Dividend Tax in Paraguay
Dividend tax is a levy on distributions of corporate profits to shareholders. It can be applied as a withholding tax at the corporate level when dividends are paid, or as part of the shareholder's personal income tax, or both.
How It Works in Paraguay
Paraguay imposes an additional 8% tax on dividends distributed by companies to their shareholders. This is applied on top of the 10% corporate income tax, resulting in a combined effective tax rate of approximately 17.2% on distributed corporate profits. The 8% is withheld by the distributing company at the time of payment. Undistributed profits are not subject to the additional 8% tax, which incentivizes reinvestment. Dividends received from foreign companies are not taxable under the territorial system.
Global Comparison
Paraguay's combined corporate and dividend tax burden of approximately 17.2% is very low globally. In the United States, the combined rate can reach over 40%. In France, dividend recipients face a flat 30% levy. Even in low-tax jurisdictions like Hong Kong (no dividend tax, but 16.5% corporate), Paraguay's overall burden is competitive, especially since foreign-source dividends are entirely untaxed.
Frequently Asked Questions
Are foreign dividends taxable in Paraguay?
No. Dividends received from companies incorporated outside of Paraguay are considered foreign-source income and are not subject to Paraguayan tax under the territorial system. This applies regardless of whether the dividends are remitted to a Paraguayan bank account.
How is the 8% dividend tax calculated and paid?
The 8% tax is withheld at source by the Paraguayan company distributing the dividend. The company must retain the 8% from the gross dividend amount and remit it to the SET (tax authority). The shareholder receives the net dividend after withholding. This applies to all distributions, whether to resident or non-resident shareholders.
Can I avoid the 8% dividend tax by reinvesting profits?
Yes. The 8% additional tax only applies when profits are actually distributed as dividends. If profits are retained within the company and reinvested, the additional 8% is not triggered. This makes Paraguay favorable for companies that prioritize growth and reinvestment over immediate distributions.
Need Help With Dividend Tax?
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Last reviewed: February 2026