Paraguay Income Tax Rates: What the IRP Actually Charges

The personal income tax, by band

Ley N° 6380/2019 splits the IRP into two things that are taxed differently. Income from personal services (your work) runs up a progressive scale. Income from capital (your assets) is flat.

Capital income and gains are taxed at 8%, without a scale.

Two features of this design matter more than the headline percentages.

First, the scale applies to net income, after the deductions the law allows, not to gross receipts. Second, where gross income from personal services does not exceed ₲80,000,000 in the fiscal year, the formal obligations of the tax apply but no tax is payable. That threshold is a real feature of the statute and it is the reason a good number of registered IRP taxpayers in Paraguay file and pay nothing.

The other rates you will meet

People searching for "Paraguay income tax rate" usually mean the IRP. Paraguay has several other rates that end up in the same conversation, and mixing them up is how planning goes wrong.

The IRE rate of 10% is the one that catches planners out. A resident individual taxed only under the IRP sits inside a genuinely territorial source rule. A person who forms a Paraguayan company steps into Article 6, whose source rule is materially wider and expressly reaches foreign bank interest, foreign dividends and business activity carried out abroad. That is set out in full in IRP vs IRE, and it is a bigger decision than any rate on this page.

Why the rate is the wrong thing to optimise

Suppose two people both hold Paraguayan residency and both earn USD 120,000 a year.

The first is a consultant whose clients are all in Germany and the United States. Her income arises from services performed for clients who are not Paraguayan IRE or IRP taxpayers. Under Article 48 that income is not Paraguayan-source, so the 8/9/10 scale never touches it. Her Paraguayan rate is not 8%. It is nothing, because the tax does not reach the income in the first place.

The second runs the same consultancy through a Paraguayan company because someone told him a company was tidier. He is now inside the IRE. His company pays 10% on net income, and when he takes the money out the IDU applies on top. He has moved from outside the base to inside it and paid for the privilege in accounting fees.

Same rate table, opposite outcomes. The variable was never the rate.

What the rates are charged on

The IRP taxes Paraguayan-source income: income from activities carried out in Paraguay, from property situated there, or from rights economically used there. Article 48 then deems three further things Paraguayan-source, and the third of them is the one that reaches abroad: personal services performed outside the national territory by an IRP taxpayer, where the client is itself a Paraguayan IRE or IRP taxpayer.

So a Paraguayan resident invoicing a Paraguayan agency pays the 8/9/10 scale on that income whether she is sitting in Asunción or in Lisbon when she does the work. The full boundary, with the exceptions, is in what the 0% actually covers.

Indirect taxes, briefly

Paraguay's value-added tax (IVA) is charged at a general rate of 10%, with a reduced 5% rate for certain goods and services including specified foodstuffs and residential property leasing. IVA is a consumption tax on Paraguayan transactions and applies to you as a buyer regardless of your income tax position. It is one of the reasons a low income tax rate does not by itself make a country cheap.

Reading guaraní figures

Every threshold in the IRP is stated in guaraníes and none of them is indexed to the dollar. A band that looks generous at one exchange rate looks different at another, so convert at the Banco Central del Paraguay reference rate on the day rather than at a figure you saw in a blog post. The bands themselves change only when the law changes; the dollar value of those bands changes constantly.

The question worth asking instead

Not "what is the rate", but "is this income Paraguayan-source, and am I an IRP taxpayer or an IRE taxpayer?" Get those two answers and the rate follows mechanically. Get the rate first and you have learned nothing you can act on.

Start with how territorial taxation actually works, then read IRP vs IRE. If your home country still considers you resident, none of this changes your bill there, which is covered in tax residency vs legal residency.