IVA Tax in Paraguay Explained: 10% VAT Guide

What Is IVA in Paraguay?

IVA stands for Impuesto al Valor Agregado, which is Paraguay’s version of a Value Added Tax (VAT). It is a consumption tax applied to the sale of goods and services within the country. If you are doing business in Paraguay or simply living here as a resident, understanding IVA is essential for managing your finances correctly.

Paraguay’s IVA system is notably simpler and lower than the VAT systems in most other countries, which is one of the reasons the country is attractive to entrepreneurs and foreign investors.

IVA Rates in Paraguay

Paraguay has two IVA rates:

Standard Rate: 10%

The 10% IVA rate applies to most goods and services, including:

• Retail sales of consumer goods
• Professional services
• Imported goods
• Restaurant meals and entertainment
• Telecommunications services
• Construction and real estate services

Reduced Rate: 5%

A reduced 5% IVA rate applies to certain essential goods and services:

• Basic food items (rice, pasta, cooking oil, milk, eggs, bread)
• Pharmaceutical products
• Agricultural products sold in their natural state
• Interest on loans from financial institutions
• Public transportation
• Sale and rental of real estate

Understanding which rate applies to your business transactions is important for accurate invoicing and tax compliance.

Who Must Register for IVA?

If you operate a business in Paraguay, you are likely required to register for IVA. Specifically, registration is mandatory for:

• All businesses registered as a formal entity (SA, SRL, etc.)
• Self-employed professionals providing taxable services
• Importers of goods into Paraguay
• Individuals whose annual income from taxable activities exceeds the threshold set by the SET (Subsecretaria de Estado de Tributacion)

Even small businesses and freelancers who reach the income threshold must register and charge IVA on their invoices.

How IVA Works in Practice

IVA operates on a credit-debit system, similar to VAT in other countries:

1. When you sell goods or services, you charge IVA to your customers (this is your IVA debito)
2. When you purchase goods or services for your business, you pay IVA to your suppliers (this is your IVA credito)
3. Each month, you calculate the difference: IVA debito minus IVA credito
4. If the result is positive, you owe that amount to the tax authority
5. If the result is negative, you carry the credit forward to the next month

Example

You sell consulting services for Gs. 10,000,000 and charge 10% IVA:

• IVA debito: Gs. 1,000,000

You purchase office supplies and services totaling Gs. 3,000,000 with 10% IVA:

• IVA credito: Gs. 300,000

Net IVA owed: Gs. 1,000,000 - Gs. 300,000 = Gs. 700,000

Filing and Payment Schedule

IVA returns are filed monthly with the SET. Key details include:

• Filing deadline: The specific day depends on the last digit of your RUC (tax identification number)
• Payment: Due at the same time as the filing
• Method: Filed electronically through the SET’s online system (Marangatu)
• Currency: All amounts are in Paraguayan Guaranies

Late filings and payments are subject to penalties and interest charges, so staying on schedule is important.

IVA on Imports

When importing goods into Paraguay, IVA is charged at the point of customs clearance. The tax is calculated on the CIF value (cost, insurance, and freight) plus any applicable customs duties.

• Standard imports: 10% IVA
• Essential goods: 5% IVA
• The IVA paid on imports can be used as a tax credit against your IVA debito

If you are importing goods regularly, working with a customs broker who understands the IVA implications will save you time and potential errors.

IVA Exemptions

Certain transactions are exempt from IVA in Paraguay:

• Exports: Goods exported from Paraguay are zero-rated (0% IVA), but exporters can still claim credits on their inputs
• Financial services: Some banking and insurance services
• Educational services: Provided by recognized institutions
• Healthcare services: Medical services provided by authorized professionals
• Diplomatic exemptions: For accredited diplomatic personnel

Common IVA Mistakes to Avoid

Businesses operating in Paraguay frequently make these IVA-related errors:

1. Not issuing proper invoices (facturas) that include the IVA breakdown
2. Mixing up the 5% and 10% rates on invoices
3. Failing to claim legitimate IVA credits on business purchases
4. Missing filing deadlines and incurring unnecessary penalties
5. Not keeping proper records of all purchase and sales invoices
6. Forgetting to register for IVA when reaching the income threshold

IVA Tips for Foreign Residents and Business Owners

If you are a foreign resident doing business in Paraguay, keep these tips in mind:

• Get a good accountant who is familiar with the SET’s requirements and electronic filing system
• Keep all invoices organized digitally and physically for at least five years
• Use timbrado-compliant invoices (the numbered invoicing system authorized by the SET)
• Understand the difference between IVA-inclusive and IVA-exclusive pricing when negotiating contracts
• Budget for IVA payments separately from your operating expenses

For help establishing your business presence in Paraguay, including a professional address for your business registration, explore what MyPyMail offers. You can also find more information about taxes and business topics on our blog, including our year-end tax checklist for Paraguay residents.