PARAGUAY Law and Practice Contributed by: Mauro Mascareño, Carlos Vargas and Rodrigo Gómez Sánchez, Mascareño Vargas – Asesores
cies while maintaining an attractive investment envi - ronment. Digital services consumed in Paraguay are subject to IVA, determined by factors such as IP address, billing address or bank account details. Additionally, non- resident digital service providers must comply with INR rules. Paraguay’s strategy prioritises compliance through existing tax mechanisms rather than introducing a standalone digital tax, a model that has been tested in other Latin American jurisdictions. This approach reflects the country’s commitment to maintaining a competitive tax system while ensuring that digital transactions contribute appropriately to its tax base. 9.14 Offshore IP Provisions Paraguay does not have a specific regime governing the taxation of offshore IP. Instead, the tax treatment depends on whether the IP is economically used in Paraguay.
Under the Paraguayan source-based taxation princi - ple, payments made to non-residents for the use or exploitation of IP are subject to non-resident income tax (INR) only to the extent that the IP is used or eco - nomically exploited in Paraguay, even partially. If the IP is not used in Paraguay, the related income is gen - erally not subject to Paraguayan taxation. Where the IP is used in Paraguay, payments to non- resident licensors are subject to withholding tax under the general INR rules applicable to royalties and simi - lar payments. The nominal withholding rate is gen - erally 15%, applied on a presumptive taxable base established by law. If a double taxation treaty applies, the withholding tax may be reduced in accordance with the treaty pro - visions. For instance, under the Paraguay–Spain tax treaty, the withholding tax on royalties is capped at 5%.
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