Paraguay is becoming an increasingly popular destination for entrepreneurs, investors, and digital nomads seeking a business-friendly tax environment. With its territorial tax system, low corporate tax rate, and simple compliance rules, the country offers numerous advantages for individuals and businesses alike. But understanding who is required to file taxes in Paraguay is essential to make the most of its benefits and avoid potential pitfalls.
Whether you’re a resident, non-resident, or a foreign business owner, the rules differ depending on your source of income, residency status, and type of activity. This guide will help you navigate the requirements and determine if you need to file taxes in Paraguay—and how to maximize your opportunities while staying compliant.
Filing tax returns in Paraguay is mandatory for anyone who holds a RUC (Taxpayer’s Unique Registry). This includes:
- Individuals with a RUC
- Companies and entrepreneurs
- Religious organizations
- Charitable entities
For employees, tax obligations are usually handled by their companies. However, if you’re self-employed or plan to become a tax resident, opening a RUC is essential. This step is critical for obtaining your tax residency certificate, which is required to prove your tax residency status to both local and international authorities.
Key Point: Paraguay doesn’t require a minimum stay to maintain tax residency. The only requirement is having a form of economic activity within the country, such as:
- Employment in Paraguay
- Running a business or freelancing with a local RUC
- Generating local income (e.g., real estate rentals or investments)
Among these options, the easiest way to secure a tax residency certificate is by opening a RUC. Once you have it, you’ll need to file monthly tax returns to remain compliant. Failing to file can result in fines and delays in receiving your tax residency certificate.
How to File Your Tax Return in Paraguay
All tax returns in Paraguay are filed online through the Marangatù platform, which is overseen by SET (Paraguay’s Tax Authority). Here’s how to get started:
- Log In: Use the credentials provided when you registered for your RUC.
- Access Your Dashboard: Deadlines for upcoming filings will be displayed immediately upon login.
- Choose the Form: To file your monthly VAT return, select “221 – IVA Mensual”. You’ll need to input your income and expenses for the month.
- Fill Out the Form: If you have no local income, you can enter “0” in all fields.
Tip: Be cautious about consistently filing zero income. While legal, it may raise questions from tax authorities and complicate your status with your home country.
If you need help navigating Marangatù or want to ensure your filings are compliant, reach out to us for expert assistance.
What Income Must Be Declared?
In Paraguay, only Paraguayan-sourced income is subject to taxation. Here’s a breakdown of what you need to declare:
Income to Declare:
- Invoices issued from your Paraguayan RUC (regardless of where the customer resides)
- Local capital income (e.g., rental income from Paraguayan properties)
- Capital gains from the sale of assets or shares in Paraguayan companies
- Gambling winnings obtained in Paraguay
Income You Don’t Need to Declare:
- Salaries and income earned abroad
- Dividends from non-resident companies
- Foreign-sourced capital income
Important Example:
If you issue an invoice to a customer in Germany using your Paraguayan RUC, the income is considered Paraguayan-sourced and is taxable — even if you performed the work while abroad.
On the other hand, if you invoice through an offshore LLC without a permanent establishment in Paraguay (e.g., a Wyoming LLC or Estonian e-Residency company), you don’t need to declare this income in Paraguay.
Why Many Digital Nomads and Entrepreneurs Choose Paraguay
Thanks to Paraguay’s territorial tax system, many digital nomads and online entrepreneurs establish offshore LLCs while maintaining tax residency in Paraguay. This strategy allows them to benefit from minimal tax obligations locally, while enjoying the security of a tax residency certificate.
We’ve helped numerous clients optimize their financial setup. If you’re unsure how to manage your taxes across multiple jurisdictions, book a free consultation with our team. We’ll provide tailored advice to fit your specific situation.
Stay Compliant and Optimize Your Tax Strategy
Tax compliance in Paraguay doesn’t have to be complicated. With the right guidance, you can take full advantage of the country’s tax-friendly policies while avoiding unnecessary complications. Whether you’re just starting your journey or looking for help with your monthly filings, we’re here to assist.
Contact Us Today!
Let’s talk about how we can help you manage your taxes and secure your tax residency in Paraguay.
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