PARAGUAY Law and Practice Contributed by: Mauro Mascareño, Carlos Vargas and Rodrigo Gómez Sánchez, Mascareño Vargas – Asesores
estate transfer tax). The rate is 0.3% of the assigning value if the land is in the capital (Asunción) and 0.2% if it is in any other part of the country. In addition, a judicial fee of 0.74% of the assignment value must be paid when registering the deed of assignment before
Non-corporate forms (eg, sole proprietors) are still used, but the trend is towards a corporate form, as the individual business generally lacks limited liability protections. 3.2 Individual and Corporate Rates In Paraguay, professional services rendered by indi - viduals typically fall under the personal income tax on personal services ( impuesto a la renta personal - régimen simplificado para profesionales – IRP-RSP) system, which has a maximum rate of 10%. However, this system allows wide-ranging deductions, includ - ing personal and family expenses, not strictly tied to generating taxable income. Consequently, the actual effective rate for many professionals can be equal to or even lower than the effective 17.2% IRE plus divi - dends tax rates, removing the main incentive to shift income into a corporate form. Because of this alignment in rates, Paraguay does not impose specific “personal service corporation” rules aimed at reclassifying individual income into corporate earnings. Professionals remain free to operate through a corporate form if they wish, but there is no inherent tax advantage in doing so. The law has therefore not found it necessary to implement special anti-avoid - ance measures in this area. 3.3 Restrictions on Retention of Earnings by Closely Held Corporations No Forced Distribution or Accumulated Earnings Tax Paraguay does not impose specific rules preventing closely held corporations from accumulating earn - ings for reinvestment purposes. There is no accumu - lated earnings tax or similar mechanism penalising undistributed profits. Corporate owners can therefore choose to retain income within the company, deferring the IDU until such time as they decide to distribute dividends. Standard Corporate Formalities Under commercial law, most businesses must allocate a small portion of annual profits to a legal reserve (eg, at least 5% of the profits up to 20% of share capi - tal), but that reserve remains within the company and does not equate to a forced dividend to sharehold - ers. Beyond this mandatory reserve, there is no legal
the Public Records Office. Customs Duties on Imports
Duties on imports are collected by the customs author - ity based on the declared (ad valorem) value of such goods, plus any relevant internal taxes (like IVA and, where applicable, ISC). An IRE advance of 0.4% on the customs value of imports typically applies as well, creditable against the year-end corporate tax liability. While these taxes may not apply to every transaction, they can arise when a business imports capital goods, buys or sells real estate or builds new facilities. Com - panies should therefore review each contemplated transaction to determine whether additional taxes or Beyond the principal levies already mentioned (IRE, IDU, IVA, INR and ISC municipal taxes and import duties), there are no additional relevant taxes. Paraguay does not impose a net worth tax or stamp duties, and there is no financial transaction tax. Addi - tionally, no general export tax exists for goods shipped abroad, although exporters do face compliance meas - ures such as monthly reporting and a mandatory with - holding obligation of up to 70% of the supplier’s IVA included in certain transactions. municipal levies may apply. 2.9 Other Notable Taxes 3. Corporations and Non-Corporate Businesses 3.1 Form of Closely Held Local Businesses In Paraguay, most closely held local businesses opt for a corporate form, particularly limited liability vehi - cles like the SA, SRL and EAS. Even small-scale fam - ily enterprises frequently choose these vehicles due to their limited liability, relatively straightforward reg - istration processes and the ability to accommodate multiple or even single shareholders (in the case of the EAS).
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