Business Taxation

Paraguay Corporate Tax

Paraguay's business-friendly tax system offers a standard 10% corporate rate—but most small businesses pay just 3% through IRE Simple. Here's how it works.

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Quick Answer

Paraguay's corporate income tax (IRE) is 10% on net profits. But businesses under ~$270K revenue can use IRE Simple, paying just 3% on gross revenue—with no dividend tax. For most freelancers and small businesses, the total tax burden is just 3%.

Compare Regimes

10%

Standard IRE

3%

IRE Simple Rate

~$270K

Simple Threshold

0%

Foreign Income

Paraguay Business Taxes Overview

Paraguay has a simple, competitive tax system for businesses. The main taxes you need to know:

IRE

10%

Corporate income tax on Paraguayan-source net profits

IRE Simple

3%

Simplified regime on gross revenue (under ~$270K)

IDU

8-15%

Dividend tax on profit distributions

VAT (IVA)

10%

Value-added tax on goods and services

Territorial Taxation

Paraguay only taxes income from Paraguayan sources. Foreign-sourced income—like dividends from a US LLC or interest from foreign accounts—is exempt from IRE.
Choose Your Regime

Tax Regime Comparison

Feature RESIMPLE IRE Simple Standard IRE
Annual Revenue Limit ≤G. 80M (~$10K) ≤G. 2B (~$270K) No limit
Tax Rate Fixed monthly 3% on gross 10% on net profit
IDU (Dividend Tax) N/A EXEMPT 8% (resident) / 15% (non-resident)
Entity Types Micro businesses Sole proprietors, EAS SRL, SA, branches
Accounting Complexity Minimal Simple Full accounting
Best For Very low revenue Freelancers, small biz Larger operations

Most small businesses and freelancers should choose IRE Simple for its simplicity and IDU exemption.

Understanding Each Regime

RECOMMENDED

IRE Simple (3% Effective Rate)

IRE Simple is the best option for most small businesses and freelancers. It calculates tax as 10% of "presumed income" (30% of gross), resulting in an effective rate of just 3% on gross revenue.

Eligibility:

  • • Annual revenue ≤ G. 2 billion (~$270K)
  • • Sole proprietors (personas físicas)
  • • EAS (simplified stock companies)
  • • Single establishment only
  • • No employees required

Key Advantages:

  • • 3% effective tax rate
  • • No IDU (dividend tax)
  • • Simpler compliance
  • • Less accounting burden
  • • Total tax = just 3%

How the 3% Calculation Works:

IRE Simple uses "presumed income" of 30% of gross revenue. The 10% IRE rate applies to this presumed income:

10% × 30% = 3% effective rate on gross revenue

Example: $100,000 gross revenue → $3,000 tax (3%)

Standard IRE (10% on Net Profits)

Standard IRE applies to larger businesses and formal companies (SRL, SA). The 10% rate is on net taxable income (gross income minus deductible expenses).

Applies To:

  • • SRL (limited liability company)
  • • SA (corporation)
  • • Foreign branches
  • • Businesses over G. 2B revenue
  • • Businesses choosing standard regime

Deductible Expenses:

  • • Direct business costs
  • • Employee salaries and benefits
  • • Rent and utilities
  • • Professional services
  • • Depreciation

Don't Forget IDU

Under standard IRE, you also pay IDU (dividend tax) when distributing profits: 8% for resident shareholders, 15% for non-residents. This brings the effective total rate to ~17-24%.

RESIMPLE (Micro Businesses)

RESIMPLE is for very small operations with annual revenue under G. 80 million (~$10,000). It uses fixed monthly payments rather than percentage-based taxation.

Fixed Monthly Payments:

G. 20,000 - G. 80,000 per month depending on activity type (~$3-10 USD monthly)

When to Use RESIMPLE

Only choose RESIMPLE if your revenue is consistently very low. Once you exceed G. 80 million, you must switch to IRE Simple. For most digital nomads and freelancers, IRE Simple is the better choice from the start.

Effective Tax Rate Examples

Your total tax burden depends on your regime and ownership structure. Here's what you actually pay:

SCENARIO 1

Freelancer under IRE Simple

Gross Revenue:

$100,000

IRE Simple (3%):

$3,000

IDU (Dividend Tax):

$0 (exempt)

Total Tax: $3,000 (3% effective rate)

SCENARIO 2

SRL with Paraguayan Resident Owner

Net Profit:

$100,000

IRE (10%):

$10,000

After-Tax Profit:

$90,000

IDU (8%):

$7,200

Total Tax: $17,200 (~17.2% effective rate)

SCENARIO 3

SA with Non-Resident Foreign Owner

Net Profit:

$100,000

IRE (10%):

$10,000

After-Tax Profit:

$90,000

IDU (15%):

$13,500

Total Tax: $23,500 (~23.5% effective rate)

The IRE Simple Advantage

Notice the massive difference: 3% vs. 17-24%. For most small businesses, IRE Simple is the clear winner. You only lose this benefit when you exceed G. 2 billion revenue (~$270K).

Company Types in Paraguay

SRL

Sociedad de Responsabilidad Limitada

  • • Most common for SMEs
  • • Limited liability
  • • Minimum 2 partners
  • • Standard IRE (10%)
  • • Formation: 4-6 weeks

SA

Sociedad Anónima

  • • For larger operations
  • • Can issue shares publicly
  • • Minimum capital required
  • • Standard IRE (10%)
  • • Formation: 6-8 weeks

EAS / Sole Proprietor

Simplified Structure

  • • Simplest option
  • • Eligible for IRE Simple
  • • Single owner
  • • 3% effective rate
  • • No IDU on withdrawals
  • • Cost: Minimal

Start Simple, Scale Later

Most digital nomads and freelancers should start as a sole proprietor under IRE Simple (3%). Only form a formal company (SRL/SA) when you have specific needs like liability protection, local partners, or revenue exceeding the IRE Simple threshold.

Compliance Requirements

IRE Simple Compliance

  • ✓ Register for RUC with SET
  • ✓ Monthly Form 120 (VAT) via Marangatú
  • ✓ Annual IRE Simple return
  • ✓ Keep basic income records
  • ✓ E-kuatia'i for invoicing (free)

Standard IRE Compliance

  • ✓ Full accounting records
  • ✓ Monthly VAT declarations
  • ✓ Annual IRE return (detailed)
  • ✓ IDU withholding on distributions
  • ✓ Audited financials (larger companies)
  • ✓ Local legal representative
Common Questions

Corporate Tax FAQ

Paraguay has a standard corporate income tax (IRE) rate of 10% on net profits from Paraguayan-source income. However, most small businesses and freelancers qualify for IRE Simple, which has an effective rate of just 3% on gross revenue.
IRE Simple is a simplified tax regime for businesses with annual revenue under G. 2 billion (~$270,000 USD). It calculates tax as 10% of "presumed income" (30% of gross), resulting in an effective rate of 3% on gross revenue. Sole proprietors, EAS companies, and other entities under the threshold qualify.
IRE Simple: 3% on gross revenue, simpler compliance, no dividend tax (IDU). Standard IRE: 10% on net profits, full accounting required, 8-15% IDU on distributions. IRE Simple is better for most small businesses; standard IRE makes sense for larger operations or those with significant deductible expenses.
No. This is a major advantage of IRE Simple. Owners are exempt from IDU (dividend tax), so the total tax burden is just 3%. Under standard IRE, you'd pay 10% + 8% IDU = ~17.2% effective, or 10% + 15% IDU = ~23.5% for non-resident shareholders.
No. Paraguay uses a territorial tax system. Only income from Paraguayan sources is taxed. Foreign-sourced income (dividends from abroad, interest from foreign accounts, etc.) is exempt from IRE.
It depends on your structure: IRE Simple: 3% total (no IDU). Standard IRE + resident owner: ~17.2% (10% IRE + 8% IDU). Standard IRE + non-resident owner: ~23.5% (10% IRE + 15% IDU).
You must switch when your revenue exceeds G. 2 billion (~$270K). However, you might choose to switch earlier if: you have significant deductible expenses (making net profit much lower than gross), you need a formal company structure (SRL/SA), or you're planning to scale significantly.
SRL (Sociedad de Responsabilidad Limitada): Most common for SMEs, limited liability, minimum 2 partners. SA (Sociedad Anónima): For larger operations, can issue shares. EAS (Empresa por Acciones Simplificada): Simplified stock company, can use IRE Simple.
Incorporation takes 4-6 weeks. However, full setup including bank account opening can take 3-6 months. SRL is faster than SA. Professional fees vary depending on complexity.
Monthly VAT declarations (Form 120) via Marangatú, annual IRE return, and proper bookkeeping. IRE Simple has simpler requirements. Standard IRE requires full accounting, audited financials for larger companies, and potentially more frequent reporting.
See All Tax Questions →

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