Income is taxed in Paraguay according to the resource principle (i.e. the territorial system of taxation).
There are three tax systems in Paraguay, depending on the type of taxpayer, as follows:
- Commercial income tax (CIT): For income from commercial, industrial, and service activities, the general income tax rate of 10% applies. See Capital gains and Dividend income in the Income determination section for a description of how such income is taxed. Note that dividend distributions require an additional 5% tax that must be paid on the amount of dividend approved for distribution at the shareholder meeting.
- Agriculture income tax (AIT): For income from agricultural and cattle activities, the tax rate is 10% (determined by annual income).
- Little taxpayer income tax (LTIT): For those taxpayers with annual income of less than 100 million Paraguayan guaraníes (PYG), a single tax at a rate of 10% applies.
Local income taxes
There are no other income taxes (i.e. municipal tax on income, etc.) or patrimony taxes in Paraguay.