Paraguay has one of the lowest personal income tax rates in the world. Only 3 brackets (8%-10%). Uses a territorial tax system — only Paraguayan-source income is taxed. IPS contributions (9%) are deductible. Annual exemption: ₲80,000,000.
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📌 IRP 2026 — One of the Lowest in the World:
Only 3 brackets: 8% / 9% / 10%. Annual exemption: ₲80,000,000 (~$10,960 USD). IPS contributions (9%) fully deductible. Additional deductions: health expenses, education, housing (rent/mortgage), clothing, food (with limits), charitable donations. Territorial system: Only Paraguayan-source income taxed. Foreign income is NOT taxed. Aguinaldo (13th salary): Mandatory Christmas bonus. Non-residents: 15% withholding on Paraguayan-source income. Minimum wage 2026: ~₲5,300,000/month. Paraguay's tax system is among the simplest and most competitive globally — corporate tax 10%, VAT 10%, personal income tax max 10%.
📊 Paraguay Tax Rates Overview 2026
Tax Type
Rate
Details
IRP (Exempt)
0%
Up to ₲80,000,000/yr
IRP (Bracket 1)
8%
Up to ₲50,000,000 taxable
IRP (Bracket 2)
9%
₲50M – ₲150M taxable
IRP (Bracket 3)
10%
Over ₲150,000,000 taxable
IPS Employee
9%
Social security
IPS Employer
16.5%
Social security
IVA (Standard)
10%
Most goods & services
IVA (Reduced)
5%
Some basic goods
IRACIS (Corporate)
10%
General rate
ISC (Excise)
5%-20%
Alcohol, tobacco, fuel
Dividend WHT
8%
Profit distributions
Non-Resident WHT
15%
Paraguayan-source income
Agro Corporate
1%
Agricultural companies
Municipal Property
0.5-1%
Real estate tax
📌 "10-10-10" Tax System:
Paraguay is famous for its "10-10-10" tax system: 10% corporate tax, 10% VAT, 10% maximum personal income tax. This is one of the simplest and most competitive tax regimes in the world. The territorial system means foreign-sourced income is NOT taxed. Agricultural companies enjoy an even lower 1% corporate tax rate. Paraguay is a member of Mercosur (with Brazil, Argentina, Uruguay), benefiting from reduced tariffs on intra-bloc trade. The economy is growing steadily, driven by agriculture (soybeans, beef), hydropower (Itaipú Dam), and growing manufacturing.
👥 IPS Calculator (Instituto de Previsión Social)
Paraguayan social security via IPS (Instituto de Previsión Social). Employee: 9%. Employer: 16.5%. Combined: 25.5%. Covers pension, healthcare, and occupational risks.
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📌 IPS 2026:Employee (9%): Pension + healthcare coverage. Employer (16.5%): Pension fund contribution + healthcare + occupational risk insurance. Combined (25.5%): One of the higher combined rates in the region, but balanced by very low income tax rates. Aguinaldo (13th salary): Mandatory Christmas bonus — one full monthly salary, paid in December. Vacaciones: 12 working days per year (after 1 year of service), plus 1 extra day per additional year. Indemnización por desahucio: Severance pay — 30 days salary per year of service. Licencia por maternidad: 14 weeks paid leave (prenatal + postnatal). Licencia por paternidad: 14 days paid leave. Salario familiar: Family allowance for children up to 18 years.
🧾 IVA Calculator (Impuesto al Valor Agregado)
Paraguayan VAT is one of the lowest in the region. Standard rate: 10%. Reduced: 5%. Zero: 0% (exports, some basic goods). Plus ISC excise tax on specific goods.
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📌 IVA 2026:10% (Tasa general): Most goods & services, electronics, clothing, restaurants, professional services, vehicles. 5% (Tasa reducida): Some basic goods, certain services. 0% (Exempt): Exports, basic unprocessed food, medical/health services, education, financial services, residential rent. ISC (Impuesto Selectivo al Consumo): Excise tax on specific goods — alcohol (18-20%), tobacco (20%), fuel (variable), vehicles, luxury goods. Monthly filing: IVA credit mechanism — IVA paid on purchases offsets IVA collected on sales. Excess credits can be carried forward.
🏢 IRACIS (Impuesto a la Renta de Actividades Comerciales)
Corporate income tax: 10% — one of the lowest in the world. Territorial system. Agricultural companies: 1%. Plus dividend withholding 8% and ISC excise taxes.
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🏠 Dividendos + ISC + Municipal
Dividend withholding: 8%. ISC excise tax: 5%-20%. Municipal property tax: 0.5%-1%. Property transfer tax: 0.4%-1.6%.
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📌 Corporate & Other Tax Notes:IRACIS (10%): One of the lowest corporate tax rates globally. Only Paraguayan-source income taxed (territorial). Loss carry-forward: up to 5 years. Agricultural (1%): Extremely favorable rate for agribusiness — soybeans, beef, corn, etc. Agricultural exports also enjoy 0% IVA. Dividend WHT (8%): Applied to profit distributions to shareholders. ISC: Excise tax — alcohol 18-20%, tobacco 20%, fuel variable, luxury goods. Municipal property tax: 0.5-1% of assessed property value. Property transfer tax: 1% to municipality + notary/registration fees. Free Trade Zones: No specific FTZ regime like Uruguay, but incentives exist for investment outside Asunción and in less developed regions.