In Paraguay, personal income tax is referred to as IRP (Impuesto a la Renta Personal). In 2026, it applies according to a progressive scale of 8% to 10% on Paraguay-sourced income, while foreign-sourced income is not subject to IRP. The country operates a territorial tax system.
The following sections describe the rates and brackets in effect, the exemption threshold, the conditions for taxation, and the classification of income by source, followed by typical situations according to the taxpayer's profile.
How IRP works in Paraguay: rates and brackets (2026)
Principle and scope of application
IRP only applies to Paraguay-sourced income (Law No. 6380/19). Foreign-sourced income remains outside the scope, in accordance with the territorial system in place in Paraguay.
Rates and brackets
For income from personal services (IRP — employment, fees, professional services), the scale is progressive:
| Bracket (guaraníes) | USD equivalent* | Rate |
|---|---|---|
| Up to 50,000,000 PYG | ~7,592 USD | 8% |
| From 50,000,001 to 150,000,000 PYG | ~7,592 to ~22,776 USD | 9% |
| Over 150,000,001 PYG | > ~22,776 USD | 10% |
*Indicative rate 1 USD = 6,586 PYG (February 2026).
Capital income (interest, royalties, capital gains, rentals, etc.) is taxed at 8% (excluding dividends subject to the "IDU" dividend and profit tax). For details on categories and rules, see our complete guide to taxation in Paraguay.
The amounts in guaraníes may be revised annually according to the consumer price index "IPC" (Law 6380/19, art. 62).
Calculation example: for IRP on personal services, the tax does not apply to gross turnover but to the renta neta (net income = gross income minus deductible expenses over the fiscal year). Once this net income is determined, if your gross income in this category exceeds 80M PYG over the year, the IRP is calculated by brackets:
| Bracket (net income) | Taxable base | Rate | IRP bracket |
|---|---|---|---|
| 1st bracket | 50,000,000 PYG | 8% | 4,000,000 PYG |
| 2nd bracket | 100,000,000 PYG | 9% | 9,000,000 PYG |
| 3rd bracket | 50,000,000 PYG | 10% | 5,000,000 PYG |
| Total 200,000,000 PYG | 18,000,000 PYG (~2,732 USD) |
Exemption threshold
The threshold relates to annual gross income from personal services: if this total does not exceed 80,000,000 PYG (~12,147 USD) over the year, you are not liable for IRP in this category. Beyond this, you are subject to taxation and the tax is calculated on the renta neta (gross income minus deductible expenses) according to the progressive scale.
Who must pay IRP and under what conditions?
Taxpayers and tax residence
Natural persons (national or foreign) resident in the national territory are subject to IRP (Law No. 6380/19).
Tax residence in Paraguay is not based on any notion of days: the often-cited rule of "120 days" is an error; it refers to personal domicile (habitual residence) in civil law, not to tax residence.
In Paraguayan law, tax residence is built on the individual's residence in the territory and, practically, on obtaining the RUC (Registro Único del Contribuyente). The RUC is the tax identification number that gives the person fiscal existence and opens access to online declaration services.
You are liable for IRP if you receive Paraguay-sourced income. Regarding personal services, you only become taxable if your gross income in this category exceeds 80 million PYG over the year.
What income is Paraguay-sourced?
According to Law No. 125/1991 (art. 5), the following are considered Paraguay-sourced income:
- Activities carried out in Paraguay
- Assets located in Paraguay
- Rights economically used in Paraguay
- Services provided in Paraguay
- Transfer of use of assets or rights used in Paraguay
- Interest or returns when the issuing entity is incorporated or domiciled in Paraguay
- Insurance or reinsurance operations for risks in Paraguay
- International transport (part considered Paraguay-sourced depending on cases)
- Financial derivative instruments when the entity is in Paraguay
Involuntary creation of a tax nexus
If you live in Paraguay most of the year and you provide your services from Paraguay with a foreign "transparent" company such as a US LLC, the administration may consider that your income falls under "activities carried out in Paraguay", therefore Paraguay-sourced — even with 100% foreign clients. The concepts of economic substance, permanent establishment, and operational control come into play here. The support of a local tax expert is strongly recommended to structure your situation and remain compliant.
Examples by profile
1. Freelancer resident in Paraguay most of the year, activity operated from Paraguay
Worldwide income (clients everywhere), but activity exercised and operated from Paraguay: income is in principle Paraguay-sourced → subject to IRP (8–10% scale above 80M PYG).
Caution: the creation of a tax nexus can shift income to "Paraguay-sourced". Case-by-case analysis with an expert is strongly recommended.
2. Digital nomad with tax residence in Paraguay
You do not reside in Paraguay most of the time, but you have a Paraguayan tax residence properly established (residence + RUC), and your income comes from foreign clients or activities, without operations from Paraguay: foreign-sourced income → 0% IRP in Paraguay.
3. International investor
Dividends, interest, capital gains on foreign-sourced investments (companies, accounts, foreign assets): 0% IRP. Only the portion of Paraguay-sourced income (e.g., dividends from Paraguayan entities) falls within the scope of IRP or IDU as applicable.
4. Established entrepreneur (local/international mix)
Mixed income: local activity + international investments or income. The Paraguay-sourced portion is taxable under IRP (personal services) or applicable taxes (IRE, IDU, etc.); the foreign-sourced portion remains at 0% IRP in Paraguay. For an overview of rates and concrete cases with calculations, see our Paraguay taxation guide.
Conclusion
The Paraguayan tax system proves to be extremely generous: low rates (8–10% on local income, 0% on foreign income), exemption threshold at 80M PYG, and numerous optimization opportunities for those who properly structure their activity and residence. For entrepreneurs, investors, and digital nomads, Paraguay positions itself as a very attractive tax destination, provided proper and compliant structuring.
International taxation is a cutting-edge subject; a poor reading of the rules or inadequate support can create major risks (double taxation, reclassification, audits).
Do you want to take advantage of Paraguay's favorable tax system while ensuring your international tax compliance? Our team of specialized Paraguayan lawyers accompanies you through all stages of the process. Book a free discovery appointment for a personalized diagnosis.
FAQ
Are IRP rates in Paraguay changing in 2026?
The current scale (8%, 9%, 10%, threshold 80M PYG, brackets 50M/150M PYG) is set by Law No. 6380/19. The amounts in guaraníes may be revised according to IPC (Law, art. 62). To date, no rate reform is announced for 2026.
What is the IRP exemption threshold in Paraguay?
For personal service income (IRP), below 80,000,000 PYG (~12,147 USD) in annual gross income, no IRP is due in this category.
Who must pay IRP in Paraguay?
Resident natural persons (national or foreign) who have Paraguay-sourced income above the threshold (80M PYG for personal services) or capital income from Paraguay sources. Tax residence is based on residence in the territory and obtaining the RUC (no day-counting rule in Paraguayan law).
How is IRP calculated in Paraguay?
For personal services (IRP), the tax applies to the renta neta (net income = gross income minus deductible expenses over the fiscal year), not on gross turnover. Once the threshold of 80M PYG in gross income is exceeded, the progressive scale (8%/9%/10%) is applied by brackets. For capital income: 8% on the net base (see taxation guide).
Is foreign-sourced income taxed in Paraguay?
No. Foreign-sourced income = 0% IRP in Paraguay (territorial system).
How does IRP apply to freelancers and digital nomads in Paraguay?
It all depends on where the activity is carried out and how it is structured. Income received from abroad, without operations from Paraguay → 0% IRP. If you operate from Paraguay (residence + services delivered from the country), a tax nexus may be established: your income becomes Paraguay-sourced → IRP 8–10% above 80M PYG. Hence the importance of expert advice to properly structure and secure your situation.
Sources
- Law No. 6380/19 – Income tax (IRP legal framework, brackets, threshold, procedures).
- Law No. 125/1991, art. 5 – Definition of Paraguay-sourced income.
- Law No. 978/96 – Migraciones (permanent residence).
- DNIT (Dirección Nacional de Ingresos Tributarios) – Tax framework and procedures (consultation of official provisions for amounts and updates).