Corporate Income Tax System in Paraguay
Paraguay's corporate income tax system is governed by Law No. 125/91, known as the Tax Code. The tax is levied on the net income of corporations and other legal entities, including branches of foreign companies operating in Paraguay.
Methodology for Calculating Corporate Income Tax
The calculation of corporate income tax in Paraguay involves the following steps:
- Determination of Taxable Income: Taxable income is calculated by subtracting allowable deductions from gross income. Gross income includes all income from business activities, such as sales revenue, interest income, and rental income. Allowable deductions include expenses incurred in generating income, such as salaries, rent, and depreciation.
- Application of Tax Rate: The applicable corporate income tax rate is 10%. The tax rate is applied to the taxable income to determine the tax liability.
Tax Rates
Paraguay has a single corporate income tax rate of 10%. There are no tiered or graduated tax structures.
Taxable Income
Taxable income for corporations in Paraguay includes:
- Income from business activities
- Interest income
- Rental income
- Royalties
- Capital gains
- Other income derived from economic activities
Exemptions
Certain types of income are exempt from corporate income tax in Paraguay, including:
- Dividends received from other Paraguayan companies
- Interest income from government bonds
- Income from the export of agricultural products
- Income from certain non-profit organizations
Legal Framework
The legal framework governing corporate income tax in Paraguay is primarily based on Law No. 125/91, the Tax Code. Specific articles of the Tax Code relevant to corporate income tax include:
- Article 28: Defines taxable income for corporations.
- Article 29: Specifies allowable deductions from taxable income.
- Article 30: Lists income types exempt from corporate income tax.
- Article 31: Establishes the corporate income tax rate.
Objectives of the Corporate Income Tax System
The objectives of Paraguay's corporate income tax system include:
- Generating revenue for the government
- Promoting economic growth and investment
- Ensuring fairness and equity in the tax system
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