Tax Scheme in Paraguay: Operating with a U.S. LLC
Introduction
Are you a Paraguayan tax resident with a U.S. LLC? This comprehensive guide explains everything you need to know about the tax implications of receiving dividends and billing services through your U.S. business structure.
If you don't yet have Paraguayan residency, check our step-by-step guide to obtaining Paraguay residency before implementing these tax strategies.
Typical Scenario
This information applies if you meet the following profile:
- Paraguayan tax resident conducting business from Paraguayan territory
- Owner of a U.S. LLC receiving dividends from business activities
- Service provider such as software developer, online services seller, digital products seller, or similar
- Clients located outside Paraguay
- USD income received through traceable international bank transfers
To efficiently manage your USD income, explore the best banking options for freelancers in Paraguay that facilitate international transfers.
Legal Framework: Law 6380/2019
Territoriality Principle
Paraguay applies the territoriality criterion for taxation, which means:
- All income generated in Paraguay by resident individuals or Paraguayan companies is subject to General IRE or Simple IRE
- Foreign dividends are declared in the IRPGC (Personal Income Tax on Capital Gains)
- Services provided from Paraguay are considered Paraguayan income, regardless of where the client is located
Tax Obligations
Corporate Income Tax (IRE)
Simple IRE:
- Applies up to G. 2,000 million in annual billing
- Requires registration with DNIT as an individual with sole proprietorship activity
- Declare income as service exports
General IRE:
- Applies when exceeding G. 2,000 million in annual billing
Value Added Tax (VAT)
Export Service Exemption
According to Article 88 of Law 6380/19, exported services are VAT exempt if they meet these requirements:
- The service must be effectively used abroad
- Income must be received in foreign currency or through verifiable banking means
- The service must not be consumed or have economic effects within Paraguay
Services Exempt by Export
- Software development
- Graphic or web design
- Professional consulting
- Digital marketing
- Administrative services or remote support
Cases Where Exemption Does NOT Apply
- Services consumed within Paraguay
- LLC with branch or permanent establishment in Paraguay
- Work with direct effects on the Paraguayan market
Taxpayer Obligations
Tax Registration
- VAT: Only if conducting taxable activities (may declare as exempt if only exporting services)
- IRE: Mandatory registration in Simple or General according to billing
Need help with tax registration procedures and other aspects of residency? Our specialized services include comprehensive advisory for expats establishing businesses in Paraguay.
Documentation and Invoicing
Exempt Invoice
Invoices must include:
- Issued in guaraníes or dollars (if authorized)
- Complete U.S. client data
- Service detail provided
- Billed amount
- Indication: "Exempt for service export"
Basic Accounting Records
- Income and expense ledger
- Record of issued invoices
- Documentation of deductible expenses (fees, internet, software, equipment)
- Bank reconciliation
- USD to guaraníes conversion using BCP official exchange rate
Required Supporting Documents
- Payment receipts (transfers, PayPal receipts, etc.)
- Documentation to support income before SET
Permitted Deductions
- Expenses directly related to the service
- Proportional internet and electricity
- Equipment and software
- Accounting fees
Treatment of U.S. LLC Dividends
In Paraguay
Paraguay does NOT tax dividends received from abroad by tax residents, as it only taxes income from Paraguayan sources.
In the United States
- 30% withholding on dividends paid to non-residents
- No tax treaty between Paraguay and the U.S. to avoid double taxation
- No possibility to recover or credit the 30% withholding
Declarative Obligations
- Declaration in IRPGC as information (in exempt section)
- Conversion to guaraníes using BCP exchange rate on collection date
- Required documentation: bank statement, LLC profit distribution minutes, LLC financial statements
Dividends received from abroad must be deposited in appropriate Paraguayan bank accounts. Check our recommendations on banking for expats in Paraguay to optimize the reception of these funds.
Professional Recommendations
Separate Accounting
Maintain clear records differentiating:
- Service income
- Dividend income
Recommended Registrations
- IRE (Simple or General according to billing)
- IRP - Capital Income in addition to IRE
Supporting Documentation
Preserve all LLC documentation to justify dividends before possible DNIT inspections, including:
- Proof of income origin
- Nature of distributions
- Updated financial statements
Important Considerations
- USD income must be recorded in guaraníes at the BCP official exchange rate
- Complete documentation is crucial for any tax inspection
- Specialized accounting advice is recommended to comply with all obligations
To successfully implement this tax structure, it's fundamental to have Paraguayan resident status properly established. If you need to obtain or renew your residency, review our complete guide to the residency process.
Specialized Advisory
Implementing international tax structures requires specialized knowledge and professional guidance. Contact our experts for personalized advice on:
- Optimizing your LLC + Paraguay Residency tax structure
- Tax compliance and declarations
- Opening bank accounts for expats
- Residency renewal and maintenance
Need a comprehensive consultation that combines residency, tax, and banking aspects? Our specialized services are specifically designed for expats and digital nomads looking to optimize their situation in Paraguay.
Professional Contact
For specialized advice on this type of tax structure, you can contact:
Agescon
📱 +595 982 193886
Specialized consulting in international tax structures and tax compliance in Paraguay.