The "10-10-10" rule in Paraguay is a simple and unique scheme in its tax system, which refers to the standard tax rates applied to the country's main taxes. This model is in force and represents an important attraction for investors and companies due to its simplicity and competitiveness in tax terms.
What does the 10-10-10 rule mean?
1) 10% Value Added Tax (VAT):
It applies to most goods and services. However, there are specific exemptions for certain products of the basic basket, medicines and essential services.
2) 10% Corporate Income Tax (IRE):
It applies to the profits of companies, which includes both commercial and industrial activities. It is an incentive for local and foreign companies due to its competitive rate at the regional level.
3) 10% Personal Income Tax (IRP):
It applies to personal income that exceeds a specific threshold. This tax also includes a deduction system that allows the tax base to be reduced by considering personal expenses related to education, health and housing.
Advantages of the "10-10-10" model
Simplicity: It is easy to understand and apply, both for citizens and companies.
Competitiveness: Compared to other countries in the region, Paraguay offers low rates and a less bureaucratic system.
Stability: This scheme has proven to be consistent, which gives predictability to investors.
Is it still valid?
As of today (January 2025), the "10-10-10" scheme continues to be a central feature of the Paraguayan tax system. However, any reform or update could introduce changes. If you need to confirm updated or specific details, it is advisable to review the current regulations of the Undersecretary of State for Taxation (SET) in Paraguay.
Advantages for Local and Foreign Investors
1) Competitive Tax Rates:
With a 10% rate on key taxes (VAT, IRE, IRP), Paraguay has one of the lowest tax regimes in the region.
This allows investors to maximize their net profits and reinvest more capital in their businesses.
2) Simplicity of the Tax System:
The "10-10-10" structure is clear and easy to understand, reducing administrative costs related to tax planning.
It avoids the complexity of tax systems with multiple rates or deductions, which is ideal for businesses looking for operational efficiency.
3) Attraction for Exporting Companies:
Paraguay is a member of Mercosur, which facilitates access to regional markets.
Combined with low tax rates, investors can operate with lower costs and a significant competitive advantage in exports.
4) Fiscal Stability and Predictability:
The rule has remained constant, which generates confidence among investors that there will be no abrupt changes in tax policy that could affect their financial projections.
5) Cash Flow Benefits:
Low rates allow businesses to hold more cash, which improves liquidity and opportunities for expansion.
For personal investors, specific deductions in the IRP (such as education, housing, and health expenses) further reduce the tax burden.
6) Favorable Climate for New Investments:
The simplicity of the tax system makes it easier to set up new businesses, especially for foreign investors who are unfamiliar with the region's systems.
Strategic sectors such as agriculture, livestock, manufacturing and energy are especially benefited.
7) Incentives for Free Trade Zones and Maquila:
Paraguay combines the "10-10-10" rule with additional incentives, such as the maquila regime (where exports are taxed at only 1% of value added).
This is particularly attractive to foreign companies looking for a production hub in South America.
8) Promotion of International Trade:
With a competitive tax system, investors can take advantage of low operating costs to establish businesses that export goods and services globally.
9) Relative Political and Economic Stability:
Although Paraguay is not immune to challenges, it maintains a more stable political and economic environment compared to other countries in the region, which complements fiscal attractiveness.
Most Favored Sectors
Agribusiness: Paraguay is a leader in soybean and meat production, with low taxes that boost global competitiveness.
Energy: By leveraging resources such as Itaipu and Yacyretá, reduced energy costs benefit energy-intensive industries.
Manufacturing: The combination of low taxes and the maquila regime encourages the installation of factories.
Services: Investors in areas such as technology, tourism and retail find a favorable tax framework.
The "10-10-10" rule not only simplifies tax compliance, but also provides an attractive environment for investment. Both local and foreign investors benefit from a system that reduces costs, fosters competitiveness and supports sustainable economic growth.