Dividend Taxation

Paraguay Dividend Tax

Paraguay taxes dividends from local companies at 8-15%—but dividends from foreign companies are completely exempt. Here's how IDU works and how to minimize your tax burden.

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Quick Answer

Paraguay's dividend tax (IDU) is 8% for residents and 15% for non-residents on dividends from Paraguayan companies. But dividends from foreign companies (like a US LLC) are 0% tax. IRE Simple owners are also exempt from IDU, making their total tax just 3%.

See Exemptions

8%

Resident Rate

15%

Non-Resident Rate

0%

Foreign Dividends

5-10%

Spain Treaty

Inbound vs. Outbound Dividends

This is the key distinction most guides miss. The tax treatment depends on whether you're receiving dividends or paying them.

INBOUND - Foreign Dividends You Receive

0%

Completely Exempt

Dividends from foreign companies (US LLC, UK Ltd, etc.) are considered foreign-sourced income and are not taxed in Paraguay.

  • • US LLC dividends → 0%
  • • Foreign stock dividends → 0%
  • • Foreign fund distributions → 0%

OUTBOUND - Dividends from PY Companies

8-15%

IDU Applies

Dividends paid by Paraguayan companies to shareholders are subject to IDU withholding.

  • • Resident shareholders → 8%
  • • Non-resident shareholders → 15%
  • • IRE Simple owners → 0% (exempt)

This Is Why the US LLC Structure Works

When you own a US LLC that earns income and pays you dividends, Paraguay sees those as foreign dividends received—which are 0% tax. The LLC is a foreign entity; you're just receiving its distributions.

IDU Rate Summary

Recipient Type IDU Rate Notes
Paraguayan resident shareholder 8% Standard domestic rate
Non-resident shareholder (general) 15% Countries without treaty
Spain treaty (>50% ownership) 5% Beneficial owner with majority stake
Spain treaty (other) 10% Other Spanish investors
IRE Simple owner (sole proprietor) 0% Exempt from IDU entirely
Maquila regime 0% Export assembly exemption
Law 60/90 qualified investment 0% Up to 10-year exemption

Effective Combined Tax Rates (IRE + IDU)

When you distribute profits from a Paraguayan company, you pay both IRE (corporate tax) and IDU (dividend tax). Here's what that looks like:

IRE Simple (Sole Proprietor)

3% IRE + 0% IDU

3%

Effective Total

Standard IRE + Resident Owner

10% IRE + 8% IDU on remaining

~17.2%

Effective Total

Standard IRE + Non-Resident Owner

10% IRE + 15% IDU on remaining

~23.5%

Effective Total

Spain Treaty + >50% Ownership

10% IRE + 5% IDU on remaining

~14.5%

Effective Total

IDU Exemptions

1. IRE Simple Regime

Owners operating under IRE Simple are completely exempt from IDU. This is the simplest way to avoid dividend tax—your total tax burden is just 3%.

Eligibility: Annual revenue under G. 2 billion (~$270K), sole proprietor or EAS

2. Maquila Regime

The Maquila program provides complete IDU exemption for export assembly operations. Companies import raw materials, process/assemble them, and export the finished products.

Eligibility: Manufacturing/assembly operations with significant exports. Requires government approval.

3. Law 60/90 Investment Incentives

Law 60/90 provides up to 10 years of IDU exemption for qualified investments in priority sectors (agriculture, manufacturing, etc.).

Eligibility: Investments of ~$13M+ in priority sectors. Application to government required.

Tax Treaty Benefits

Spain (CDI ES-PY)

Effective 2025

  • • 5% IDU - Company with >50% direct ownership
  • • 10% IDU - Other cases
  • • Significant reduction from 15% standard

Uruguay & Chile

Following UN model

  • • Reduced withholding rates available
  • • Chile treaty under renegotiation (BEPS)
  • • Consult tax advisor for specific rates

No US-Paraguay Tax Treaty

There is no tax treaty between the United States and Paraguay. US investors in Paraguayan companies pay the full 15% non-resident IDU rate. However, if you're a US resident receiving dividends from a US LLC, Paraguay considers that foreign income (0% tax).

The US LLC + Paraguay Strategy

This is why many digital nomads use a US LLC for their business: the dividends are foreign-sourced and tax-free in Paraguay.

How It Works:

  1. 1 You form a US LLC (Wyoming, Delaware, etc.)
  2. 2 The LLC contracts with clients and earns income
  3. 3 LLC has no US tax (pass-through + no US business activities)
  4. 4 LLC distributes dividends to you (Paraguay resident)
  5. 5 Paraguay sees foreign dividends received = 0% tax

Result: The LLC has no US tax (no US business activities), and you have no Paraguay tax (foreign dividends exempt). Legal, documented, and widely used.

Documentation Matters

Keep proper records to prove the foreign nature of your dividends: LLC operating agreement, board resolutions, bank statements, annual financials. Without documentation, SET could challenge your 0% treatment.

Documentation for Foreign Dividends

To prove foreign dividends are genuinely foreign-sourced, maintain these records:

  • □ Foreign company ownership documents - Certificate of formation, operating agreement
  • □ Board resolutions / meeting minutes - Documenting dividend declarations
  • □ Bank statements - Showing dividend transfers from foreign account
  • □ Annual financial statements - Of the foreign company
  • □ Tax documents from source country - If applicable
  • □ BCP exchange rate documentation - For currency conversion
Common Questions

Dividend Tax FAQ

IDU (Impuesto a los Dividendos y Utilidades) is Paraguay's tax on dividend distributions and profit withdrawals from companies. The rate is 8% for Paraguayan residents and 15% for non-residents. IRE Simple owners are exempt.
No. This is a major advantage of Paraguay's territorial tax system. Dividends you receive from foreign companies (like a US LLC, UK Ltd, etc.) are considered foreign-sourced income and are exempt from taxation in Paraguay.
For a Paraguayan company distributing all profits: Resident owner: 10% IRE + 8% IDU = ~17.2% effective. Non-resident owner: 10% IRE + 15% IDU = ~23.5% effective. IRE Simple: 3% total (no IDU).
Three main options: (1) Use IRE Simple (owners are IDU exempt), (2) Structure through a foreign LLC so Paraguay receives "foreign dividends" (0% tax), (3) Qualify for investment incentives like Law 60/90 or Maquila regime.
Yes. The Spain-Paraguay treaty (effective 2025) reduces IDU withholding to: 5% if the beneficial owner is a company with >50% direct ownership, or 10% in other cases. This is significantly lower than the standard 15% non-resident rate.
No. There is no tax treaty between the US and Paraguay. US investors in Paraguayan companies pay the full 15% non-resident IDU rate. However, US residents receiving dividends from a US LLC are not subject to Paraguay taxation (foreign-sourced income).
Keep: (1) Foreign company ownership documents, (2) Board resolutions/minutes authorizing dividends, (3) Bank statements showing transfers, (4) Annual financial statements of the foreign company, (5) Any tax documents from the source country.
IDU is withheld at the time of dividend distribution or profit withdrawal. The company paying dividends is responsible for withholding and remitting the tax to SET. Reporting is done through the Marangatú platform.
See All Tax Questions →

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