Withholding Tax in Paraguay
Withholding tax is a tax deducted at source from payments made to the recipient. In Paraguay, withholding taxes apply to various payments including dividends, interest, royalties, fees for services, and other income types, with different rates for resident and non-resident recipients.
How It Works in Paraguay
Paraguay requires payers to withhold tax on certain payments at varying rates. For non-residents, the standard withholding rate is 15% on most types of Paraguayan-source income including dividends, interest, royalties, and service fees. For residents, withholding applies primarily to dividend distributions (8%) and certain professional service payments. The payer is responsible for deducting the tax and remitting it to the SET. Withholding taxes serve as advance payments toward the recipient's final tax liability, and excess withholdings can be credited or refunded.
Global Comparison
Paraguay's 15% non-resident withholding rate is moderate by international standards. India charges up to 40%, Brazil up to 25%, and the US applies 30% on most non-resident payments. Paraguay's rates are competitive with countries like Singapore (15-22%) and lower than most European countries. Where double tax treaties exist, the withholding rates may be further reduced.
Frequently Asked Questions
What is the withholding tax rate on payments to non-residents?
The standard withholding rate for non-residents is 15% on Paraguayan-source income. This applies to dividends, interest, royalties, management fees, technical service fees, and other income types. The rate may be reduced under applicable double tax treaties with Chile, Taiwan, or Belgium. The payer must withhold and remit the tax to the SET.
Are there withholding obligations for payments between Paraguayan companies?
Yes. Paraguayan companies may be required to withhold on certain payments to other domestic entities, particularly for professional services and certain types of income. The rates vary depending on whether the recipient is registered with the SET and the type of income. Registered taxpayers generally have lower withholding rates as the withholding serves as a credit against their final tax liability.
How do I claim a refund for excess withholding?
If withholding taxes exceed your final tax liability, you can claim a credit on your annual tax return. The excess can be applied against future tax obligations or, in some cases, refunded. To claim a refund, you must file the appropriate forms with the SET and provide documentation of the withholdings (certificates issued by the payer). The refund process typically takes 3-6 months.
Need Help With Withholding Tax?
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Last reviewed: February 2026