Paraguay’s tax system: a guide for those used to paying income tax in Spain

If Spanish personal income tax can reach 47% and corporate income tax is around 25%, understanding Paraguay’s tax system can feel almost like a typographical error: most of the key taxes are set at a flat 10%.

The three pillars of the system

Under Law 6380/2019, Paraguay’s system is built around three main taxes: VAT (a standard rate of 10%, or 5% for basic food products), business income tax (IRE) at 10%, and personal income tax (IRP), also at 10%. There is also dividend and profit distribution tax (IDU), which applies when profits are distributed.

What types of taxes exist in Paraguay?

There are also more specific taxes: selective consumption tax on goods such as alcohol, tobacco and fuel; municipal property tax, which is very low compared with Spain’s IBI; and social security contributions for employers. Overall, the total tax burden remains noticeably lower than in Spain.

The authority to know: DNIT

Since 2021, tax and customs administration has been unified under DNIT (Dirección Nacional de Ingresos Tributarios), which replaced the former SET. The online administration system is called Marangatu, and is used to file returns and check the RUC, the equivalent of Spain’s NIF tax identification number.

RUC, VAT and personal income tax: the vocabulary to learn

The RUC (Registro Único del Contribuyente, or taxpayer register) is the first step for any person or company wishing to operate formally. Without an active RUC, you cannot issue invoices or subsequently apply for a tax residence certificate. Many Spaniards search for ‘IRPF Paraguay’ out of habit, although the correct equivalent is Paraguay’s IRP, which follows a completely different structure and set of bands.

Why this matters if you only want to invest

Even without tax residence in Paraguay, income generated within the country, such as rent or income from a local business, is taxed under this system. Understanding the 10% framework is more than a matter of curiosity: it is the basis for calculating actual net investment returns before comparing them with what would remain after tax in Spain.