Worldwide VAT, GST and Sales Tax Guide
Asunción GMT -3
EY
Edificio Citicenter
Mcal. López esquina Cruz del Chaco Asunción Paraguay
Indirect tax contacts
Gustavo Colman
+595 (21) 664-308 gustavo.colman@py.ey.com
Alvaro Hoeckle +595 (21) 664-308 alvaro.hoeckle@py.ey.com
Tania Caceres +595 (21) 664-308 tania.caceres@py.ey.com
Sven N. Ratzlaff +595 (21) 664-308 sven.ratzlaff@py.ey.com
Leonardo Cazal +595 (21) 664-308 leonardo.cazal@py.ey.com
A. At a glance
Name of the tax
Value-added tax (VAT)
Local name Impuesto al valor agregado (IVA)
Date introduced 1 July 1992
Trading bloc membership MERCOSUR
Administered by
VAT rates
National Directorate of Tax Revenue (DNIT, acronym in Spanish) (www.dnit.gov.py)
Standard 10%
Reduced 5%
Other Exempt
VAT number format
General tax ID number is used for VAT ID. If the taxable person is an individual, the VAT ID is their tax ID plus its verification number. If the taxable person is a legal entity, it is eight digits plus its verification number.
VAT return periods Monthly (general period)
Thresholds
Registration None
Recovery of VAT by non-established businesses No
B. Scope of the tax
VAT applies to the following transactions:
• The supply of goods or services made in Paraguay by a taxable individual or business
• The importation of goods from outside Paraguay, regardless of the status of the importer
Where a payment for digital services is made through a financial institution in Paraguay, the financial institution is responsible for collecting and remitting VAT at the standard rate of 10% on the payment. This provision entered into force on 1 January 2021. Such financial institutions, therefore, must act as VAT collection agents when the holders of credit or debit cards contracts for digital services from foreign entities. Such entities are required to provide a VAT receipt. “Financial institutions” include banks, financial entities, exchange houses, cooperatives, payment processors and similar entities, as well as telephone companies and other intermediary entities.
The VAT stated in the credit or debit card statement of the user acquiring the service may be used by the taxable person as a VAT tax credit, to the extent it is linked to income subject to tax. For this purpose, the evidence for the credit will be the card or account statement.
VAT is charged at 10% and INR at 4.5% on the value of the digital services.
In addition, the following digital services are subject to this obligation:
• Digital multimedia content distribution (games, movies, music, videos, among others)
• Processing and storage of data in general, software development or updates or applications in general
• Cable or satellite television
• Marketing and advertising
• Gambling, chance, bets and similar activities
• Educational services provided through technological platforms
Registration procedures. Registration starts through an online process; immediately after registering the taxable person receives a confirmation by email and must present physically (papers in person or through power of attorney) the following documents:
• Public deed of incorporation of the company in Paraguay
• Tax Form 605
• Copy of legal representative’s ID card
Deregistration. The following documents are required for deregistration of any Paraguayan taxable person:
• Public deed of liquidation of the company (if the taxable person is a business)
• Certificate of indebtedness with the Paraguayan tax authority
• Cancellation of Tax Validity Number or “Timbrado” number (Tax Form 621)
• Cancellation of tax identification number or “RUC” (Tax Form 623)
• Copy of legal representative’s personal ID card (if the taxable person is a business – if not, the personal ID card of the taxable individual). If the business or individual decides to deregister from VAT only, they must file Form 615 or 610, respectively.
Changes to VAT registration details. It is the taxable person’s obligation to notify the tax administration when there is a change in its tax registration details in Paraguay. Changes related to tax status include address, new local establishment, additional type of business, changes or new representatives, etc. The notification is related to taxable persons in general, not specific VAT registration. The time limit to present any updates is 30 days from the time of the change. The notification must be submitted online.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT.
The VAT rates are:
• Standard rate: 10%
• Reduced rate: 5%
The standard rate of VAT applies to all supplies of goods or services unless a specific measure provides for a reduced rate or an exemption.
Examples of goods and services taxable at 5%
• Basic family products
• Pharmaceutical goods
• Sale or housing purposes lease of real estate
• Agricultural products and cattle
A reduced tax base applies to certain supplies, thereby reducing the effective rate of VAT.
Examples of goods and services with a reduced tax base
• Certain imports of goods under specified tax treatment (Decree 2063/2024 known as the Tourism Regime), such as: beauty creams, food supplements, video game, consoles and machines, articles and equipment for physical culture, gymnastics or athletics, etc.
• Real estate
The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Examples of exempt supplies
• Foreign currency
• Oil by-product fuels
• Interest on public securities
• Interest on bank deposits, books, certificates and shares
• Exportation of goods and exportation freight services
• Transfer of credits
• Transfer of carbonic credits
Option to tax for exempt supplies. The option to tax exempt supplies is not available in Paraguay.
E. Time of supply
The time when VAT becomes due is called the “time of supply” or “taxable event.” In general terms, the taxable event will occur with one of these events, whichever occurs first: a) delivery of the good or provision of the service; b) perception of the total amount or partial payment of the good or service; or c) expiration of the term foreseen for the payment of the service.
For importations, the taxable event will occur at the time of the numbering of the customs declaration of the goods in the Customs Office or the equivalent act.
Invoices must be issued on the date in which the taxable events occur.
Deposits and prepayments. According to tax regulations, any deposit or prepayments are subject to VAT for both goods and services. As mentioned above, the taxable event for VAT purposes occurs with the perception of the total amount or partial payment of the good or service.
Continuous supplies of services. There are no special time of supply rules in Paraguay for supplies of continuous supplies of services. As such, therefore the general time of supply rules apply (as outlined above).
Goods sent on approval for sale or return. There are no special time of supply rules in Paraguay for supplies of goods sent on approval for sale or return. As such, therefore the general time of supply rules apply (as outlined above).
Reverse-charge services. Paraguayan tax legislation does not provide for reverse charges for VAT purposes. VAT on the provision of services by nonresidents is collected by means of WHT.
Electronic invoicing. Electronic invoicing is mandatory in Paraguay, for certain taxable persons.
Scope of electronic invoicing. For B2B, B2C and business-to-government (B2G) supplies, electronic invoicing is allowed but not mandatory in Paraguay.
However, from 1 January 2025, legal entities registered as new taxable persons will be mandated to issue electronically all their tax documents, with the exception of the virtual withholding voucher, through the platforms provided by the tax authority.
The tax authority has established a calendar of mandatory electronic invoicing in which 10 different groups have been identified with the dates from which they must issue all their tax documents electronically. Depending on the group, the obligation was implemented from 1 July 2022 until 31 October 2024. The list of taxable persons that make up the groups is available on the SIFEN website (ekuatia.set.gov.py/portal/ekuatia/).
There is no threshold beyond which taxable persons are required to adopt electronic invoicing in Paraguay.
Simplified VAT invoices. Simplified VAT invoicing is not allowed in Paraguay. Nevertheless, the tax law provides some specific types of sales documentations, such as airline tickets, sales notes, public show tickets, among others. These can only be used for the relevant types of suppliers (i.e., airlines can use airline tickets, micro-businesses can use sales notes and show providers can use public show tickets, instead of full VAT invoices).
Self-billing. Self-billing is allowed in Paraguay; however, it is only allowed in exceptional cases. For example, in cases where the supplier is not VAT registered and is selling an asset, the buyer (who is VAT registered) must issue a self-invoice. It is not generally allowed for other cases, and in practice it is not a very common use self-billing.
Proof of exports. VAT is not chargeable on supplies of exported goods. However, to qualify as VAT-free, exports must be supported by an exportation file that includes the customs authority good formalizations to leave Paraguay.
Foreign currency invoices. If a VAT invoice is issued in a foreign currency, all amounts must be converted to the domestic currency, which is the Paraguayan guarani (PYG), using the exchange rate published by the tax authority for recording purposes (local books).
Supplies to nontaxable persons. Full VAT invoicing is mandatory for all transactions. If the buyer does not require an invoice, the seller must complete it with “no name” and an “X” in the RUC space. However, for supplies to nontaxable persons, Paraguayan taxable persons must still issue a full VAT invoice but without the name of the customer.
Records. In Paraguay, examples of what records must be held for VAT purposes include all documentation related to taxes, such as accounting books and records, documents, invoices, purchase and sales invoices, that must be held by taxable persons in Paraguay.
In Paraguay, VAT books and records can be held outside of the country. Although the records can be kept outside the country, the platform and the archives should be accessible locally and all data and support documentation related to account software must be kept by local taxable persons.
Record retention period. The action for collection of the taxes shall expire after five years from 1 January of the year following that in which the obligation should have been fulfilled. For annual taxes on income or profits, it shall be understood that the taxable event occurs at the close of the fiscal year. It is mandatory to keep tax files during the abovementioned statute of limitation period.
Electronic archiving. Electronic archiving is allowed in Paraguay. This is only if the requirements are met, i.e., they include a digital signature and the documents must be stored for five years in a durable format (e.g., pdf).
I. Returns and payment
Periodic returns. VAT returns are submitted on a monthly basis. The due date for VAT returns depends on the last number of the taxable person’s tax identification number.
Periodic payments. The due date for VAT payment depends on the last number of the taxable person’s tax identification number. Return liabilities must be paid in Paraguayan guarani. Payment must be made through the Paraguayan tax authority online system (https://marangatu.set. gov.py/eset/login). The VAT payments are the difference between output tax generated through the local sales and the input tax accumulated through the purchase of goods and services. If the input tax is higher than output tax, the difference can be used in the following periods.
Electronic filing. Electronic filing is mandatory in Paraguay for all taxable persons. It must be done online through the tax administration’s system [www.set.gov.pyunder (Sistema Marangatú)]. This is a software created by the Paraguayan tax authority (https://marangatu.set.gov.py/eset/ login). This online/electronic system also allows taxable persons to make tax payments through this system. Taxable persons log on using their own tax ID and password.
Payments on account. Payments on account are generally not required in Paraguay, except for certain taxable persons. The Paraguayan tax authority may require VAT payments on account at the end of the fiscal period. This is only applicable when a taxable person does not submit their tax return or pay taxes online on time. In this case, the tax authorities can claim the overdue tax from the previous tax return as a payment on account. However, while this facility is included in the law, it is not enforced in Paraguay, and it is not common.
Special schemes. Tourist VAT system. The Paraguayan tax authority provides a specific list of products that a tourist can buy with a VAT exemption by presenting their passport. The taxable person must be registered in the tourist regime and a copy of the tourist’s passport is attached to the VAT exempt invoice.
Secondhand goods. There is a special scheme for the sale of secondhand goods that treats only 30% of such supplies subject to VAT; the remaining 70% is considered VAT exempt.
Annual returns. Annual returns are not required in Paraguay.
Supplementary filings. Special VAT categories. The Paraguayan tax authority may require a taxable person to use special books, sales and purchase books, records or forms of accounting for VAT purposes, according to the category of the taxable person. This would only be required to be submitted where the tax authorities request this from a taxable person, which can be done by the tax authorities on demand. The tax authorities may also request copies of invoices from certain suppliers.
Correcting errors in previous returns. The tax law and regulations allow the presentation of a tax return amendment in case of errors or omissions. This presentation must be done online through the tax administration’s system [www.set.gov.pyunder (Sistema Marangatú)] with an additional tax return that must be used in case of amendments.
Digital tax administration. There are no transactional reporting requirements in Paraguay.
J. Penalties
Penalties for late registration. Penalties are assessed for late registration for VAT. In addition, fines and interest are also applicable if the taxable person owes VAT. The penalty for late registration is approximately USD7.