Paraguay

In accordance with the regulations in force, foreign entities may be subject to income tax withholdings in respect of services rendered to them deemed to be of Paraguayan source, including payments made by the branch or affiliate of a foreign home office.

The non-resident tax regulates the WHT on payments to foreign suppliers for the benefit of Paraguayan entities.

The withholdings are to be made from the payments made by local entities for such services.

Non-resident tax

In Paraguay, the principle of territoriality applies, so if entities established abroad obtain income from a Paraguayan source, they will be subject to WHT.

To this end, the non-resident tax was created, which affects income, profits, or benefits obtained by individuals, legal entities, or other entities not residing in the country. It applies to taxable events established for CIT or PIT.

Individuals, legal entities, and other entities established abroad are taxpayers of this tax when they obtain income, profit, or benefits that are covered by this tax.

The law establishes the tax base on which WHT rates should be applied because a portion of the income is considered to be obtained abroad, depending on the type of service and the territorial aspect of the tax. Tax bases are defined as a conclusive presumption (i.e. it does not accept proof to the contrary), and the 15% rate must be applied thereto.

Opportunity for withholding, settlement, and payment

The attachment of the obligation shall occur when the funds become available, when they are remitted abroad, or whenever a payment is made, whichever comes first. Compensation, novation, transaction, and other allowed means for paying an obligation shall deem the funds to have been made available.

In the case of individuals providing independent personal services, they shall act as withholding agents only when they pay for services of a similar nature and are directly related to obtaining their taxed income from these services.

In transfers of shares or capital shares of companies established in the country between individuals, legal entities, or non-resident entities, the companies established in the country issuing the securities subject to the transaction shall be responsible for paying the seller's tax for such a transaction. In this case, the attachment of the obligation will be the date of the transaction or contract.

In international freight, the tax will be paid before the withdrawal of goods from customs.

This tax will be paid in a one-time and definitive payment.

Source

Income from activities carried out with assets or rights used financially within the Republic by individuals, legal entities, and other non-resident entities shall be considered to have a Paraguayan source. In addition, revenues from Paraguayan sources are considered to be:

• Interest on loans or any other investment made by the parent company or other branches or agencies abroad, royalties, and technical assistance.
• Interest or commissions from financing or loans when the issuing or providing entity is established or resides abroad. Interest, commissions, returns, profits, or capital gains from securities and transferable securities from legal entities or other entities established or based in the Republic.
• Capital gains from the sale or lease of property located in the country; transfer of rights; and the sale of securities, shares, and capital shares of companies established in the Republic.
• Insurance or reinsurance operations that cover risks in the country or that refer to individuals or entities residing in the country at the time of execution of the contract.
• Granting the use of assets and rights, when used or exploited in the country, even in part.
• Transactions with derivative financial instruments when the investment entity or beneficiary is established or based in the country.
• International transport operations of goods or persons, when they are carried out between Paraguay and another country.
• Services provided from abroad by individuals, professional or not, when they are linked to earning income taxed by the IRE.
• Services provided within the country's borders, in whole or in part, by individuals, professional or not, irrespective of their link to earning income taxed by the IRE.
• Services provided by legal entities and other non-resident entities in the Republic, carried out from abroad or in the country, as long as they are linked to earning income taxed by the IRE.
• Digital services when they are effectively used or exploited in the country, including entertainment or gambling services, regardless of who provides them or whether or not the service is linked to earning income taxed by the IRE or the IRP. For this purpose, it will be understood that the service is used in the country when any of the following is located in Paraguay: the IP address of the device used by the customer or country code of the SIM card; the customer's invoicing address; the bank account used for the referral of the payment; the invoicing address of the customer available to the bank; or the financial entity that issues the credit or debit card with which the payment is made
• Any amount made available, remitted, or paid from the country abroad, in any other concept not mentioned in the preceding items, excluding those linked to operations for the import of goods.