Double Tax Treaties in Paraguay
Double tax treaties (DTTs), also called double taxation agreements (DTAs), are bilateral agreements between two countries that determine how income is taxed when a taxpayer has connections to both countries. They prevent the same income from being taxed twice and typically reduce withholding tax rates on cross-border payments.
How It Works in Paraguay
Paraguay has a very limited network of double tax treaties. As of 2026, Paraguay has full DTTs with Chile, Taiwan, and Belgium, along with limited agreements with some other countries for specific types of income. This small treaty network is partly because Paraguay's territorial tax system already minimizes double taxation for residents. The treaties that exist primarily benefit companies engaged in cross-border trade by reducing withholding taxes on dividends, interest, and royalties paid between the treaty countries.
Global Comparison
Paraguay's treaty network is much smaller than most countries. The United Kingdom has over 130 treaties, the United States over 60, and even regional neighbors like Chile have over 30. However, the limited treaty network is less of a disadvantage for Paraguay than it might appear because the territorial tax system means foreign income is already untaxed. Countries like Panama and Guatemala similarly have few treaties but minimal double taxation risk due to their territorial systems.
Frequently Asked Questions
Does the lack of tax treaties create problems for Paraguay residents?
For most individuals, no. Since Paraguay does not tax foreign-source income, there is little risk of double taxation from the Paraguay side. The issue may arise with your home country if it continues to claim tax residency over you. In that case, you would need to properly sever tax residency ties with your home country rather than rely on a treaty tie-breaker provision.
How do existing treaties affect withholding taxes?
Paraguay's treaties with Chile, Taiwan, and Belgium reduce withholding tax rates on cross-border dividends, interest, and royalties between those countries. For example, the Chile treaty reduces dividend withholding to 10% (from a standard 15%) under certain conditions. Without a treaty, Paraguay's standard withholding rate on payments to non-residents is 15% for most income types.
Is Paraguay working on expanding its treaty network?
Paraguay has expressed interest in expanding its treaty network, particularly with key trading partners and countries with significant Paraguayan diaspora populations. However, progress has been slow. The country's OECD membership aspirations may accelerate treaty negotiations in the coming years, as having a robust treaty network is one of the standards the OECD evaluates.
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Last reviewed: February 2026