Paraguay is a country that is usually overlooked in popular business reviews, and this is completely undeserved.
The Paraguayan business climate feels like a breath of fresh air after European tax rates. Here, you do not get the feeling that the state sees an entrepreneur merely as a source of income for the budget. You can operate under the “10-10-10” formula and immediately understand your net profit without complicated hidden fees. There is also an opportunity to legally work with foreign clients. This is the level of predictability that is so lacking in today’s global economy.
Of course, Paraguay is not a carefree “tax haven.” Nothing happens by itself here. You need to get used to the relaxed Latin American pace, a simplified system of control, and more informal relations between the state and the entrepreneur. It is necessary to find a qualified local accountant to handle monthly tax declarations. It is also worth learning to keep every invoice for coffee or fuel in order to reduce the taxable base.
But if you are looking for a stable place for your own business, where the rules of the game are clear and do not change every season, and where your work brings real results, Paraguay is definitely worth taking the risk and opening your first business here in Latin America.
Thanks to its territorial taxation system, fixed low tax rates, and simple registration of individual entrepreneurship (RUC), Paraguay offers one of the most convenient business climates in the region.
Legal Forms and Types of Activities
In Paraguay, the choice of legal form depends on the size of your project. For freelancing, consulting, IT, or small-scale craft production, the easiest option is to register as a Persona Física, which is an equivalent of a sole proprietorship, and obtain an RUC number. If you want to launch a business with partners or attract investment, the best option is EAS, or Empresa de Acciones Simplificadas. This is a modern equivalent of an LLC, which can be registered even by one person entirely online. For large companies and importers, the traditional SRL and SA forms are used. As for business sectors, the greatest freedom and tax advantages are offered by online service exports, gastronomy, craft processing, trade, and the service sector. These are markets where demand for quality products and services in Paraguay is constantly growing.
Why Paraguay: Key Advantages for Entrepreneurs
Territorial taxation principle: Income earned outside Paraguay, for example from foreign clients for IT services or consulting, is not subject to local income tax.
The “10-10-10” formula: This is the basis of the Paraguayan tax system.
10% – Value Added Tax (IVA / VAT).
10% – Corporate Income Tax (IRE).
10% – Personal Income Tax (IRP).
Economic stability: The national currency, the Paraguayan guaraní, is stable. There are no strict currency restrictions on the withdrawal of capital.
How to Open a Business (RUC) in Paraguay
To legally work as an individual entrepreneur in Paraguay, you need to obtain an RUC (Registro Único de Contribuyentes) and obtain a license for the type of activity you want to carry out from the local municipality, as well as any relevant licenses or permits if required. These are equivalents of the Ukrainian tax identification number and sole proprietorship status. Registration is carried out by the National Directorate of Tax Administration (DNIT, formerly SET), local municipalities, and relevant authorities depending on the type of business activity.
Requirements and Documents for Registration:
- Paraguayan identity card (Cédula de Identidad): You need to have a temporary or permanent residence permit.
- Tax address (Domicilio Fiscal): Proof of residence or an office/home rental in Paraguay, such as utility bills or a lease agreement.
- Access key to the Marangatu system: The electronic taxpayer portal.
1. Preparing Documents and Obtaining the Cédula
This is a mandatory condition for RUC registration. Before submitting an application to open a sole proprietorship, you need to go through the process of obtaining Paraguayan residency and receive the internal identity document (Cédula).
2. Submitting an Application to the DNIT
The application can be submitted online through the Marangatu portal or in person. The taxpayer registration form is completed, specifying the types of economic activities (ISIC/CIIU code) and selecting the appropriate tax regime.
3. Identification and Account Activation
The taxpayer’s identity is verified by a tax inspector. The tax authority requires an in-person visit or video identification to confirm the identity and obtain a password for the Marangatu personal account.
4. Electronic Signature and Invoicing
Factura Electrónica / Factura Física. You need to obtain permission to print official invoice forms (Facturas) or connect to the electronic invoicing system to issue invoices to clients.
Tax Regimes for Small and Medium-Sized Businesses
Depending on annual income, individual entrepreneurs in Paraguay are subject to three main categories of income tax (IRE — Impuesto a la Renta Empresarial):
IRE RESIMPLE — Up to 80 million PYG (~$10,500). Microbusinesses. A fixed monthly or quarterly payment without the need to submit detailed VAT declarations.
IRE SIMPLE — From 80 million to 2,000 million PYG (~$260,000). Small and medium-sized businesses. Simplified accounting, with a 10% tax rate on net profit (income minus documented expenses).
IRE GENERAL — Over 2,000 million PYG (>$260,000). Large businesses and corporations. Full accounting, with a 10% tax rate.
Specifics of Doing Business in Paraguay
The Role of an Accountant (Contador):
Unlike simplified systems in some countries, in Paraguay it is necessary to submit monthly VAT (IVA) declarations even if there was no income during the month. Working with a local accountant is important to avoid penalties for late reporting.
Deductible Expenses (Gastos Deducibles):
Under the IRE Simple regime, the 10% tax is paid on net profit rather than on total turnover. Therefore, you need to keep all official receipts (Facturas) for business-related expenses, such as rent, equipment, telecommunications, and transportation.
Banking Sector:
To open a current account for a new sole proprietorship, you need to prove the source of funds and provide the first paid tax declarations for several months of operation.
Paraguay offers a simple and clear model for running a business. The lack of bureaucracy when obtaining an RUC, a moderate 10% VAT rate, and the possibility of legally minimizing taxes when working with exports make the country one of the best options for Ukrainian entrepreneurs in South America.
Author: Tetiana Bihdan
Photo: Tetiana Bihdan
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