Personal Income Tax (IRP) in Paraguay
Personal income tax, known as IRP (Impuesto a la Renta Personal) in Paraguay, is a tax on the income earned by individual residents and non-residents from sources within the country. It covers employment income, investment income, capital gains, and other personal earnings.
How It Works in Paraguay
The IRP applies to Paraguayan-source income earned by individuals. The rate is 8% on income up to PYG 150 million annually and 10% on income above that threshold. Only individuals whose annual income exceeds a minimum threshold (approximately 36 monthly minimum wages) are required to file. Deductible expenses include documented personal and family expenses up to certain limits. The IRP only applies to income sourced within Paraguay, so foreign employment income, foreign investment returns, and other foreign earnings are exempt.
Global Comparison
Paraguay's 8-10% personal income tax is exceptionally low by international standards. The average top marginal rate in OECD countries is approximately 42%. Neighboring countries charge significantly more: Argentina up to 35%, Brazil up to 27.5%, and Chile up to 40%. Only a few countries like Bulgaria (10% flat) and Bosnia (10%) have comparably low personal income tax rates.
Frequently Asked Questions
What income is subject to IRP in Paraguay?
IRP applies to all Paraguayan-source income earned by individuals, including: salaries from local employers, fees from services provided within Paraguay, rental income from Paraguayan property, interest from Paraguayan bank accounts, capital gains on Paraguayan assets, and dividends from Paraguayan companies. Foreign-source income of any type is exempt.
What expenses can I deduct from IRP?
You can deduct documented personal and family expenses including healthcare, education, housing costs, utilities, food, clothing, and transportation, provided they are supported by legal invoices (facturas). The total deduction cannot exceed a percentage of your gross income. Additionally, mandatory social security contributions (IPS) are deductible.
Do all residents need to file an IRP return?
No. Only individuals whose total Paraguayan-source income exceeds approximately 36 monthly minimum wages in a calendar year are required to register for IRP and file annual returns. Those below this threshold are not required to file. However, if you are registered, you must file even in years when your income falls below the threshold.
Need Help With Personal Income Tax (IRP)?
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Last reviewed: February 2026