The Maquila regime is probably the least known of the three main tax planning instruments available in Paraguay — but for productive and export operations, it is the most powerful. Understanding its legal structure is essential to evaluate whether it applies to your business.
Legal Foundation: Law 1.064/97 and Regulatory Decrees
Paraguay’s Maquila regime was created by Law No. 1.064 of 1997 and regulated by a series of subsequent decrees, with Decree 9.585/2000 being the primary regulatory instrument. In 2020, Decree 3.867 brought significant updates, including the expansion of the regime to service activities.
The regime defines two main agents:
- Contracting company (principal): the foreign company that supplies inputs, technology, or specifications and receives back the processed product. This can be a company based in any country.
- Paraguayan maquila company (contractor): the company incorporated and registered in Paraguay that performs the processing, manufacturing, or service. It is this entity that holds the regime certification with CNIME.
What the Regime Allows — and What It Requires
The maquila contract establishes that the Paraguayan company will perform some form of value addition on inputs or demands supplied by the foreign principal, for subsequent export. The regime rests on two pillars.
Pillar 1 — Suspension of Import Duties on Inputs
Inputs, raw materials, machinery, equipment, and packaging imported by the Paraguayan maquila company for exclusive use in production destined for export enter the country with full suspension of customs duties: no VAT, no excise tax, and no import tariffs.
This suspension is conditional: if the inputs are not used in the exported production (i.e., they are diverted to the Paraguayan domestic market), the suspended taxes are assessed with penalties and interest.
Pillar 2 — Minimal Taxation on Local Value Added
The only tax charge on maquila activity is the Maquila Flat Tax: 1% on the value added generated in Paraguay. This value added is calculated as the difference between the price of the exported product and the value of the imported inputs used.
ℹ️ Simplified example: A company imports inputs worth $100,000 USD, processes them in Paraguay, and exports for $130,000 USD. The value added is $30,000 USD. Maquila tax = 1% × $30,000 = $300. No other federal tax applies to this operation.
The Expansion to Services: Service Maquila
One of the most significant regulatory advances was the formal inclusion of service activities in the Maquila regime, consolidated by Decree 3.867/2020. This opened the regime to sectors such as:
- Software development and technology;
- Call center and remote support services;
- Administrative and financial back-office;
- Design, content creation and production services;
- Engineering and technical consulting services.
In service maquila, the “input” is generally the demand or specification provided by the foreign principal, and the “exported product” is the delivered service. The tax logic is the same: 1% on the value of the service provided.
The CNIME Registration Process
CNIME (Consejo Nacional de la Industria Maquiladora de Exportación) is the executive branch body responsible for approving, monitoring, and potentially suspending the regime for maquila companies.
1. Incorporation of the Paraguayan Maquila Company
You must have a Paraguayan legal entity (SRL or SA) registered and operational, with an active RUC with the SET.
2. Drafting the Maquila Contract
The contract must detail: parties involved (foreign principal and Paraguayan company), activity to be performed, inputs to be imported, products or services to be exported, contract term, and value-added calculation mechanism. The contract is drafted in Spanish and must follow formats accepted by CNIME.
3. Submission to CNIME and Technical Review
CNIME analyzes whether the project qualifies for the regime — verifying that the described activity meets the legal criteria and that the export percentage meets the required minimum. The review period is 30 to 60 calendar days.
4. Certificate Issuance and Start of Operations
With the certificate issued, the company can apply to Paraguayan customs for the temporary admission regime for duty-free import of inputs, and begin exports with the benefit of the 1% flat tax.
Minimum Export Requirement: The 90% Rule
A fundamental requirement of the regime is that at least 90% of the production or service performed under the maquila regime must be exported. The other 10% may be sold in the Paraguayan domestic market, but normal taxes (VAT and IRACIS) apply to that portion.
Failure to meet this percentage can result in:
- Temporary suspension of the regime;
- Assessment of suspended taxes on inputs used in the non-exported portion;
- In serious cases, cancellation of the certification.
How a Foreign Company Can Act as the Maquila Principal
A company headquartered abroad can legally act as the contracting company (principal) in the maquila contract. In this structure:
- The foreign company supplies inputs, specifications, or demands to the Paraguayan company;
- The Paraguayan company performs the processing with minimal tax burden;
- The result is exported to the foreign company or to third parties abroad;
- The foreign company receives the already-processed product or service.
From the foreign company’s tax perspective, importing the result of the maquila follows normal import rules in the home country. The tax benefit occurs in Paraguay — at the processing stage.
⚠️ Planning required: Structuring a maquila operation involving a foreign company requires analysis of both Paraguayan law and the home country’s transfer pricing and import rules. An error in this interface can create problems in both countries.
Maquila vs. Standard Company Taxation: When to Use Each
| Criterion | Maquila | Standard Company |
|---|---|---|
| Nature of operation | Production or service for export | Any activity |
| Effective taxation | 1% on value added | 10% corporate tax + 8% dividend tax |
| Export requirement | Minimum 90% | None |
| Operational complexity | High (certification + customs control) | Low to medium |
| Ideal for | Manufacturing, industry, exported digital services | Local services, commerce, holding |
Maquila is not the right solution for every business. For a digital nomad providing services to international clients without a local team structure, a standard company (10% corporate tax on Paraguayan profit) may be simpler and equally efficient. Maquila wins when there is production volume, use of imported inputs, and almost total export orientation.
Want to evaluate whether the Maquila regime applies to your operation? Speak with a ConnectUp specialist.