Paraguay Territorial Tax System

Regime nature: This is not a special elective expat regime. The territorial character is part of Paraguay's default income tax design as described in major tax summaries: residents are generally taxed on Paraguayan-source income.

Rates (headline): Personal income tax (IRP) is commonly summarised as 8% to 10%. There is no net wealth tax and no inheritance or gift tax in the headline quick charts. Dividends and capital gains linked to Paraguayan sources can be taxable depending on structure and characterisation.

Foreign income: The typical planning thesis is that foreign-source income is outside the Paraguayan tax base. In practice, this depends on sourcing rules and the factual record. If you are physically working from Paraguay, foreign client income can still be argued as Paraguayan-source services. Keep a defensible sourcing position and document it.

Residency threshold (practical): Paraguay is often marketed with a 120 day tax residence concept. Use this only as a starting point: tax residence and source rules are legal concepts with multiple tests, and treaty positions can override local defaults. Validate the current tax-residency and source rules before relying on them.

US planning side note: Paraguay appears on the U.S. State Department list of treaty countries for the E-2 nonimmigrant investor visa category, which can be relevant for some entrepreneurs, but does not change Paraguay tax outcomes.