Business Expenses in Paraguay 2026: What You Can Deduct, and the Caps

Last reviewed: November 2026 · Reviewed by Stéphane Gombauld, tax expert, technologist and digital nomad

You run, or plan to run, a business in Paraguay as a sole proprietor or through a company, and you want to know which costs really reduce your tax. This guide covers the 2026 deduction tests, the caps that surprise newcomers, foreign payments, depreciation, losses and the paperwork the DNIT expects.

Paraguay business expenses in 2026: the key figures

What changed for 2026

The deduction rules in Law 6380/2019 are unchanged from 2025. Two DNIT resolutions change the paperwork around them:

• More mandatory e-invoicing. RG DNIT 52/26 of 5 May 2026 adds groups 19 to 24 of mandatory electronic issuers. Start dates run from 1 June 2026 to 1 September 2027. Once a supplier's date passes, its pre-printed invoices lose validity.
• Profit disclosure. RG DNIT 49/26 requires notes on distributable profits and reserves, from financial statements closed on 31 December 2025.

Is this guide for you?

Read on if you…

• invoice through a Paraguayan sole proprietorship, EAS, SRL or SA and want every deductible guaraní;
• pay foreign freelancers, software vendors or a parent company;
• have received a DNIT query on disallowed costs.

Probably not your case if you…

• are an employee with no business. Your personal costs are covered in personal tax deductions in Paraguay;
• run your business from another country. See business expenses in Brazil or business expenses in Mexico.

What counts as a deductible business expense in Paraguay?

The Impuesto a la Renta Empresarial (IRE) taxes net income: gross income minus deductible costs. Art. 14 of Law 6380/2019 sets four cumulative conditions. An expense must:

1. be necessary to obtain and maintain the source of income;
2. be a real outlay;
3. be documented with a valid tax document;
4. not exceed market price, where that test applies.

Art. 15 then lists typical deductible items. They include salaries, fees, rent, interest at market rates, insurance, losses from crimes not covered by insurance, and depreciation. Office rent, software, advertising, travel, professional fees and payroll pass easily when the paperwork is right.

Shared costs

If a cost serves both taxable and non-taxable income, art. 17 requires you to prorate it by gross income. A laptop used for both IRE activity and exempt income is only partly deductible.

Documentation is the real test

Paraguay is strict on form. Art. 22 applies the VAT documentation rules. It also makes you keep documents, accounts and tax books for the whole limitation period. A receipt that is not a valid tax document, or one without your RUC, fails art. 14.

Electronic invoicing makes this sharper. Under RG 52/26, a designated supplier must issue all its tax documents electronically from its start date. Ask every supplier for an electronic document issued to your RUC. The DNIT e-invoicing page explains the two issuing channels, e-kuatia and e-kuatia'i.

Which expenses are capped or not deductible?

The caps

Here's the catch most newcomers miss. Several expense types share one cap of 1% of gross income in total (art. 15):

• fees to individuals who are not IRP taxpayers;
• pay to owners or shareholders working as senior staff, depending on how they are taxed;
• remuneration as a percentage of profits;
• donations to the State, municipalities and recognised entities;
• purchases from RESIMPLE taxpayers.

Two more limits matter for cross-border founders:

• Foreign expenses (art. 15(18)) are capped at 1% of gross income. The cap falls away when the foreign provider is subject to the non-resident tax (INR) and it was withheld.
• Interest, royalties and technical assistance paid to a shareholder, head office or related company are capped at 30% of the year's net income, measured before those payments (art. 15(23)).

The exclusions

Art. 16 lists what never reduces IRE:

• the IRE itself;
• fines imposed by public bodies;
• profits allocated to capital increases or reserves;
• amortisation of self-generated goodwill;
• personal or family expenses of the owner, partners or shareholders, and withdrawals against profits;
• VAT linked to taxed operations;
• costs linked to non-taxed, exempt or foreign-source income;
• any cost that fails the art. 14 tests.

The personal-expense rule is the one sole proprietors trip over. Your groceries, family car or home rent do not become IRE costs because the business pays them.

How do foreign payments and INR interact?

When you pay a non-resident for something used in Paraguay, INR usually applies at 15% on a presumed base. The DNIT INR guide sets the base at 30% for interest and digital services, 50% for real estate rent, and 70% for personal services. Effective rates are therefore 4.5%, 7.5% and 10.5% of the gross payment.

Good news for software subscriptions. When you pay a foreign digital provider by card or transfer, banks and card processors act as INR withholding agents. For a foreign freelancer paid directly, the withholding is your job. Skip it and the 1% foreign-expense cap bites.

How do depreciation and losses work?

Depreciation

Fixed assets are not expensed at once. Art. 15(15) allows depreciation for wear, obsolescence and depletion. Art. 11 defines it as the systematic spreading of an asset's wear, with useful lives set by regulation for each class. The residual value cannot exceed 20% of cost. RG 77/20 approved the DNIT's model depreciation schedule.

Losses

Under art. 18, a tax loss carries forward for up to five consecutive years. Each year you can offset prior losses only up to 20% of that year's net income. A PYG 100 million loss followed by PYG 200 million of profit gives a PYG 40 million offset in that year.

Does your regime or legal form change the picture?

The deduction rules are the same for every IRE taxpayer. The regime decides how much they matter. For the full comparison of entities, see legal forms of business in Paraguay.

SAs and SRLs are named in art. 2(2), so they fall outside SIMPLE. Sole proprietors under SIMPLE also escape the dividend tax (IDU). Whether an EAS counts as an art. 2(8) entity is not spelled out in the law; confirm with the DNIT before relying on it.

One more point for nomads. Art. 2(7) makes permanent establishments of foreign entities IRE taxpayers. A foreign company managed day to day from Paraguay risks being treated as one. Map that risk before you move; Heavnn's business setup service does it. The rate and dividend side is in corporate income taxes in Paraguay.

How does VAT interact with your expenses?

Most purchases carry 10% VAT (DNIT IVA guide). Input VAT on valid invoices is credited against output VAT, so the IRE cost is usually the net amount.

Self-employed professionals have a narrower list of creditable VAT. It covers health, training, office rent, equipment and work clothing. Food and vehicle purchases are capped at 30% of the credit. The specific taxes guide covers VAT filing.

Common mistakes (and what they cost)

• Accepting paper invoices from designated e-invoicers → the document fails art. 14, the cost is disallowed and you pay 10% IRE on it.
• Paying foreign freelancers without INR withholding → the expense is capped at 1% of gross income, so most of it becomes taxable profit.
• Paying yourself fees that fall into the 1% bucket → the excess above 1% of gross income is added back to taxable income.
• Expensing equipment in year one → the DNIT spreads it over the regulatory useful life and reassesses the difference.
• Counting on full loss relief → only 20% of each year's net income can absorb old losses, and losses expire after five years.

Frequently asked questions

What expenses are tax deductible for a business in Paraguay?

Any cost that is necessary to obtain and maintain your income, actually paid, documented with a valid tax document and not above market price. That covers salaries, rent, software, professional fees, advertising, travel, insurance and depreciation. Art. 14 and art. 15 of Law 6380/2019 set the tests and the main list.

Are payments to foreign suppliers deductible in Paraguay?

Yes, but with a cap. Art. 15(18) limits foreign expenses to 1% of gross income. The cap disappears when the foreign provider is subject to INR and the tax was withheld. For digital services paid by card or transfer, banks and processors handle the withholding. For direct payments to foreign freelancers, you do.

Can a Paraguayan company deduct a salary paid to its owner?

Often only within limits. Art. 15 puts pay to owners or shareholders working as senior staff in a grouped cap of 1% of gross income in some cases. How the owner is taxed under IRP decides it. Undocumented withdrawals are never deductible. Check your owner pay with an adviser before you set it.

How long can I carry forward losses in Paraguay?

Five consecutive years after the loss year, under art. 18 of Law 6380/2019. Each year, prior losses can offset at most 20% of that year's net income. A large startup loss is absorbed slowly, and whatever is unused after five years is lost. The law provides no carry-back.

Do I need electronic invoices for every expense?

You need a valid tax document for every expense, and more of them must now be electronic. RG DNIT 52/26 brings six new groups of suppliers into mandatory e-invoicing between June 2026 and September 2027. Once a supplier's start date passes, its pre-printed invoices lose validity. Ask for an electronic document issued to your RUC.

Are donations deductible for a Paraguayan business?

Donations to the State, municipalities and recognised religious or public-benefit entities are deductible under art. 15. They fall into the grouped cap, which limits the total of those items to 1% of gross income. Donations to unrecognised bodies fail the test entirely.

Related guides

• Legal forms of business in Paraguay
• Corporate income taxes in Paraguay
• Specific taxes in Paraguay
• Tax fraud regulations of Paraguay
• Paraguay tax landscape overview
• Business expenses in Brazil
• All country tax guides

Sources

• Ley N° 6380/2019 de Modernización y Simplificación del Sistema Tributario Nacional – DNIT
• Impuesto a la Renta Empresarial (IRE) – DNIT
• Cartilla Informativa INR – DNIT
• Cartilla Informativa IVA – DNIT
• Resolución General DNIT N° 52/26, facturadores electrónicos – DNIT
• Facturación electrónica – DNIT
• Paraguay – Corporate – Deductions – PwC Worldwide Tax Summaries (secondary)

This guide is general information, not personalised tax advice. See how we research and review.