foreign entities and local producers, extending tax benefits to the arrangement.
Intermediation - service-based model
Sectors and Export Markets
The Maquila program currently generates approximately 30,000 jobs across multiple sectors:
- Manufacturing: autoparts, garments, food processing, aluminum products, plastics, chemicals, pharmaceuticals
- Services: IT services, back-office processing, customer support
- Emerging: renewable energy components, electronic assembly
Exports reach 45+ countries, with primary destinations in MERCOSUR (especially Brazil and Argentina), Netherlands, USA, and Chile. The MERCOSUR origin certificates available through the regime facilitate duty-free access to the bloc's 260M+ consumers.
Combining Maquila with Other Incentives
The Maquila regime is explicitly designed to work alongside other Paraguay incentive programs:
- Law 60/90: Capital goods can be imported tax-free under Law 60/90 and then used in Maquila operations. No restrictions on combining the two regimes.
- Automotive policy (Law 4838/12): Automotive Maquila operations can access 0% capital goods imports and 2% IVA in addition to the Maquila 1% production tax.
- Industrial parks: Several industrial parks house Maquila operations, providing infrastructure plus combined incentive access.
- Subcontracting: Tax benefits extend to subcontractors under certain conditions, allowing Maquiladoras to build local supply chains without losing fiscal advantages.
Requirements
The Maquila program has relatively accessible requirements compared to other incentive regimes:
- Paraguay domicile: Any person or company with domicile in Paraguay can qualify
- Company form: Any entity type - EAS, SA, SRL, branch, or individual enterprise
- Export focus: The program must be oriented toward export (with the exception of Idle Capacity modality)
- Customs guarantee: Insurance policy, warrant, or bank guaranty for National Customs equal to the value of suspended taxes on imported inputs
- Registry: Registration in RIEL (industrial) or REPSE (services) at MIC
- No minimum capital or production: No restrictions on scale
- No ownership restrictions: Total, partial, or joint venture foreign participation allowed
How to Apply
- Form or identify a Paraguayan company. Any entity type with Paraguay domicile qualifies. Use SUACE for EAS formation if needed.
- Register in RIEL or REPSE at MIC. Industrial activities go to RIEL (industrial registry); service activities to REPSE (services registry).
- Prepare the Maquila program application. Include estimated operations: goods/services types, volumes, foreign contracting entity, raw materials, workforce requirements.
- File with the Maquila Council. Submit through MIC. Include the customs guarantee for suspended duties.
- Begin operations. Once approved, the program can be modified as needed. Maintain the guarantee for suspended taxes throughout the program.
Paraguay vs Other Maquila Programs
| Factor | Paraguay | Mexico | Central America |
|---|---|---|---|
| Production tax | 1% | Variable (income tax applies) | Variable by country |
| Labor cost | Low (~$367/month minimum wage) | Moderate | Low to moderate |
| Energy cost | Very low (hydroelectric) | Moderate to high | Moderate |
| Market access | MERCOSUR (260M+ consumers) | USMCA/US market | US (CAFTA-DR) |
| Setup complexity | Simple - any entity type | More complex regulations | Moderate |
| Combine with other incentives | Yes (Law 60/90, automotive) | Limited combining | Varies |
The right choice depends on target markets, logistics, existing supply chains, and whether MERCOSUR or US market access is the priority.