Paraguay Company Taxes in 2026: IRE, VAT, IDU and INR Explained

Quick answer: a Paraguayan company does not have just one “10% tax”. IRE generally taxes net business income at 10%; VAT applies to many sales and services, generally at 10% and 5% in specified cases; IDU applies when profits are distributed, at 8% for resident recipients and 15% for non-residents; and INR can require the Paraguayan company to withhold tax when it pays certain Paraguayan-source income to a foreign person or entity.

So the question “how much tax does a company pay in Paraguay?” cannot be answered properly with one percentage.

The actual sequence can be:

business activity → business profit → IRE → profit distribution → IDU → foreign payments → possible INR.

VAT runs alongside those layers on taxable transactions and should not be confused with an income tax on profit.

IRE, VAT, IDU and INR: what each one taxes

The correct reading is that these are different tax layers.

The same guaraní of turnover does not automatically suffer IRE + VAT + IDU + INR. Each tax has a different taxable event.

1. IRE: Paraguay’s business income tax

IRE taxes Paraguayan-source profits, gains and business income arising from primary, secondary and tertiary economic activities, including:

• commercial activities;
• industry;
• agriculture;
• forestry;
• services;
• other business operations.

Article 21 of Law No. 6380/2019 sets the general rate at:

10% of net taxable income.

It is not generally 10% of gross turnover.

At a simplified level:

taxable revenue – deductible costs and expenses = net taxable income → 10% IRE.

Simple example

An EAS invoices G.1 billion and has G.600 million of tax-deductible costs and expenses.

Simplified net taxable income:

G.400 million.

Illustrative IRE:

G.40 million.

Real tax computation can differ because accounting profit and taxable profit are not always identical.

2. Does Paraguay only tax what the company does inside Paraguay?

Paraguay is often described as territorial, but the IRE source rule is broader than many summaries suggest.

Article 6 of Law 6380 includes income arising from:

• activities carried out in Paraguay;
• assets situated in Paraguay;
• rights economically used in Paraguay.

It also contains specific rules covering, among other items:

• technical assistance, management, advertising and technical/logistics services performed in Paraguay;
• rights used in Paraguay;
• certain foreign financial income of a resident company;
• foreign-company dividends received by a Paraguayan company;
• certain activities carried out abroad by IRE taxpayers.

Law 6380 further provides that activities performed abroad by an IRE taxpayer can be treated as Paraguayan-source unless foreign income tax has been paid at a rate at least equal to the IRE rate, subject to the statutory conditions.

Therefore, a Paraguayan company should not assume:

“foreign customer = untaxed business income.”

See our guide to working from Paraguay for foreign clients.

3. Which expenses can reduce IRE?

As a general rule, Law 6380 requires an expense to:

1. be necessary to obtain and preserve the income-producing activity;
2. represent a real expenditure;
3. be properly documented;
4. comply with withholding obligations where applicable.

Potentially deductible items, when the legal conditions are met, include:

• goods and inputs;
• business services;
• advertising;
• telecommunications;
• insurance;
• freight;
• employee remuneration;
• social-security charges;
• certain interest and rent;
• depreciation;
• amortisation;
• formation and reorganisation costs.

The key word is deductible.

An expense being paid by the company does not automatically mean it can always be deducted for tax purposes.

4. IRE General, SIMPLE and RESIMPLE are different regimes

IRE General

This is the ordinary framework for companies such as EAS, SA and SRL carrying on business activities.

The rate is 10% on net taxable income.

IRE SIMPLE

SIMPLE is a simplified regime for certain eligible taxpayers whose prior-year income does not exceed G.2 billion.

Its rate is also 10% on net income determined under its own methodology.

Do not assume that any EAS can elect SIMPLE: eligibility depends on the taxpayer type and statutory conditions.

IRE RESIMPLE

RESIMPLE is intended for small sole proprietorships within the statutory revenue ceiling.

It operates through simplified fixed payments and is not the ordinary regime for an EAS, SA or SRL.

For a foreign founder incorporating an EAS, IRE General is therefore normally the starting point for analysis rather than extrapolating the micro-business RESIMPLE regime.

5. VAT: a tax on the transaction, not on business profit

VAT applies to, among other taxable events:

• sales of goods;
• services;
• imports of goods.

The general rate is:

10%.

Law 6380 applies a 5% rate to specified categories, including certain:

• residential property rentals;
• real-estate sales;
• basic food products;
• agricultural/livestock products;
• human medicines.

All other cases generally fall under the 10% rate.

6. VAT debit minus VAT credit

A company does not compute VAT the same way it computes IRE.

In simplified terms:

• VAT debit: VAT generated on taxable sales/services;
• VAT credit: qualifying VAT suffered on purchases/expenses;
• VAT payable: the relevant difference under the VAT rules.

Example

The company invoices services for G.110 million including VAT.

Tax base: G.100 million.

VAT debit: G.10 million.

If qualifying VAT credit is G.4 million, the simplified VAT payable would be:

G.6 million.

VAT collected from the customer should not be confused with business profit.

7. Does a foreign customer automatically mean no VAT?

No.

Binding Ruling DNIT No. 827/2025 examined professional services physically performed from Paraguay for a company located solely in Spain.

DNIT concluded that the service was subject to Paraguayan VAT.

Territoriality is not determined solely by:

• customer country;
• domicile of the parties;
• place where the contract was signed;
• place from which payment originates.

So “exporting services” should not be used automatically as a synonym for “0% VAT”.

8. IDU: the tax layer when profits are distributed

The Dividend and Profit Tax (IDU) applies to dividends, profits or returns made available or paid to owners, partners and shareholders.

Current domestic rates are:

• 8% where the recipient is a Paraguay resident;
• 15% where the recipient is a non-resident.

DNIT expressly reconfirmed these rates in April 2026.

The profit-generating entity generally acts as the withholding agent.

A shareholder should therefore not assess the total Paraguay tax burden by looking only at the company’s 10% IRE.

9. IRE + IDU: what reaches the shareholder?

Take an illustrative 100 of company net taxable income before IRE.

This is useful for understanding the tax layers, but it is not a universal “effective corporate tax rate”.

The result can change because of:

• tax treaties;
• special regimes or incentives;
• recipient status;
• reserves or capitalisation;
• other withholding taxes;
• tax in the shareholder’s own country.

10. What if the company reinvests instead of distributing?

IDU is triggered by a profit distribution or making profits available.

Law 6380 provides that profits allocated to:

• legal reserves;
• optional reserves;
• capitalisation;

are not subject to IDU at that stage, without prejudice to the rules that can apply on later redemption or distribution.

This creates an important distinction between:

• a company that reinvests profits; and
• a company designed to distribute most profits every year.

Capitalisation should still reflect real corporate substance rather than being used merely to disguise shareholder withdrawals.

11. INR: when a Paraguay company pays a non-resident

Non-Resident Income Tax (INR) applies to Paraguayan-source income, gains and benefits earned by foreign individuals and entities.

The statutory rate is:

15%.

But one of the most important points is:

a 15% INR rate does not always mean 15% of the gross payment.

Article 75 provides different deemed net-income bases depending on the income category.

The 15% rate is applied to that statutory base.

12. INR deemed bases and effective percentage of gross

This table simplifies Article 75.

Before withholding, the company must determine:

1. whether the income is Paraguayan-source;
2. which statutory category applies;
3. whether a tax treaty applies;
4. whether a special rule or exception changes the result.

13. Foreign payments a Paraguay company should review before remitting

INR may be relevant where a Paraguay company pays foreign recipients for items such as:

• professional services;
• services of a foreign entity connected to IRE income;
• technical assistance;
• royalties or rights used in Paraguay;
• interest;
• certain digital services;
• payments to shareholders or related parties;
• other Paraguayan-source income.

The Paraguay payer generally acts as withholding agent when it pays, remits or makes the income available.

This can also matter for deductibility because Law 6380 requires relevant withholding obligations to be satisfied for certain expenses to be tax-deductible.

Do not transfer money abroad first and ask later whether withholding was required.

14. Tax treaties can cap domestic withholding

If Paraguay has an applicable double-tax treaty with the recipient’s country, the domestic result can be reduced or limited.

For example, the Spain–Paraguay treaty contains its own limits for dividends, interest and royalties.

That means a Spanish shareholder should not mechanically assume the 15% domestic IDU rate without checking:

• tax residence;
• beneficial ownership;
• shareholding percentage;
• holding period where relevant;
• the treaty article;
• anti-abuse rules.

The treaty does not replace the domestic analysis; it determines whether Paraguay’s domestic taxing right must be limited.

15. Does an EAS pay IRE, VAT, IDU and INR?

Potentially yes, but each tax appears only if its taxable event occurs.

A typical EAS can:

• pay IRE on net taxable income;
• account for VAT on taxable transactions;
• withhold IDU when distributing profits;
• withhold INR when making certain payments to non-residents.

That does not mean every EAS pays all four every month.

For example:

• no distribution → no IDU on a distribution that did not occur;
• no INR-relevant foreign payment → no corresponding INR withholding;
• an exempt or non-taxable transaction can have different VAT treatment.

See our guide to starting a company in Paraguay as a foreigner.

16. Full example: Paraguay service EAS with a foreign shareholder

Assume a Paraguay EAS:

• performs taxable services from Paraguay;
• has G.1 billion of revenue net of VAT;
• incurs G.600 million of deductible costs and expenses;
• has G.400 million of net taxable income;
• distributes all post-IRE profit to a non-resident shareholder.

Step 1. IRE

G.400m × 10% = G.40m.

Post-IRE profit: G.360m.

Step 2. Domestic IDU

If no treaty reduction applies:

G.360m × 15% = G.54m.

Net distributed: G.306m.

Step 3. VAT

VAT is not calculated on the G.400m profit.

It is determined separately through the debit/credit mechanism on taxable transactions.

Step 4. INR

If the EAS paid foreign services, interest, royalties or other INR-relevant income during the year, those payments require a separate withholding analysis.

This example shows why “10% corporate tax” only describes one part of the picture.

10 common mistakes about Paraguay company taxes

1. “The company only pays 10%”

10% is the general IRE rate on net income. VAT, IDU and INR are separate layers.

2. “IRE is 10% of turnover”

Under the general regime, it is 10% of net taxable income.

3. “A foreign shareholder pays no Paraguay tax on dividends”

Domestic IDU is 15% for non-residents unless an applicable treaty limits the result.

4. “10% IRE + 15% IDU = 25%”

Not exactly. IDU applies to the post-IRE distributed profit. In the simple example, the combined Paraguay burden is 23.5%.

5. “Every foreign client means 0% VAT”

No. Service-location and VAT territoriality rules matter.

6. “INR is always 15% of the gross payment”

No. The 15% statutory rate is applied to different deemed net bases.

7. “If the supplier is abroad, Paraguay cannot tax the payment”

INR specifically addresses Paraguayan-source income earned by non-residents.

8. “Any EAS can use RESIMPLE”

No. RESIMPLE is for qualifying small sole proprietorships.

9. “If I never declare dividends, shareholder withdrawals are tax-free”

Payments or transactions with owners need real legal and economic substance.

10. “The treaty replaces Paraguay tax law”

Domestic tax is identified first, then the treaty is checked for limitations or relief.

Frequently asked questions

What is Paraguay’s corporate income tax rate?

IRE has a general 10% rate on net taxable business income.

Does an EAS pay 10% of turnover?

No under IRE General. The 10% rate is applied to net taxable income, not gross turnover.

What VAT rate does a Paraguay company charge?

The general VAT rate is 10%, with a 5% rate for specified statutory goods and transactions.

What IDU applies to a resident shareholder?

The domestic rate is 8% on distributed dividends/profits.

What about a non-resident shareholder?

The domestic IDU rate is 15%, although an applicable tax treaty may limit it.

What is the combined IRE + IDU burden for a resident shareholder?

In a simple full-distribution example, 10% IRE followed by 8% IDU on the remaining 90 gives a theoretical 17.2% Paraguay burden on the original 100.

And for a non-resident shareholder?

Without treaty relief, 10% IRE followed by 15% IDU on the remaining 90 gives a theoretical 23.5% Paraguay burden.

What is INR?

INR is the tax on certain Paraguayan-source income earned by non-residents. The Paraguay payer can be required to withhold it.

Is INR always 15%?

The statutory rate is 15%, but it is applied to different deemed net-income bases. The effective percentage of gross can therefore be 10.5%, 4.5% or 15% depending on the income category.

Does a Paraguay company pay tax on foreign customers?

It can. Customer country does not by itself determine IRE source or VAT treatment.

Is an EAS tax-efficient?

It can be, but the decision should consider activity, liability, partners, reinvestment, distributions and international tax — not only the 10% headline IRE rate.

Paraguay’s “10%” is the start of the analysis, not the end

Paraguay has a competitive business-tax framework.

But explaining it correctly requires separating:

1. IRE: company profit;
2. VAT: taxable transaction;
3. IDU: profit distribution;
4. INR: certain income paid to non-residents.

A company that reinvests, an EAS that distributes everything to a foreign shareholder and a company paying royalties or international services can all have very different tax outcomes even though all three operate under a “10% IRE” system.

The correct structure follows the entire cash flow: how money enters the company, which costs are deductible, what is reinvested, what is distributed and what is paid abroad.

Official sources and last review

Last reviewed: August 2026.

• DNIT — Law No. 6380/2019: IRE, IDU, INR and VAT.
• DNIT — IRE, IDU and VAT FAQs.
• DNIT — IDU reminder, April 2026.
• DNIT — IRE RESIMPLE information, 2026.

This article is general information. Domestic rates can be modified by tax treaties, special regimes and transaction-specific rules. INR withholding, deductibility and treaty entitlement should be reviewed before making international payments.