Indirect tax - Paraguay

Value Added Tax (VAT) is the main type of indirect taxation in Paraguay.
It is a tax on consumption which is applied during the production and distribution process to most goods and services. It is also applied to goods and services entering the country. Although VAT is ultimately borne by the consumer by being included in the price paid, the responsibility for charging, collecting and paying it to the tax authority at each stage of the process rests with the business making the sale.
A business registered for the tax will charge VAT (output tax) on its sales and incur VAT (input tax) on its purchases (including any VAT paid at importation and any VAT withheld to non-residents). The difference between the output tax and the deductible input tax in each accounting period will be the amount of VAT payable by the business to the tax authority.

Scope of the Paraguayan VAT:
-VAT applies to sales of goods, import of goods and provision of services.
-Sales of goods are all transactions, whether free of charge or not, which purpose is the delivery of goods with transfer of property rights.
-Service is any provision, whether free of charge or not, that provides the other party an advantage or benefit.
-Importation is the definitive introduction of goods in Paraguay

There are two rates of VAT that are applied to goods and services in Paraguay; the standard rate and the reduced rate. In addition, some goods and services are exempted from the tax.

VAT exemptions:
• Transfer of foreign currency, transfer of shares or quotas of capital stock, cession of credits, capital goods produced by domestic manufacturers under law 60/90 of investments, books and newspapers, educational, cultural or scientific magazines, notebooks and their inputs for educational programs for children and adolescents, goods donated to foundations, associations and other non-profit organizations dedicated to education (initial and pre-school, primary school, secondary, technical, tertiary and university) recognized by the Ministry of Education, and non-profit entities dedicated to sports activities; oil fuels, including biofuels.
• Services of interest of private and public securities, deposits into banks and financial institutions governed by Law 861/96 as well as those in cooperatives and in public financial institutions, those performed by employees of embassies, consulates, and international organizations.
• Imports of goods considered baggage according to the customs law, goods introduced by diplomats, consular and international organizations; capital goods produced by domestic manufacturers applied to the industrial or agricultural/livestock industrial cycle, under the Law 60/90 of investments goods exempted by the tax law, the sale of goods and services provided by associations, federations, foundations, mutual funds and others entities with legal capacity to engage in activities related to health care, social work, charity, literary, artistic, unions, sports, scientific, religious, educational recognized by the Ministry of Education and Culture or by law, and legally recognized political parties, provided that they are non-profit and the profits or surpluses are not distributed directly or indirectly between members who should have as sole target the purposes for which they were created.

The above mentioned exemptions shall not apply in cases of sales of goods or provision of services related to the following economic activities: habitual sale and purchase of real state, extractive, poultry, apiculture, sericulture, swine and rabbit raising, floriculture, forestry, consignment of goods, transport, insurance, safety, parking, hotel, lease of properties, carpentry, financial intermediation, rental and exhibition of films, location of property and rights, clubs, transfer of use of intangible property, travel agencies, funeral and related activities, laundry, cleaning and dyeing of garments in general, advertising, construction, renovation and demolition.

No, all individuals and legal entities engaged in taxable transactions must register as VAT taxpayer.

A penalty may be imposed by the tax authority if a business fails to register at the correct time.

No. There is no registration limit for businesses that are not established in Paraguay and they will need to register as soon as they start to make taxable transactions. In some cases, if a non-resident individual or entity make taxable transactions with corporate income tax (CIT) taxpayers, the CIT taxpayer will be VAT withholding agent and the non-resident could be exempted of the registration obligation.

If a non-established business plans to have ongoing operations in Paraguay, they must have a permanent establishment and appoint a legal representative.
The legal representative must have Paraguay ID.

Yes.
When a CIT taxpayer consumer makes a payment to a non-resident entity or individual, it is obliged to act as VAT withholding agent.
If the non-resident provides digital services to final consumer, it must notify the Tax Administration about the starting of the provision of services in Paraguay within ten (10) business days after said event and pay the tax.

No. However, the non-resident entity is obliged to have a legal representative with Paraguayan ID.

Monthly. The due date for the VAT tax return submission and VAT payment depends on the last number of the taxpayer’s tax identification number. The submission of the tax return in the Paraguayan tax system is self-declarative. This means that the taxpayer is responsible for filling out the form and submitting the tax return to the Tax Authority. All Tax Returns are directly submitted by the taxpayer in the Tax Authority web platform (Sistema Marangatú).

Yes. If a VAT return, or the corresponding payment, is submitted late penalties are imposed. The penalty for late submission is of USD 7. Penalties for late payment can range from 4% to 14% depending of the outstanding terms and daily surcharges of 0,05% will apply over unpaid VAT amount.

Sales and purchase books have to be submitted in the Tax Authority web platform (Sistema Marangatú).

The Paraguayan tax authority may require copies of invoices, books and records, documents from a taxpayer.

Yes. Penalties can be imposed for a range of error, omissions, or fraud.

Omissions are penalized with a fine equivalent to 50% of the tax unpaid and penalties for fraud vary between a one (1) and three (3) times the tax unpaid.

No.

A VAT invoice must show:
• tax invoice authorization number granted by the tax authority
• the tax identification number (TIN, which in Paraguay is called "RUC")
• the seller's name and address
• an invoice number which is unique and sequential
• the invoice date
• the customer's name and address
• a description sufficient to identify the goods or services supplied to the customer
• the rate of any cash discount
• the total amount of VAT charged

For each different type of item listed on the invoice, the following must be shown:
• the unit price or rate, including VAT
• the quantity of goods or the extent of the services
• the rate of VAT that applies to what's being sold
• the total amount payable, including VAT

Electronic invoicing is allowed in Paraguay and will be mandatory since 2024.

VAT invoices can be issued, received and stored in electronic format and there is no need to tell the tax authority. Electronic invoices must contain the same information as paper invoices.

UK - While there is no SAF-T requirement in the UK– the UK government is going ahead with its Making Tax Digital (“MTD”) programme, starting with VAT-registered taxpayers. From 1 April 2019, businesses with a turnover above the VAT registration threshold will be required to keep specified minimum records in the VAT account and to submit the current nine- box VAT return to HMRC via Application Program Interface (“API”) software (linking either the accounting system or excel spreadsheets to the HMRC system).

Yes. Sales and purchase books have to be submitted in the Tax Authority web platform (Sistema Marangatú).