PARAGUAY LAW AND PRACTICE Contributed by: Manuel Arias, Carla Sosa, Martin Carlevaro, Milena Sljivich, Alexander Berkemeyer and Antonio Villa Berkemeyer, BKM - Berkemeyer
Sectoral Tax Incentives Paraguay has several sectoral regimes aimed at pro - moting industrialisation, tourism and international events, including: • Law No 7547/2025 ( Maquila Regime); • Law No 7548/2025 (New Fiscal Incentive Regime for National and Foreign Investment, also for tour - ism); • Law No 7546/2025 (Production and Assembly of Electrical, Electronic, Electromechanical and Digital Equipment); • Law No 7467/2025 (International Sporting Events); and • Law No 4838/2012 (National Automotive Policy). Paraguay’s Double Taxation Treaty Network Paraguay has an active network of double taxation treaties with countries like Chile, Qatar, Uruguay, Spain, the UAE and China (Taiwan), and is in negotia - tions with several other countries for similar agree - ments. The use of these strategies must align with Paraguayan legislation and the applicable double tax - ation treaty provisions, ensuring proper management of international operations and tax cost optimisation. 9.4 Tax on Sale or Other Dispositions of FDI Paraguay has implemented a favourable regulatory framework for FDI, offering various incentives and a simple and competitive tax system compared to oth - er jurisdictions. This framework includes four income taxes and two consumption taxes, including IRE, IDU and VAT with rates of 5% and 10%. Paraguay promotes investment, industrialisation and job creation through various fiscal and productive regimes, including: • the recently modernised Maquila Regime (Law No 7547/2025); • Free Trade Zones; • Law No 7548/2025 (New Fiscal Incentive Regime for National and Foreign Investment); and • Law No 7546/2025 (National Policy for Production and Assembly of Electrical, Electronic, Electrome - chanical and Digital Equipment).
These 2025 reforms enhance competitiveness and productive integration, positioning Paraguay as an attractive destination for industrial relocation and for - eign investment, backed by robust tax incentives and a modern, transparent and predictable legal frame - work. However, as a general rule, there are no exemptions benefitting foreign direct investment regarding capital gains, which are usually subject to INR for both non- • interest on public debt securities issued by the state (the Ministry of Economy and Municipalities), as well as any other capital income or capital gains derived from holding or transferring these instru - ments; and • returns from investment funds provided for in the Capital Markets and Products Law (Law No 7572/2025). 9.5 Anti-Evasion Regimes Paraguay has specific regulations designed to pre - vent tax evasion in transactions related to FDI. These include transfer pricing, thin capitalisation rules and provisions regarding low or no taxation jurisdictions (BONT). The main regulations are as follows. Transfer Pricing Taxpayers must submit a transfer pricing technical study demonstrating that transactions with related parties comply with the arm’s length principle. Thin Capitalisation Rules resident legal entities and individuals. The following are exempt from INR: These rules limit the deductibility of interest gener - ated by loans between a local taxpayer and its related parties, in order to prevent companies from financing operations through excessive debt instead of equity. Provisions for BONT Jurisdictions Transactions with residents of BONT countries or jurisdictions are presumed related unless proven oth - erwise.
432 CHAMBERS.COM
Powered by FlippingBook