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Tax and Offshore Investment in Paraguay
Tax regimes vary greatly throughout Latin America. While some countries are investor friendly, others are not so open. There are several benefits (i.e. retirement programmes, tax discounts) but also some tax obligations. In this section we provide an analysis of the different tax structure in each country where January First Real Estate lists properties. This information may be very important for you to choose you retirement destination or where to invest. Keep in mind that there are related visa and residence issues which are discussed in Visa/Residence Requirements. In case you need more information or have doubts on any of these issues, the specialised staff in January First Real Estate will be glad to answer all your questions, click here.
Real estate assets are, without doubts, one of the most secure and profitable ways of investment. There are two main reasons for this:
- Properties always tend to increase their value in the long term.
- They generate an income for their exploitation (rental/yields).
International real estate is set to be the biggest and best investment market of the next several years.
Taxes and Costs in Paraguay
Rental Income
Income earned by nonresidents from leasing property is taxed at the standard nonresident income tax rate of 35%. The taxable income is deemed to be 50% of the gross rent. No other deductions are allowed. Consequently, the effective tax rate is 17.5% on the gross income.
Strictly speaking, Paraguay does not have a personal income tax (though one is now being introduced). The single most important tax is Value Added tax (VAT), and its rate is low at only 10%. Services, such as the lease of real estate, are VAT exempt. In July 2004 the new Duarte government’s Tax Reform Law (Ley No. 2421/04) was approved, but is not yet in force.
Real Estate Tax (Impuesto Inmobiliario)
Real Estate Tax is levied annually at 1% of the cadastral value of property, as assessed by the national cadastre service. Assessed property values increase annually according to the consumer price index, but such increases cannot exceed 15% per annum.
This tax rate is reduced to 0.5% for rural properties smaller than five hectares used for small scale farming. In the case of rural properties, improvements or buildings are not computed in the tax base.
Capital Gains Tax
Capital gains earned by nonresidents from the sale of property are taxed at a flat rate of 35%. The taxable gain is 50% of the gross gain. No other deductions are allowed. The effective tax rate is therefore 17.5% on the gross gains.
Living There
Individual income tax at the rate of 10% applies to residents, starting 1 January 2006. The taxable income is the net income exceeding 10 minimum monthly wages.
Capital Gains
Capital gains earned by residents from selling real estate properties are generally not taxed in Paraguay.
However, capital gains derived by persons who are habitually engaged in purchasing and selling real estate properties are taxed as ordinary income. A person is deemed to be engaged in habitual activity when he sells more than two properties in a given tax year.
Paraguay, make your dream investment come true.
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