For the CIT and LTIT, the taxable period is the calendar year. Regarding the AIT, the taxable period is as follows:
- In the event a taxpayer is subject to AIT exclusively, the tax period is from 1 July to 30 June of the following year.
- If a taxpayer is subject to AIT and CIT according to the activities performed, the taxable period is the calendar year.
Income tax returns are submitted on a fiscal-year basis as a self-assessment and must be filed by the fourth month following the end of the fiscal year.
Payment of tax
Income tax is due on varying days in the fourth month following the end of the fiscal year, depending on the taxpayer ID number, according to a calendar established by the Treasury Ministry. Four equal advance payments are made throughout the year, calculated based on 100% of the tax due in the previous year. Payments must be made in May, July, September, and November of each year after the due date for filing the income tax return, according to the calendar established by the tax authorities.
Tax legislation provides the following penalties:
- Late payment of income tax is penalised by a fine varying from 4% to a maximum of 14%, plus interest at 0.116% per day.
- Tax fraud is punished by a charge of from one to three times the value of the tax in default.
- Tax law infringements are penalised through fines varying from the equivalent of USD 10 to USD 250.
- Omission of payment incurs a fine of 50% of the tax pending.
Tax audit process
The auditing process is performed by the tax authorities when there is a certainty or suspicion of tax evasion. Additionally, the taxpayer may be audited according to a draw process that is made by the tax authority.
The tax law also establishes an obligatory tax audit, which has to be made by external auditors, when the taxpayer obtains PYG 6 billion of gross income during the year. An annual audit report on tax compliance rules is presented to and reviewed by the tax authorities. When a tax issue is identified, the tax authority may apply a penalty to the taxpayer.
Statute of limitations
The tax authority may audit the last five fiscal years.
Topics of focus for tax authorities
The tax authority is focusing on purchases invoices. It is important to note, that in order to consider an expense as deductible for tax purposes, it must comply with the formal requirements established by Law.
In addition to this, these vouchers must also comply with the mentioned formal requirements in order to consider them as a part of the VAT credit.
While there are not transfer pricing rules in force in Paraguay, the government has announced the start of the process to apply to the OECD as a full member. This means that there is a significant trend towards establishing transfer pricing rules in the short term in Paraguay since it is one of the OECD application requirements.
In that context, the tax authority has issued a General Resolution that mentions that a local Committee comprising public and private people is analysing a Tax Reform in Paraguay.