Paraguay Personal Tax Guide 2026 — IRP 8% Flat Foreign / 10% Domestic
Paraguay's IRP (Impuesto a la Renta del Personal) is a flat personal income tax with two rates: 8% on foreign-source income for residents and 10% on Paraguayan-source income. The territorial system means only Paraguay-source income is taxed, making it one of the lowest personal tax regimes in the Americas.
The IRP applies to individuals resident in Paraguay. The tax year is the calendar year (1 January to 31 December). Residents benefit from a territorial tax system: only income derived from Paraguayan sources is taxable. Foreign-source income for residents is either taxed at 8% or fully exempt depending on the nature of the income. The tax authority is the Subsecretaría de Estado de Tributación (SET).
Example: A resident with PYG 100M in domestic salary income and PYG 50M in foreign dividends owes: PYG 10M (10% of 100M domestic) + PYG 0 (foreign dividends are exempt). Total: PYG 10M. Effective rate: 6.7%.
IRP Tax Rates 2026
- Domestic-source income: 10% flat on employment, self-employment, and business income from Paraguayan sources
- Foreign-source income (residents): 8% flat on most foreign-source income (salary, consulting, business profits from abroad)
- Foreign dividends and capital gains (residents): 0% — fully exempt under the territorial system
- Rental income: 8% on gross rental income (with optional deduction regime)
- Non-residents: 10% withholding on Paraguayan-source income
Unlike progressive systems, Paraguay's flat rates mean high earners do not face bracket creep. The simplicity is a major attraction for expats and remote workers.
Territorial System Explained
Paraguay follows the territorial principle of taxation. Only income that has a source in Paraguay is subject to IRP at 10%. Income from outside Paraguay — including foreign employment, foreign business profits, foreign interest, and foreign dividends — is either taxed at the reduced 8% rate or fully exempt. Specifically:
- Foreign employment income earned while physically abroad: 8% if remitted to Paraguay
- Foreign dividends, capital gains, and interest: 0% (fully exempt)
- Foreign business income from a foreign PE: 0%
- Domestic Paraguayan salary: 10%
This system makes Paraguay highly attractive for digital nomads, remote workers, and retirees with foreign pensions or investment income.
Deductions
IRP allows limited deductions against domestic-source income:
- Personal exemption: PYG 4,500,000 per month (PYG 54M per year) as a standard deduction
- Dependants: Additional allowance for children and other dependants
- IPS contributions: Employee social security contributions are deductible
- Health insurance: Private health insurance premiums may be deductible up to limits
- Mortgage interest: Interest on the primary residence mortgage is deductible up to PYG 15M annually
Filing Requirements
Individuals must file an annual IRP return if their annual income exceeds PYG 30M. The filing deadline is April 30 of the following year. Returns are filed electronically through the SET's online portal (Marangatu). Penalties for late filing start at 2% per month on tax due.
FAQs
Do I need to pay IRP on my foreign pension?
Foreign pensions received by a Paraguayan resident are generally treated as foreign-source income and taxed at 8%. However, if the pension is from a government source or qualifies under specific exemptions, it may be fully exempt. Consult a tax professional.
What is the difference between IRP and IRPC?
IRP (Impuesto a la Renta del Personal) is the personal income tax for individuals. IRPC (Impuesto a la Renta del Pequeño Contribuyente) is a simplified regime for small taxpayers with lower administrative burdens.
Can I deduct expenses against foreign-source income?
No. Deductions are only allowed against Paraguayan-source income. Foreign-source income taxed at 8% is gross income — no deductions are permitted.
Disclaimer
This guide is for informational purposes only and does not constitute tax advice. Tax laws are complex and subject to change. Consult a qualified Paraguayan tax professional (contador público) for advice specific to your circumstances.