Transfer Pricing Rules in Paraguay
Transfer pricing refers to the prices charged between related parties (such as a parent company and its subsidiary) for goods, services, or intellectual property. Transfer pricing rules ensure these intercompany transactions are conducted at arm's length prices, comparable to prices charged between unrelated parties.
How It Works in Paraguay
Paraguay implemented transfer pricing rules through Law 6380/2019 and subsequent regulations. Related-party transactions must comply with the arm's length principle. Taxpayers with annual related-party transactions exceeding PYG 10 billion (approximately $1.4 million) must prepare transfer pricing documentation. Accepted methods include the Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin (TNMM), and Profit Split methods. The SET can adjust taxable income if it determines that intercompany prices deviate from arm's length standards. Taxpayers must file an annual transfer pricing information return.
Global Comparison
Paraguay's transfer pricing framework is relatively new and less developed than those of OECD countries. The rules are aligned with OECD Transfer Pricing Guidelines but with simplified documentation requirements compared to countries like the US, Germany, or Brazil. The thresholds for documentation are higher, meaning fewer businesses are affected. Paraguay's rules are more comparable to those of other Latin American developing nations that have recently adopted transfer pricing regimes.
Frequently Asked Questions
Which transactions are subject to transfer pricing rules in Paraguay?
All transactions between related parties are subject to transfer pricing rules, including: sales and purchases of goods, provision and receipt of services, licensing of intellectual property, loans and financial transactions, and cost-sharing arrangements. Related parties include entities with direct or indirect ownership of 50% or more, common control, economic dependence, or exclusive distribution arrangements.
What documentation is required for transfer pricing compliance?
Taxpayers exceeding the PYG 10 billion threshold for related-party transactions must prepare a transfer pricing study documenting the arm's length nature of their intercompany prices. This includes a functional analysis, selection and application of the most appropriate transfer pricing method, comparable analysis with benchmark data, and an annual information return filed with the SET. Documentation must be maintained for 5 years.
What are the penalties for transfer pricing non-compliance?
Penalties for non-compliance include income adjustments (the SET can increase taxable income to reflect arm's length prices), fines for failure to file the transfer pricing information return, interest on underpaid taxes resulting from adjustments, and potential additional penalties for intentional tax evasion. The SET has been increasingly active in enforcing transfer pricing rules since their implementation.
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Last reviewed: February 2026