Free Trade Zones in Paraguay
Free trade zones (zonas francas) are designated geographic areas within a country where goods can be imported, stored, processed, manufactured, and re-exported with special tax and customs benefits. They are designed to attract foreign investment and boost exports.
How It Works in Paraguay
Paraguay's Free Trade Zone regime (Law 523/95) allows businesses operating within designated zones to benefit from significant tax advantages. Companies in free trade zones are exempt from all national taxes including income tax, VAT, and customs duties on goods that are processed and re-exported. Only a 0.5% tax on the value of goods entering the zone applies. Goods sold to the domestic Paraguayan market from a free trade zone are subject to normal import duties and taxes. The most prominent zone is the Ciudad del Este Free Trade Zone. Companies must apply for a license and meet investment and employment requirements.
Global Comparison
Paraguay's free trade zone benefits are competitive with global offerings. The UAE's free zones offer similar tax exemptions. Panama's Colon Free Trade Zone is one of the world's largest. Paraguay's zones are smaller in scale but offer comparable tax benefits with lower operating costs. Unlike some countries where free zone benefits are being phased out due to OECD pressure, Paraguay's regime remains active and available to new entrants.
Frequently Asked Questions
What taxes are exempt in a Paraguayan free trade zone?
Businesses operating within a free trade zone are exempt from: corporate income tax (IRACIS), value added tax (IVA), customs duties on imports used for production, municipal taxes, and all other national taxes. The only tax is a 0.5% fee on the gross value of goods and commodities entering the zone. This applies to goods that are processed and re-exported; goods sold domestically are subject to normal taxes.
Can a service company operate in a free trade zone?
The free trade zone regime is primarily designed for manufacturing, assembly, and logistics operations involving physical goods. Pure service companies are generally not eligible for free trade zone benefits. However, companies that provide services incidental to the movement and processing of goods within the zone may qualify. Consult with the free trade zone authority for specific eligibility.
What are the requirements to set up in a Paraguayan free trade zone?
To operate in a free trade zone, a company must obtain a license from the National Council of Free Trade Zones (CNZF). Requirements include a minimum investment commitment, a business plan demonstrating export activity, compliance with employment generation targets, and formal incorporation in Paraguay. The process typically takes 2-4 months and requires both CNZF and SET approvals.
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Last reviewed: February 2026