Industrial maquila in Paraguay: the tax shortcut drawing European factories

Industrial maquila in Paraguay is, alongside the Investor Pass, one of the mechanisms generating the most corporate interest from Europe right now. That is no accident: few countries offer such a low flat tax for manufacturing and exporting.

What is the maquila regime in Paraguay?

The Maquila Regime, regulated by the Ministry of Industry and Commerce, allows a foreign company to set up a production plant or service operation in Paraguay, import inputs with tariff benefits, and pay a flat 1% tax on the value added within Paraguay, instead of the 10% corporate income tax (IRE) under the general regime. In exchange, the output must be exported (in full or in part) out of the country.

Figures behind the growing interest

According to the Paraguayan Chamber of Maquiladora Companies (CEMAP), the country has more than 300 active maquiladora operations, generating close to 29,000 formal jobs and exporting more than USD 470 million in the first four months of a recent year alone. International footwear and textile brands (such as Fila) already operate under this regime.

How the maquila contract works

It is formalised through a maquila contract between the parent company (the "maquiladora") and a local Paraguayan company or subsidiary, which is submitted to the National Maquila Council for approval. Spanish companies already familiar with the Mexican maquiladora model will find a similar logic here, though with procedures and thresholds specific to Paraguay's legal framework (Law 1064/97 and its amendments).

Which industries mainly use this regime?

Textiles and apparel, auto parts, footwear, light electronics and, increasingly, software and BPO services stand out. Paraguayan labour is marketed as up to 25% more cost-efficient than in neighbouring countries, according to CEMAP data.

Who it makes sense for

If a company exports and needs to cut production costs without losing proximity to Mercosur and the ports connected by the Bioceanic Route, the Paraguayan maquila is one of the most competitive tax structures in the region. Before signing any contract, it is worth processing the approval through the Single Export Window and seeking advice from a firm that has already handled similar cases for European clients.