IRP vs IRE: Which Paraguayan Tax Applies to You

Side by side

Why this is the most consequential distinction in Paraguayan tax

Because the thing people come to Paraguay for — a narrow tax base on foreign income — lives entirely in the IRP column, and a good deal of the advice people receive pushes them into the IRE column.

Register a Paraguayan SA or SRL and route your income through it, and Article 6 is now the rule that describes your affairs. Under Article 6, the foreign bank account, the foreign holding company and the offshore business activity are not outside the Paraguayan base — they are named in it.

This is not an argument against Paraguayan companies. It is an argument against acquiring one by default because it came bundled.

What Article 6 says

Deemed Paraguayan-source income includes:

Interest, commissions, returns or gains on capital deposited in public or private banking or financial institutions abroad, as well as exchange differences, and dividends or net profits obtained as a partner or shareholder of foreign entities, when the investing or beneficiary entity is constituted or resident in the country.

And, in the article's final paragraph, income obtained from activities carried out abroad by taxpayers of this tax is also Paraguayan-source, unless the taxpayer has paid income tax abroad on that income at a rate equal to or higher than the rate of this tax — with the credit mechanism in Article 134 available to avoid double taxation.

Note what that last carve-out implies. If you are an IRE taxpayer and your foreign activity is taxed abroad at 10% or more, Paraguay does not reach it. If it is taxed abroad at 0%, Paraguay does.

When a Paraguayan company is the right answer

• You have real Paraguayan operations — staff, premises, local customers, local supply.
• You need to invoice Paraguayan clients, who will want a compliant local invoice.
• You need a local banking relationship in the company's name for operational reasons.
• You are investing through structures that need a Paraguayan entity anyway.

When it may not be

• You are a remote worker or freelancer with only foreign clients, taxed as an individual, and the company adds Article 6 exposure without adding function.
• Your income is largely foreign dividends or foreign interest, which Article 6 names explicitly and Article 48 does not.
• You were told the company was "part of the package" and nobody asked what it was for.

Where the RUC fits

The RUC — Registro Único del Contribuyente — is the taxpayer registration number. You need one to obtain a tax residency certificate as a registered taxpayer, and it is a prerequisite for Paraguayan accounting services.

Registering for a RUC is not the same act as becoming an IRE taxpayer, and the two should not be conflated. But it is the point at which "what am I actually registering as?" becomes a question with consequences, and the right time to ask it is before, not after.

Dividends: the third tax

There is also the IDU, the dividends and profits tax. Distributions by Paraguayan entities are taxed at 8% where the recipient is resident in the country and 15% where the recipient is a non-resident individual or entity, including a foreign parent.

So the full picture for a Paraguayan company distributing profit to its owner is the IRE at 10% on net income, then the IDU on distribution. Comparing that against an individual taxed under the IRP at 8% on capital income — or outside the base entirely on foreign income — is the arithmetic that actually matters.

What to do with this

Work out which column you are in before you buy anything that moves you between them. Then take the specific question — your income types, your countries, your structures — to a Paraguayan accountant who will look at the whole picture.

This page is general information about how two Paraguayan taxes are written. It is not tax advice for your circumstances, and the interaction with your home country's rules is at least as important as the Paraguayan side.