In Paraguay, tax returns are submitted on a monthly basis through a fully digital system managed via a platform called Marangatù, which is directly overseen by the Paraguayan government.
If you’re contemplating applying for residency in Paraguay or have already secured it, understanding how to stay compliant with local tax laws is crucial to avoid issues with both the local and your home country’s tax authorities. This guide will detail who needs to file taxes, who doesn’t, how to do it, and what types of income must be declared.
If you are looking for an accounting firm in Paraguay that can navigate international and local taxation at the same time, feel free to contact us. We’d be happy to review your situation and take care of your tax filings in Paraguay.
Who Needs to File Taxes in Paraguay?
Filing tax returns is mandatory for all individuals with a RUC (Taxpayer’s Unique Registry), companies, religious organizations, and charitable entities. For employees, their respective companies handle the tax obligations on their behalf.
Opening a RUC is a critical step for foreigners aiming to establish tax residency in Paraguay. Without a RUC, obtaining a tax residency certificate is impossible. Paraguay is not like other countries, where you become a tax resident depending on the number of days you spend there. Here there is no minimum stay requirement to keep your tax residency. On the other hand, the tax residency certificate is given only to people who have some form of economic activity:
- Employees
- Entrepreneurs with businesses in the national territory
- Self-employed individuals with a RUC
Among these options, the simplest way to secure a tax residency certificate is by obtaining a RUC. You can use this certificate to prove that your tax residency is in Paraguay -not just your personal one- to your home country, banks, or third countries.
Once you have opened your RUC, you must file monthly tax returns. Failure to do so results in fines for each month the declaration is missed. You’ll need to file late and catch up to remain in good standing. Until you become compliant again, obtaining a tax residency certificate will not be possible.
How to File My Tax Return?
You can file your tax returns on the Marangatù platform:
- Login: Use the credentials provided by the SET (Paraguay’s tax authority) when you registered for your RUC.
- Dashboard: Upon logging in, you’ll immediately see your upcoming deadlines for filings.
By clicking on the button highlighted by the arrow, you can begin the process to file a new declaration. If you’re simply looking to submit your monthly VAT, you’ll choose the option “221 – IVA Mensual”.
At this point, you’ll fill out the declaration fields based on all the transactions, both purchases and sales, you’ve made during the month. Many digital nomads and online entrepreneurs might find themselves with nothing to declare, particularly if they conduct business through an offshore LLC to benefit from Paraguay’s territorial tax system.
In such cases, the monthly declaration might be filled out entirely with “0” in every field. However, it’s important to remember that it’s not advisable to use the RUC just to declare zero income, as this could lead to issues both in your home country and in Paraguay. If you want to know the best solution for your specific needs, you can book a free consultation call to receive our advice on adapting the RUC to your situation.
Which Incomes Should I Declare?
The incomes you must declare on the Marangatù platform include all Paraguayan-sourced income subject to taxation, such as:
- Invoices issued from your RUC, regardless of where your final customer resides
- Local capital income (e.g., rental income from an apartment)
- Capital gains from the sale of assets located in Paraguay or shares in companies based in Paraguay
- Gambling winnings obtained in Paraguay
However, certain types of income are excluded from your tax declaration:
- Salaries and incomes earned abroad
- Dividends and capital distributions from non-resident companies in Paraguay
- Foreign-sourced capital income
An important point to note is that for invoicing purposes, what matters is the entity issuing the invoice. If you send an invoice to a customer in Germany, and the invoice comes from your Paraguayan RUC, you will need to pay income tax, and in some cases, VAT as well. It doesn’t matter if you were abroad when you performed the work; it still counts as Paraguayan-sourced income taxable under local laws.
Conversely, if you have an offshore LLC without a permanent establishment in Paraguay, and the invoice sent to the client comes from this LLC, then you do not need to include it in your income tax declaration. This is why it’s common for digital nomads and online entrepreneurs residing in Paraguay to have an offshore LLC—often based in Wyoming or Estonia—to invoice their clients.