Paraguay Cross-Border Tax Guide 2026 — 0 Treaties, Territorial System
Paraguay has no double taxation treaties (except limited LATAM cooperation agreements). However, the territorial system mitigates this: foreign-source income is exempt for residents, so no foreign tax credit is needed. WHT rates to non-residents: dividends 0%, interest 0%, royalties 15%.
Paraguay's cross-border tax landscape is unique in South America. The country has not signed any comprehensive double taxation treaties (DTTs) with other countries. However, the territorial tax system largely eliminates the need for treaties — since foreign-source income is not taxed in Paraguay, there is no double taxation that a treaty would resolve for residents. Non-residents receiving Paraguayan-source income face withholding taxes with limited treaty relief.
Double Taxation Treaties
Paraguay has zero comprehensive double taxation treaties. The country has signed a few limited cooperation agreements with other LATAM countries (Argentina, Brazil, Uruguay, Chile, Peru) for information exchange and mutual assistance, but these do not provide reduced withholding rates or tie-breaker rules. This means:
- No reduced WHT rates are available for treaty partners
- No mutual agreement procedure for cross-border disputes
- No treaty-based exchange of information with most countries
- Residents of Paraguay cannot claim treaty benefits when investing abroad
Withholding Taxes to Non-Residents
- Dividends: 0% — no withholding on dividends paid to non-residents
- Interest: 0% to non-residents generally (5-10% on certain bank interest paid to non-residents outside Paraguay)
- Royalties: 15% withholding on royalties paid to non-residents
- Technical services: 15% withholding on fees for technical services paid to non-residents
- Capital gains on Paraguayan real estate: 10% withholding on gross sale price
Territorial System and Cross-Border Planning
The territorial system has important cross-border implications:
- Inbound: Non-residents earning Paraguayan-source income are subject to 10% IRP (or specific WHT rates as above)
- Outbound: Paraguayan residents earning foreign income are exempt — no foreign tax credit needed
- No CFC rules: Paraguay has no controlled foreign corporation rules, so foreign retained earnings are never taxed
- No exit tax: Paraguay does not impose an exit tax on individuals who leave the country
FAQs
Can I claim a foreign tax credit for taxes paid abroad?
No. Since Paraguay does not tax foreign-source income, there is no need for a foreign tax credit. If you pay tax abroad on foreign income, you cannot claim a credit in Paraguay.
Does Paraguay have information exchange agreements?
Paraguay has signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC) and has some bilateral information exchange agreements with LATAM countries. The SET can exchange tax information with foreign authorities under these agreements.
Are payments to foreign companies subject to withholding?
Yes. Payments for royalties (15%) and technical services (15%) to foreign companies are subject to withholding tax. Interest payments to non-residents are generally 0% except for certain bank interest.
Disclaimer
This guide is for informational purposes only and does not constitute cross-border tax advice. International tax planning requires professional advice in multiple jurisdictions. Consult qualified tax professionals.