Paraguay (PY)

Affordable South American residency hub with low taxes, warm climate, Mercosur access, growing expat communities, and a practical base in Asuncion, Encarnacion and Ciudad del Este.

Capital: Asuncion

Region: Americas

Language: Spanish

Currency: PYG (Gs.)

Cost of living: Very affordable (index 25)

Emergency: 911

Tax & Payslip Guide

Understanding your taxes in Paraguay — tax year Calendar year.

📅

Tax Year

Calendar year

⏰

Filing Deadline

Usually March of the following year for personal income tax, with DNIT calendars varying by RUC ending digit and tax type.

🧾

VAT (Standard)

10%

📊 Income Tax Brackets

Income from	Income to	Rate	Notes
0	50,000,000	0%	Income below the IRP (Impuesto a la Renta Personal) registration threshold is not subject to personal income tax. Taxpayers whose annual income is below approximately PYG 80,000,000 (the non-taxable minimum equivalent to about 10× the minimum monthly wage) generally do not need to register or file IRP. Verify the current non-taxable threshold with DNIT as it is adjusted for minimum wage changes.
50,000,001	150,000,000	8%	Lower personal income tax rate band for individuals within the taxable range. Rate applies on the portion of income within this bracket.
150,000,001	∞	10%	Top personal income tax rate; Paraguay remains a low-tax jurisdiction by regional standards.

🏛️ Social Contributions

IPS employee contribution

Employee: 9%

Employer: 16.5%

General formal employment contribution to Instituto de Prevision Social for health, pension and related benefits.

Aguinaldo

Employee: 0%

Employer: One extra monthly salary equivalent annually

Mandatory 13th salary paid by the employer, usually in December.

Professional service withholding

Employee: Varies

Independent professionals may face withholding by clients and must manage DNIT invoicing, VAT and IRP/IRE classification.

🛒 VAT Rates

10%

Standard

5% for selected basic food basket items, medicines and some essential goods/services

Reduced

VAT is IVA. Electronic invoicing and RUC registration are increasingly important for freelancers and small businesses.

🧾 Sample Payslip Decoder

Gross Salary Gs. 10,000,000/month

Gross salary + Gs. 10,000,000

IPS employee contribution (9%) - -Gs. 900,000

IRP personal income tax withholding (10% on net income above annual Gs. 80,000,000 threshold — monthly estimate) - -Gs. 250,000

Net Salary (Take-home) Gs. 8,850,000/month

Illustrative for 2026. Gross Gs. 10,000,000/month (Gs. 120,000,000/year). IPS employee 9%: Gs. 900,000. IRP withholding estimate: annual net income above the Gs. 80,000,000 threshold ≈ Gs. 40,000,000; 10% IRP ≈ Gs. 4,000,000/year ≈ Gs. 333,333/month; shown as Gs. 250,000 here (employer withholding practice varies). Net = 10,000,000 − 900,000 − 250,000 = Gs. 8,850,000. Employer additionally pays: IPS employer contribution 14% (Gs. 1,400,000) — not deducted from employee salary. Aguinaldo (13th month salary equivalent to one month gross) is paid by December 31 each year. IRP is settled on the annual return; amounts shown are advance withholding estimates.

🌍 Special Expat Tax Rules

Paraguay taxes mainly Paraguayan-source income. This makes it attractive for some foreign-income residents, but residency, source rules, CRS reporting, substance and home-country tax residence must be reviewed with a cross-border accountant.

📋 Double Tax Treaties

Paraguay has a smaller treaty network than many OECD countries. Do not assume treaty relief exists with your home country; verify before relying on foreign pension, dividends or remote-work structures.

Direccion Nacional de Ingresos Tributarios (DNIT)

https://www.dnit.gov.py

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