Paraguay Rental Income Tax Guide 2026 — IRP 8% / 10%
Rental income from Paraguayan property is taxed under IRP at 8% on gross rental receipts (simplified regime) or 10% on net income after deductions (standard regime). Landlords may choose the most favourable option based on their costs and rental income.
Rental income from real estate located in Paraguay is considered Paraguayan-source income and is subject to personal income tax (IRP). The taxpayer may elect between two regimes: the simplified regime (8% of gross rental income, no deductions allowed) or the standard regime (10% on net rental income after allowable deductions). The election is made annually at the time of filing.
Example: A property generates PYG 120M in annual rent with PYG 30M in expenses. Simplified regime: PYG 9.6M tax (8% of 120M). Standard regime: PYG 9M tax (10% of 90M). The standard regime saves PYG 600,000.
Simplified Regime (8% Gross)
Under the simplified regime, the landlord pays a flat 8% tax on gross rental income. No deductions are permitted. This regime is beneficial when expenses are low (e.g., an unfurnished property with minimal maintenance). The 8% rate applies to total rental receipts without any offset for costs. This is the default regime unless the taxpayer elects otherwise.
Standard Regime (10% Net)
Under the standard regime, the landlord pays 10% on net rental income (gross rent minus allowable deductions). Allowable deductions include:
- Mortgage interest: Interest paid on loans used to acquire, construct, or improve the rental property
- Property tax: The annual property tax paid to the municipality
- Insurance premiums: Property insurance costs
- Maintenance and repairs: Costs of maintaining the property in rentable condition
- Property management fees: Fees paid to a professional property manager
- Depreciation: Depreciation of the building (not land) at allowable rates
- Utilities: If paid by the landlord (water, electricity, gas, etc.)
- Legal and professional fees: Costs of lease drafting, eviction proceedings, etc.
Record Keeping
Landlords must maintain proper records of all rental income and expenses, including copies of lease agreements, receipts for expenses, and proof of tax payments. The SET may request supporting documentation in audits. Records should be maintained for at least 5 years.
FAQs
Is rental income from foreign property taxable in Paraguay?
No. Rental income from property located outside Paraguay is foreign-source income and is not subject to Paraguayan income tax under the territorial system.
Can I switch between simplified and standard regimes?
Yes. The election between simplified and standard regimes is made annually. You can choose the most advantageous option each tax year based on your rental income and expenses.
What if I rent to a company?
The same rules apply. Rental income is subject to IRP regardless of whether the tenant is an individual or a legal entity. Commercial rental rates are typically higher but the same tax treatment applies.
Disclaimer
This guide is for informational purposes only and does not constitute tax advice. Consult a qualified Paraguayan accountant for advice specific to your rental property situation.