Taxes in Paraguay 2026: Government Maintains Low Rates but Reviews Exemptions
Fiscal stability is the most powerful pillar for attracting capital in South America. In a recent official appearance, the Minister of Economy and Finance, Óscar Lovera, confirmed that the rates of the main taxes in Paraguay will not be increased, nor will new levies be created. This statement consolidates the country’s predictability for the coming years, a decisive factor for international entrepreneurs looking to protect their assets.
However, the tax administration has focused its attention on so-called “tax expenditures.” This implies a thorough audit of currently valid deductions and exemptions, which represent an estimated volume of 1 billion dollars in potential tax revenue.
TL;DR: The essentials of the regulations
- No increases: The nominal rates for IRE (10%), IRP (8-10%), and VAT (10%) remain fixed by government decision.
- Review of deductions: The Ministry of Economy seeks to improve fiscal efficiency by auditing deductible concepts.
- Legal certainty: The creation of new taxes is ruled out, which guarantees a friendly environment for foreign direct investment.
- Control focus: Oversight will focus on curbing the abuse of exemptions to optimize collection without stifling the taxpayer.
What is tax expenditure and why does it affect you as an investor?
For a foreign entrepreneur who decides to transfer their tax residence or incorporate a company, understanding how taxes in Paraguay work is essential. Tax expenditure refers to the resources that the State ceases to receive due to incentives, special deductions, or tax exemptions.
Does this mean a tightening of the system? Not necessarily. The Executive’s intention is to clear the system of legal loopholes and bad practices, ensuring that tax benefits reach only those who meet the real requirements of the law. For companies operating under transparent and properly planned structures, this refinement process provides greater legal certainty by eliminating unfair competition.
“This Government has a firm position; we are not going to touch tax rates or create new taxes. What we are reviewing is what concerns the concept of tax expenditure…” — Óscar Lovera, Minister of Economy and Finance.
The coordination of this review campaign is in charge of the National Directorate of Tax Revenues (DNIT). This entity has increased the use of technology and data cross-referencing to detect inconsistencies, which forces taxpayers to maintain impeccable accounting with demonstrable economic substance.
Comparison of the Tax Scenario in Paraguay
To visualize the impact of this measure on your financial planning, it is useful to analyze the state of the main taxes after the latest government announcement:
| Main Tax | Nominal Rate | Status after Statement | Area under Oversight |
|---|---|---|---|
| Corporate Income Tax (IRE) | 10% | Confirmed no increases | Deductions of operating expenses not directly linked to business activity. |
| Personal Income Tax (IRP) | 8% to 10% | Confirmed no increases | Justification of investments and deductions of personal expenses abroad. |
| Value Added Tax (VAT) | 5% or 10% | Confirmed no increases | Tax credit for purchases that do not strictly correspond to the taxed activity. |
The importance of economic substance when setting up a company
Those who are evaluating the option of setting up a company in Paraguay should understand that the country is no longer a territory where it was enough to open a shell company to enjoy tax advantages. The regional and international trend demands real economic substance: offices, contracts, demonstrable commercial operations, and a coherent financial flow.
The review of exemptions announced by the Ministry of Economy seeks, precisely, to encourage real formalization. Those who decide to establish legitimate operations will continue to enjoy one of the environments with the lowest tax burden on the continent, backed by the macroeconomic stability of the Guarani.
The opinion of our ParaguayWay experts
The Government’s decision should not be interpreted as a warning signal, but as a confirmation of the country’s institutional maturity. Keeping the nominal rates of IRE, IRP, and VAT unchanged until the end of the term is a high-value political commitment that few countries in the region can offer.
The key for foreign investors lies in preventive tax planning. If your accounting structure is well designed from the beginning, the review of exemptions will not represent a risk to your assets. On the contrary, a more efficient system reduces bureaucracy and administrative discretion.
How does this translate into practice? Last week, a European client consulted us on how to structure the transfer of his family assets and his international consulting firm. Initially, he planned to deduct a series of representation expenses that, under the DNIT’s new oversight criteria, would have triggered unnecessary alerts and annoying inspections. Thanks to our 360º comprehensive service, we designed a strategy where we separated corporate from personal accounting, ensuring full compliance with regulations and protecting his process of obtaining residency in Paraguay.
The success of a relocation does not lie solely in obtaining an identity document, but in integrating into the new financial system in an orderly manner, avoiding fiscal contingencies in the medium term.
If you wish to structure your assets under this framework of stability and optimize your tax benefits while respecting current legislation, let us analyze your relocation case without obligation and prepare your arrival in Paraguay with the help of expert advisors.