Maquila Regime in Paraguay
The Maquila regime (Law 1064/97) is a special manufacturing and export program in Paraguay modeled after Mexico's maquiladora system. It allows foreign companies to import raw materials and components duty-free, process or assemble them in Paraguay, and export the finished products with minimal taxation.
How It Works in Paraguay
Under the Maquila regime, companies pay only 1% tax on the value added in Paraguay, replacing all other national taxes including income tax and VAT. Raw materials and machinery can be imported duty-free for use in production destined for export. At least 90% of production must be exported. The regime operates through a contract between the Maquila company (typically a Paraguayan subsidiary) and a foreign parent company that supplies inputs and receives finished goods. The CNIME (Consejo Nacional de Industrias Maquiladoras de Exportación) oversees the program and issues licenses.
Global Comparison
Paraguay's 1% tax on value added is highly competitive internationally. Mexico's maquiladora program, while well-known, involves higher effective tax rates. Honduras and El Salvador offer similar programs but with less favorable terms. Paraguay's regime is particularly attractive because of low labor costs, reliable energy from the Itaipu dam, and Mercosur membership providing access to the Brazilian and Argentine markets under certain conditions.
Frequently Asked Questions
What types of products can be manufactured under the Maquila regime?
The Maquila regime covers a wide range of manufacturing activities including textiles and garments, auto parts, electronics assembly, food processing, plastics, pharmaceuticals, and chemical products. Any legitimate manufacturing or assembly operation that processes imported inputs for re-export can potentially qualify. The CNIME evaluates each application based on the specific activity proposed.
Can Maquila companies sell products in Paraguay's domestic market?
Yes, but with limitations. Up to 10% of total production value can be sold domestically. Products sold in the local market are subject to normal import duties and taxes as if they were imported goods. The remaining 90% or more must be exported. Exceeding the 10% domestic sales limit can result in penalties or loss of Maquila status.
How does the 1% tax work in practice?
The 1% tax is calculated on the value added in Paraguay, which is the difference between the export value of finished goods and the value of imported inputs. For example, if a company imports $1 million in components and exports $1.5 million in finished products, the value added is $500,000 and the tax is $5,000 (1%). This single 1% tax replaces corporate income tax, VAT, and all other national taxes related to the Maquila activity.
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Last reviewed: February 2026