Progressive IRP (personal income tax): 8% up to PYG 50M/year, 9% on PYG 50M-150M, 10% above PYG 150M. Exempt if gross income below PYG 80M. Territorial taxation. Capital gains 8%. IPS social 16%. Asunción is Latin America's most affordable capital.
On annual service income of PYG 200,000,000 (~$26,300) in Paraguay: First PYG 50M taxed at 8% = PYG 4,000,000. Next PYG 100M taxed at 9% = PYG 9,000,000. Final PYG 50M taxed at 10% = PYG 5,000,000. Total IRP = PYG 18,000,000 (~$2,370, effective rate 9%). Plus IPS social = 16% × PYG 200M = PYG 32,000,000. Total deductions: PYG 50,000,000 (25%). Remote workers earning exclusively foreign-sourced income may owe 0% IRP under the territorial principle — making Paraguay one of the world's most tax-efficient residency options.
Paraguay operates one of the most favourable personal income tax regimes in South America. The IRP (Impuesto a la Renta Personal) is a progressive tax with rates of just 8%, 9%, and 10%. Critically, individuals whose gross annual income from personal services does not exceed PYG 80 million (~$10,500) are fully exempt from the IRP — covering many lower-income workers entirely. Paraguay applies the territorial taxation principle: income sourced from outside Paraguay is generally not subject to Paraguayan income tax, making it exceptionally attractive for remote workers, digital nomads, and entrepreneurs with international income streams. Capital gains are taxed at 8%. The IPS (Social Security Institute) social contribution for employees is approximately 16%. Paraguay offers one of the easiest residence-by-investment programmes in Latin America (minimum $70,000 investment or proof of income), and Asunción provides a very affordable cost of living at ~$700-1,000/month.
| Taxable Income | Tax Rate |
|---|---|
| Annual gross income below PYG 80M (~$10,500) | 0% (exempt from IRP) |
| PYG 0 – 50,000,000/year (~$6,600) | 8% |
| PYG 50,000,001 – 150,000,000/year (~$6,600-$19,700) | 9% |
| Above PYG 150,000,000/year (~$19,700+) | 10% |
| Capital gains | 8% |
| Social contributions (IPS — employee) | ~16% of gross salary |
Note: These are marginal rates - you only pay the higher rate on income within each bracket.
Source: Subsecretaría de Estado de Tributación (SET) Paraguay
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Get Health Insurance for Paraguay →Paraguay's IRP (Impuesto a la Renta Personal) uses three progressive rates for 2026: 8% on annual net income from personal services up to PYG 50 million (~$6,600), 9% on income from PYG 50,000,001 to PYG 150 million, and 10% on income above PYG 150 million (~$19,700). Importantly, if total gross income from personal services does not exceed PYG 80 million (~$10,500) annually, no IRP is required. The IRP is administered by the Subsecretaría de Estado de Tributación (SET) at set.gov.py. Note: the corporate income tax (IRE) is a separate flat 10% on business income.
Paraguay applies the territorial taxation principle — only income sourced within Paraguay (from activities performed in, goods located in, or rights used economically in Paraguay) is subject to Paraguayan income tax. Foreign-sourced income — dividends from foreign companies, capital gains from overseas assets, salaries paid by foreign employers for work performed outside Paraguay — is generally not subject to Paraguayan income tax. This makes Paraguay exceptionally attractive for digital nomads, remote workers, and entrepreneurs who establish Paraguayan residency while earning income internationally. You maintain legal residency and enjoy a stable, affordable lifestyle in Asunción while potentially paying very little or no Paraguayan income tax.
Paraguay offers one of the most straightforward residency programmes in Latin America. Temporary residency options include: proof of regular income (pension, investment income, remote work salary), minimum bank deposit of approximately $5,000, or investment of $70,000 in Paraguayan assets. The process typically takes 3-6 months and requires: passport, background check, birth certificate (apostilled), proof of income, and medical certificate. Permanent residency is available after 2 years of temporary residency. Paraguay allows dual citizenship. The country does not have a 183-day physical presence requirement for maintaining residency — you can establish residency and return to your home country or travel freely.
The IPS (Instituto de Previsión Social) is Paraguay's main social security system. Employee contributions total approximately 9% of gross salary (for health and pension). Employer contributions are higher, typically around 16.5-17% of gross salary. Self-employed individuals and those not covered by IPS employer relationships must make separate social security arrangements. Paraguay's social security system provides health insurance (via IPS hospitals and clinics) and retirement pension benefits. For remote workers earning foreign income, IPS contributions may not apply directly — local tax and legal advice is recommended to understand your specific obligations.
Asunción is one of Latin America's most affordable capitals. Monthly costs for a single person: rent for a 1-bedroom apartment PYG 1,200,000-2,500,000 (~$160-330) in decent neighbourhoods; groceries PYG 800,000-1,200,000 (~$105-158)/month; utilities PYG 200,000-400,000 (~$26-53)/month; transport PYG 100,000-200,000 (~$13-26)/month. Total comfortable lifestyle: approximately $700-1,000/month — among the cheapest in South America. Paraguay has free, legal gun ownership; affordable electricity (hydro-powered from Itaipú Dam, one of the world's largest); and a relaxed, low-crime lifestyle outside the capital's fringe areas.
Paraguay's IRP applies to individuals providing personal services (professional services, employment, consulting) who are domiciled or resident in Paraguay and whose income exceeds PYG 80 million annually. The tax year is January 1 to December 31. Annual IRP returns are due by March 31 of the following year (March 31, 2026 for 2025 income). Individuals below the PYG 80 million threshold are exempt from filing. Employers withhold IRP from employee salaries monthly and remit to SET. Self-employed individuals make quarterly estimated payments. Paraguay's tax authority SET (set.gov.py) provides e-filing through the Marangatu system.
Last Updated: April 2026