Opening a company in Paraguay is, in most cases, simpler and faster than doing so in most other countries. But “simpler” does not mean “without criteria” — and understanding the available entity types, the legal requirements, and the tax implications of each structure makes all the difference between an efficient operation and one that creates problems.
Paraguay’s Corporate Tax System: An Overview
Before discussing legal structures, it’s important to understand the tax environment in which these companies operate. Paraguay adopts the source principle: it only taxes income generated within Paraguayan territory.
The main corporate taxes are:
| Tax | Rate | Tax Base |
|---|---|---|
| IRACIS (Corporate Income Tax) | 10% | Net profit from commercial, industrial and service activities of Paraguayan source |
| VAT | 10% (standard) / 5% (basic goods) | Sale of goods and provision of services in Paraguay |
| IDU (distributed dividends) | 8% | Distribution of profits to shareholders — applies to profit already taxed by IRACIS |
| IRAE (simplified regime) | 10% | Small companies with limited revenue |
A critical point: the IDU (Impuesto a los Dividendos y a las Utilidades) applies to profit distribution. For shareholders who are Paraguayan tax residents, the rate is 8% on the distributed amount. For non-resident shareholders, the withholding may vary — and this is where the combination of company setup and tax residency makes a difference in the total tax burden.
Entity Types Available for Foreigners
SRL — Sociedad de Responsabilidad Limitada
This is the most widely used structure by foreigners in Paraguay. It is equivalent to a limited liability company. Key characteristics:
- Minimum of 2 and maximum of 25 shareholders;
- No legally mandated minimum capital requirement (in practice, amounts from $1,000 USD are accepted);
- Shareholder liability limited to paid-in capital;
- Management by one or more managers (does not need to be a shareholder);
- Cannot issue tradable shares on the market.
Ideal for service providers, digital businesses, consulting firms, and any operation that does not require a public capital structure.
SA — Sociedad Anónima
Equivalent to a joint-stock company. Most commonly used for:
- Companies with more than 25 shareholders;
- Holding structures that need to issue shares;
- Operations involving external investors or capital raising;
- Companies that participate in public tenders in Paraguay.
Requires registration with SISA (Sistema de Información de las Sociedades Anónimas) with the Abogacía del Tesoro, which adds a step to the incorporation process.
Single-Member Company (Empresa Unipessoal — EU)
Regulated by Law 7.117/2023, it allows incorporation by a single owner. Still in its regulatory consolidation phase, but already operational. Suitable for freelancers, self-employed professionals, and digital nomads who want to formalize their activities without needing a second partner.
ℹ️ Note for digital nomads: The Single-Member Company is the leanest structure available. However, since it is relatively new, not all Paraguayan banks have well-defined processes for opening accounts under this modality. Verify in advance.
Step by Step: How to Open an SRL in Paraguay
1. Drafting and Notarization of the Articles of Incorporation
The articles of incorporation must be drafted by a licensed attorney in Paraguay, written in Spanish, and notarized. They define: company name, purpose, capital, shareholder participation, and management structure.
2. Registration with the Dirección General de los Registros Públicos
The notarized articles are registered in the Public Commercial Registry. This is the step at which the company acquires legal personality. Average timeline: 5 to 15 business days.
3. Obtaining the RUC from the SET
The RUC (Registro Único del Contribuyente) is equivalent to a tax identification number. It is issued by the SET (Subsecretaría de Estado de Tributación). With the RUC, the company is authorized to issue electronic invoices (factura electrónica), pay taxes, and operate formally.
4. Opening a Corporate Bank Account
The main banks for foreigners in Paraguay include Banco Continental, Sudameris, GNB, and Banco Regional. Most require in-person presence of the legal representative to open an account. Have on hand: RUC, registered articles of incorporation, personal documents of shareholders and, in some banks, proof of local address.
5. Municipal License (Patente Comercial)
Required for physical establishments. For 100% digital companies without a physical location in Asunción, this step may be waived or simplified, depending on the activity declared in the RUC.
Can You Have a Company in Paraguay Without Living There?
Yes. There is no legal requirement that shareholders be residents of Paraguay to incorporate a company. However, it is mandatory to designate a resident legal representative in the country — who can be a locally contracted attorney for this function (a common and legal practice).
The critical point here is tax-related: if you have a company in Paraguay but are still a tax resident in your home country, profits distributed to you may be taxed at home as foreign-source income. The combination of company + Paraguayan tax residency is what eliminates this overlap.
Costs Involved
| Item | Estimated Range (USD) |
|---|---|
| Incorporation fees (attorney) | 800 – 2,500 |
| Public registry and notary fees | 150 – 350 |
| Monthly accounting (maintenance) | 100 – 300/month |
| Local legal representative (if needed) | 50 – 200/month |
Ongoing Obligations of the Paraguayan Company
Once incorporated, the company has permanent fiscal and accounting obligations, including:
- Regular bookkeeping and submission of annual financial statements to the SET;
- Issuance of electronic invoices for all taxable transactions;
- Monthly VAT declarations;
- Annual IRACIS return;
- Compliance with Paraguayan labor law for local employees.
⚠️ Critical point: A company that is incorporated but without regular accounting activity can have its RUC suspended by the SET, which prevents the issuance of invoices and can generate retroactive fines. Keeping accounting up to date is an obligation, not optional.
Want to structure the opening of your company in Paraguay with integrated legal and accounting support? Speak with a ConnectUp specialist.