Paraguay Taxes for Expats and Digital Nomads (2026)

Paraguay tax residency: the 120-day rule

Paraguay's personal income tax, the IRP, applies to individuals resident in the country, foreigners and citizens alike (Law 6380, article 49). Law 6380 sets no day count of its own. The working test comes from the Tax Code, Law 125/1991, article 152, which presumes habitual residence, and with it a tax domicile, once you have stayed in Paraguay more than 120 days. The DNIT asks for your migration movement record for the year before it certifies you as resident, so more than 120 days in the year is the safe planning figure.

In practice the count runs off your migration record. The DNIT, Paraguay's tax authority, asks for your movement record from immigration when you request a tax residence certificate, so every entry and exit stamp is evidence of where you lived that year. A temporary or permanent residence permit gives you the right to live in Paraguay, but on its own it does not make you a tax resident.

The 120-day line cuts both ways. It is a low bar if you want a tax residence to show another country, and it is just as easy to cross by accident if you base yourself in Asunción for a third of the year and keep working.

Paraguay income tax rates (IRP) for 2026

Income from your own work, freelance fees or a salary, is taxed as IRP on personal services, IRP-RSP in DNIT shorthand. The tax is progressive on net income in guaraníes over the calendar year, on a cash basis: fees count when you receive them and costs when you pay them (Law 6380, articles 52 and 69).

Below a floor, nothing is due. If your gross income from personal services stays at or under PYG 80 million (about $13,600) in the year, you meet the filing duties but pay no IRP. Cross it, and in that first year the whole year's gross income becomes taxable, less deductible spending from the day after you crossed (Law 6380, article 62).

There are no mandatory social contributions for the self-employed. Joining the IPS pension fund is voluntary, at 13% of a base you choose that cannot be below 1 minimum wage (Law 4933/2013).

Deductions: your living costs in Paraguay

The deduction list is what sets Paraguay apart. On top of business costs such as equipment and office fit-out, article 64 lets you deduct personal and family spending made in Paraguay on food, clothing, rent and home upkeep, furniture and household goods, and leisure, plus health and education spending anywhere in the world. A car every 3 years and a home, 1 every 5 years under article 66, are deductible too.

2 conditions decide whether a deduction holds. Every expense needs an invoice in your name or your dependent's, and it has to be paid from income taxed under IRP that year, from a loan by a bank, finance company or cooperative, or from taxed income left over from the previous 5 years. Spending funded by untaxed foreign dividends does not count, and a loss created by personal deductions does not carry forward, except for the home.

Foreign income and remote work in Paraguay

Paraguay is one of the territorial tax countries: IRP reaches only income from activities carried out in Paraguay, assets located there and rights used there (Law 6380, article 48). Returns on capital count as Paraguayan only when the capital is placed in Paraguay, so dividends from foreign shares, interest from a foreign bank and gains on foreign investments are outside IRP for every resident, not only newcomers.

The same article is what catches remote workers. Income is sourced where the activity happens, so writing code or taking client calls from Asunción produces Paraguayan-source income no matter where the client or the bank account is. Article 48 also covers the reverse case: services performed abroad are Paraguayan-source when the client is itself a Paraguayan IRE or IRP taxpayer.

Income from assets inside Paraguay sits in a separate IRP category with a flat 8% rate (Law 6380, article 60), and costs or gains in one category cannot offset the other. Rent from an apartment in Asunción, for example, is taxed on 50% of the rent or on the rent minus documented costs, and interest on deposits in Paraguayan banks is exempt.

David's note

I would register the RUC for IRP and IVA before the first invoice leaves Paraguay, not when a bank abroad asks for proof of tax residence. The DNIT issues the residence certificate only to taxpayers whose filings are up to date, so the certificate you moved for depends on the returns you should have been filing from the start.

IVA on freelance invoices

Paraguay's VAT, the IVA, is the tax most newcomers miss. Individuals who provide independent personal services are IVA taxpayers (Law 6380, article 82), and article 84 taxes services performed in Paraguay regardless of where the client lives or where the payment comes from. The general rate is 10% under article 90, and the IVA return is monthly.

The DNIT has applied this to remote work directly. In binding ruling No. 476, it held that prospecting and meeting-booking work done online from a home in Paraguay for 2 German companies is subject to both IVA and IRP, and that the invoices go in the taxed column. Only digital services used abroad escape IVA, and the ruling's test for those (essentially automatic, with minimal human involvement) leaves out most freelance work.

Filing a tax return in Paraguay

The tax year is the calendar year, and the annual IRP return is due in March: Form 515 for personal services income and Form 516 for capital income, both filed online through the DNIT's Marangatu system on the day its perpetual due-date calendar assigns you (DNIT notice of March 5, 2026).

Running your own company from Paraguay

For an online founder the rules are short. Paraguay has no rule that attributes a foreign company's undistributed profit to a resident individual, and dividends from a foreign company are not Paraguayan-source income, so they are not taxed when they reach you (Law 6380, article 48).

What a company does not change is where the work happens. If you own a company formed in the United States or anywhere else and do the work from Paraguay, the activity is still carried out in Paraguay, and a salary any entity pays you for work done there is IRP income under article 62. The pairing of Paraguayan residency with a US LLC holds up best for someone who spends the required days in Paraguay but does most of the billable work while traveling, because work done outside Paraguay for foreign clients is foreign-source.

A Paraguayan company moves the math the other way. It pays IRE at 10% of net profit (Law 6380, article 21), dividends to a resident owner carry IDU at 8% under article 43, and under article 6 the IRE reaches a Paraguayan entity's foreign interest and dividends. Profit paid out that way bears 17.2% in total, and passive income you could have received tax-free as an individual becomes taxable inside the company.

US citizens living in Paraguay

The US has no income tax treaty and no Social Security totalization agreement with Paraguay, so a US citizen keeps filing a US return on worldwide income. You can exclude up to $132,900 of foreign earned income for 2026 (IRS, IR-2025-103), or credit the IRP you paid on work done in Paraguay against US tax on the same income.

Self-employment tax is the part neither fix touches: it runs at 15.3% on all net profit even when the exclusion is claimed (IRS), and without a totalization agreement nothing moves that liability to Paraguay. Since IPS membership is voluntary for the self-employed, you only pay into 2 systems if you choose to join.

Paraguay tax mistakes: the 0% myth and lost residence

The mirror-image mistake is losing the residence itself. Temporary residence has no minimum stay in the law, but permanent residence is lost after more than 3 years of unjustified absence (Law 6984/2022, article 54), so a permit held for the paperwork and never used can lapse.

The tax residence certificate has a shorter clock. It is valid for 1 year, so the more-than-120-days test comes back every year you need a fresh one, and each request rests on that year's migration record.