Investing In... 2026 Comparisons

Paraguay operates under a civil law system, where the Constitution is the supreme law. The country is a sovereign, democratic and unitary state with a presidential system of government. The Constitution was enacted in 1992 and establishes a tripartite system of government composed of the legislative, executive and judicial branches. The judicial branch is hierarchical, with the Supreme Court at the top, followed by courts of appeal, courts of first instance and other specialised courts. Paraguayan law is codified, and judges apply the law as written and interpreted, rather than relying on precedent, as in common law systems.

Foreign investment in Paraguay does not generally require specific review or approval from national authorities.

Paraguay has some of the greatest tax benefits in the Latin America region for national and foreign investments, granting different incentives to promote the production of goods and services, seeking to attract investors in order to enhance infrastructure and create new job opportunities to address the country’s current deficit. In recent years, Paraguay has enacted several new laws that significantly update and expand the regulatory environment for FDI, offering innovative legal tools and robust incentives to both domestic and foreign investors.

Recent Legislative Developments: New Laws Affecting Investments

New Maquila Regime – Law No 7547/2025

Under this regime, a maquiladora uses its installed capacity and processes to provide services to another foreign company, incorporating national added value under a maquila contract, often using ICT or other remote means. The main benefits for production and export are as follows, offering tax advantages and legal certainty:

• temporary importation without taxation of inputs, equipment and machinery for the production process;
• single tax of 1% on the value added in Paraguay or the export invoice, whichever is greater;
• exemption from other national, departmental and municipal taxes, with the right to a refund of export VAT;
• maintained modalities of pure, idle capacity, sub-maquila and shelter;
• the right to a refund of the “VAT tax credit” is recognised for exporters, ensuring liquidity for companies operating under the regime, with limitations for “maquila of services”;
• sales permitted in the domestic market of up to 10% of the volume exported, through nationalisation and the payment of taxes; and
• benefits are granted for up to 20 years, with possible renewals.

New regime of tax incentives for national and foreign investment – Law No 7548/2025

This law replaces and modernises previous investment incentive laws (eg, Law 60/90), consolidating and updating tax incentives for domestic and foreign investors. The main benefits include:

• exemption from Import Tax for capital goods and inputs intended for production;
• exemption from VAT for the sale, importation and first transfer of capital goods between beneficiaries of this Law;
• external financing – non-resident income tax (INR) exemption on interest/commissions if investment is at least USD13 million for the financing term;
• dividends/profits – exemption from tax on dividends and profits (IDU) for ten years for investments of at least USD13 million (conditions apply for non-residents and proportional increases);
• tourism/entertainment – exemption from Import Tax and VAT for capital goods in projects worth at least USD20 million;
• a general term of 20 years for benefits, with partial renewals possible based on new investments;
• the possibility of constituting a guarantee trust with tax-benefitted capital assets to finance current investment projects;
• strict monitoring mechanisms and staggered revocation for non-compliance; and
• transfer of profits – it is permissible to transfer tax benefits to new owners during sale or restructuring, under certain conditions.

Eligibility

Legal entities and sole proprietorships, national or foreign, can join if they are legally constituted. An investment project must be submitted to the Ministry of Industry and Commerce (MIC) for Bi-Ministerial Resolution approval. Compliance with tax and labour obligations and an Environmental Impact Statement are required. Projects worth more than USD13 million need a technical report from registered local consultants.

New national policy for the production and assembly of electrical, electronic, electromechanical and digital equipment – Law No 7546/2025

This new policy creates a specific regime for manufacturing and assembling electrical, electronic, electromechanical and digital equipment within Paraguay. Key aspects include the following:

• a customs tax exemption on imports of capital goods and materials (excluding service fees);
• a customs tax exemption and 1.5% import VAT for the import of materials;
• the local purchase of materials with 1.5% VAT and 4.5% on the circulation of all produced and assembled goods;
• a 20-year term for benefits, extendable for an equal period; and
• a dual monitoring system (on-site and off-site) with scalable corrective actions up to benefit revocation.

Additional Framework

Investments – Law 117/91

Law 117/91 is designed to promote the social and economic development of Paraguay by ensuring equality between domestic and foreign investments. The key provisions of the Law are as follows:

• equal treatment is guaranteed for all investors;
• investors can obtain investment insurance at both local and international levels;
• it establishes the requirements for the incorporation of joint ventures; and
• it allows parties to submit disputes to national and international arbitration.

Investment Guarantee – Law 5542/15

Law 5542/15 aims to create a stable and secure environment for investments by providing robust protection and incentives. The key provisions of the Law are as follows:

• it safeguards investors’ rights and interests;
• it mandates the application of the most advantageous exchange rate for the transfer of capital and profits; and
• it offers fixed income tax rates for up to 20 years.

Free Trade Zone – Law 523/95

Law 523/95 aims to stimulate economic growth by promoting investment, job creation, exports and international trade through the establishment of free trade zones (FTZs). The key provisions of the Law are as follows:

• it exempts businesses operating within FTZs from national, departmental and municipal taxes;
• it imposes a 0.5% tax on the total income value of sales to developing countries; and
• it exempts partners of companies generating income tax under the free trade zone tax from income tax on those profits.

These laws collectively create a favourable investment climate in Paraguay, offering a range of incentives and protections to attract and retain both domestic and foreign investors.

Paraguay enjoys economic and political stability. A significant development is the new Capital Markets and Products Law (Law No 7572/2025), a comprehensive regulatory framework modernising and unifying capital and products markets.

Standard & Poor’s has upgraded Paraguay’s sovereign rating to BBB-/A-3, granting the country investment grade status with a stable outlook. This confirms Moody’s investment grade rating (Baa3) and gives Paraguay “double investment grade” – a threshold used by many institutional investors for large-scale capital allocation. These upgrades are expected to broaden market access, reduce funding costs and further attract foreign direct investment, enhancing opportunities, creating quality jobs and fostering industrial development. 

Legislative amendments have created a straightforward, predictable tax regime for FDI. Ongoing FTZs foster industrial complexes, particularly in green initiatives such as biofuels, green hydrogen and cellulose, alongside established maquila regimes. Immigration authorities report increased residency requests, reflecting growing investor interest.

In addition, Paraguay has enacted regulations to unlock its forestry potential through carbon credit markets and has signed co-operation agreements with key markets, including Singapore. These efforts are already yielding results, attracting substantial FDI and enhancing the capabilities of local producers with a strong focus on environmental sustainability.

Notably, there has been no significant litigation or enforcement related to FDI, underscoring the country’s stability. The current business climate is expected to continue improving, with no anticipated changes in the economic or political landscape that could disrupt this positive trend.

In Paraguay, mergers and acquisitions are usually structured through asset or share purchases. Both types of operations have their pros and cons. On the one hand, asset purchases imply that the buyer acquires specific assets and liabilities of the target, allowing the investor to select particular assets and avoid unwanted liabilities. On the other hand, share purchases have been increasing in popularity in the last few years in Paraguay, where investors acquire the shares of the target, generally taking control over the Paraguayan company with all its assets and liabilities.

Among the key considerations for selecting a transaction structure, investors should consider the following factors.

• Regulatory approvals – certain sectors may require governmental approval for FDI or a change of control, which may delay the execution of the transaction.
• Tax implications – depending on the transaction structure, tax consequences may vary significantly, and a case-by-case study should be carried out before conducting the transaction.
• Liability exposure – target companies may have existing or potential liabilities in commercial, banking and finance, industrial, administrative, labour, social security or other aspects. Legal due diligence is therefore recommended before taking any action, where all the liabilities can be identified and their consequences disclosed to the investor and dealt with or mitigated thereafter.

A wide range of regulations must be considered for domestic M&A transactions in Paraguay. Antitrust approval has been an increasingly important factor to consider when structuring an acquisition, as substantial transactions are typically caught by the obligation to obtain a merger authorisation from the antitrust agency. Other matters to consider include the following.

• Sector-specific regulations – certain industries are subject to specific regulatory oversight, such as banking, insurance, telecommunications and gambling. Acquisitions in these sectors may require additional and prior approval from relevant governmental authorities.
• Environmental authority approval – all industrial activities and other specific activities determined by the Paraguayan environmental regulation require environmental permission to be obtained. In the case of an asset or share purchase, different notifications must be obtained from the Ministry of Environment and Sustainable Development (MADES).

Paraguay offers investors a wide range of corporate vehicles with different governance rules. The most common vehicles are as follows.

Corporations (Sociedades Anónimas or SA)

These are the most common type of companies in Paraguay. An SA is managed day-by-day by a board of directors, which can be composed of a sole director or of multiple directors (depending on the by-laws of the corporation), who are appointed by the shareholders through an ordinary shareholders’ meeting. The corporation must also appoint a trustee (síndico), who is responsible for the supervision of the management and administration of the company.

An SA requires at least two shareholders, whose participation in the corporation is represented and distributed through shares. An SA can have an unlimited number of shareholders.

Limited Liability Companies (Sociedad de Responsabilidad Limitada or SRL)

In this type of company, the management, administration and representation of the company is granted to one or more managers, who may or may not be shareholders of the company. Trustees are optional in this type of company.

When two or more managers are appointed, the same rules established for a corporation’s board of directors will apply. By default, the term of office of the manager is indefinite, and any change must be made through an amendment to the by-laws.

The SRL’s capital is represented with quotas, and at least two quotaholders are required at all times in this company, with a maximum number of 25 members (ie, quotaholders).

Simplified Joint Stock Companies (Empresa de Acciones Simplificadas or EAS)

This fairly new type of corporate vehicle has been designed to simplify the incorporation and functioning of a company. An EAS has no default governing body; all governing functions are instead assigned to the EAS’s legal representative. Both a board of directors and a trustee are therefore optional. The appointment of the legal representative is done through the shareholders’ meeting. The EAS is the only type of company in Paraguay that allows a single shareholder.

Shareholders in all of the above corporate vehicles may be either natural or legal persons, with or without residence in Paraguay. However, directors, managers, legal representatives and trustees must hold a Paraguayan residency permit or be Paraguayan.

While Paraguayan regulations historically offered limited specific protection for minority shareholders, the new Capital Markets and Products Law (Law No 7572/2025) significantly reinforces these safeguards. Therefore, it remains highly advisable to further regulate the relationship between shareholders and minority investors either within the by-laws or through a private shareholders’ agreement, to leverage these new protections. For example, the by-laws of a company may create different classes of shares for each investor group and tie the share class with the right to appoint members to the board or to vote within the board.

Companies are required to declare their ultimate beneficial owners with the Directorate of Companies and Legal Structures and Ultimate Beneficial Owners. These reports must include the address, ID number, full name, shareholding percentage and profession of each shareholder. If the shareholders are legal persons, they are required to report the final natural person controlling the entity. The ultimate beneficial owner report must be updated once a year (if there are no changes) or within 15 working days after any change. The Capital Markets and Products Law (Law No 7572/2025) has also tightened disclosure and advertising requirements, enhancing transparency in the market.

In addition, the shareholders’ information must be updated with the Tax Authority every time a change in the direct shareholders of the company takes place.

Although still in its early stages, Paraguay’s capital market has experienced notable growth in recent years, with promising prospects for sustained expansion, significantly bolstered by the new Capital Markets and Products Law (Law No 7572/2025).

Bonds remain the dominant traded instruments, according to transaction data up to October 2025. For 2025, the accumulated trading volume had already exceeded USD3.5 billion by July, according to the monthly trading summary published by the Securities Supervisory Authority (SIV), with projections suggesting it will surpass USD7 billion by the end of the year, which will be an all-time high. This growth is fostered by dynamic private investment, the improved country risk rating, technological modernisation and more active investors.

Despite advancements in the financial ecosystem, a significant preference for financing through the banking system persists. While capital markets offer advantages such as access to cheaper long-term funding and diversification, the speed and tailored solutions provided by banks remain more appealing to many businesses, particularly small and medium-sized companies. However, the expansion of the capital market has driven a steady increase in participation, including companies exploring alternative investment opportunities, such as raising funds through the stock market.

This dynamism in the stock market positions Paraguay as an attractive destination for both local and international capital. This appeal is further strengthened by the country’s attainment of investment grade status, following the upgrading of its credit rating by Moody’s to Baa3, reflecting improved macroeconomic indicators and prudent fiscal management; subsequently, S&P also upgraded Paraguay to investment grade (BBB-/A-3), consolidating the country’s investment grade status with two major agencies.

The new Capital Markets and Products Law (Law No 7572/2025) represents a structural reform that aligns the Paraguayan market with international standards, enhances investor protection and system integrity, enables the adoption of new technologies and instruments, and reduces regulatory frictions through a unified and coherent framework. It confirms and consolidates the Central Bank of Paraguay (BCP), through the SIV, as the competent authority for implementation and supervision.

In Paraguay, the stock market is primarily regulated by the new Capital Markets and Products Law (Law No 7572/2025), promulgated on 7 November 2025. This innovative and comprehensive regulatory framework modernises and unifies the regulation of the capital and products markets, replacing prior laws such as Law 5810/17 (public securities offerings), Law 5452/15 (investment funds) and Law 1163/97 (product exchanges and brokers). This new Law unifies matters previously legislated separately into a single piece of legislation, including public securities offerings and their issuers, the securities market registry, investment funds and their managing entities, credit rating agencies and securitisation companies, thereby improving coherence and eliminating overlaps, gaps and contradictions.

Regarding securities market supervision, the Capital Markets and Products Law (Law No 7572/2025) confirms and consolidates the BCP, through the SIV, as the competent authority for implementation and supervision. In exercising its powers, the SIV will issue comprehensive regulations to implement these provisions.

The new regulations to be issued by the SIV will include the following key requirements:

• all public securities offerings require prior authorisation from the SIV;
• registered entities must inform the SIV, the stock exchange and the public about their legal, economic and financial situation, as well as any material facts regarding the securities issued or their offering;
• entities supervised by the SIV must disclose information to the SIV and the stock exchange regarding transactions involving related parties; and
• the right to operate on the stock exchange is exclusive and non-transferable to brokerage firms.

In terms of foreign investments and securities regulations in Paraguay, foreign investors and the companies in which they participate enjoy the same rights, guarantees and obligations as domestic investors, as established by Law 117/91. However, when investing through the securities market, they must comply with the specific regulatory requirements applicable to these investments, as outlined in the new Capital Markets Law (which applies equally to local investors). For example, foreign investors must provide brokerage firms with the necessary documentation to register as clients. They are also obliged to register and report significant transactions.

The new Capital Markets and Products Law constitutes a paradigm shift, creating a unified and coherent framework for investment funds and securities based on the following fundamental pillars:

• it unifies prior separate legislation, expanding its scope to include “securities and products” and their derivatives;
• it recognises financial innovation like distributed ledger technology (DLT) for securities;
• it integrates regimes for funds and post-trade infrastructure; and
• it strengthens corporate governance, transparency and enforcement, to reinforce minority shareholder safeguards.

If a foreign investor structured as an investment fund wishes to make investment offerings in Paraguay, the collective investment entity must be authorised by the SIV for this purpose, in accordance with the new Capital Markets Law. However, if the investor only intends to invest in Paraguay in assets or securities listed on the local stock exchange as an institutional investor or through a local fund, the foreign fund must comply with all applicable regulations for investors in general (eg, submitting all necessary documentation to become a client of a brokerage firm, adhering to tax regulations and providing information related to its ultimate beneficial owners).

Paraguay instated a merger control regime in 2013.

Transactions Caught by the Merger Control Rules

A transaction is caught by the merger control rules if it brings about a change of control resulting from:

• the merger of two or more previously independent undertakings or parts of undertakings;
• the acquisition of control (total, partial, direct or indirect) of one or more national or foreign persons (individuals or legal entities) by other national or foreign persons (individuals or legal entities), whether the control has been acquired through the purchase of shares, assets, agreements or contracts, or by any other means; and/or
• the creation of a common legal entity that permanently performs the functions of an autonomous economic entity.

Filing Thresholds

Not all concentration transactions caught by the merger control rules have to be filed with the local antitrust agency (CONACOM) – only concentrations that meet at least one of the following two thresholds must be filed.

• If the transaction results in the acquisition or increase of a market share equal to or greater than 45% of the national (ie, Paraguayan) market of a specific product or service, or of a geographic market defined within it.
• If the global gross turnover in the Republic of Paraguay of all of the parties to the concentration (including the economic groups of each – ie, the acquirer and the target’s parents and affiliates), in the last accounting year, exceeds a total of 100,000 local minimum monthly wages, which is equivalent to about USD35.5 million.

Deadlines for Filing

The merger control notification must be filed within ten business days, counted from the day following the written conclusion of the agreement, the announcement of the public bid or the acquisition of a controlling interest.

Process and Timeframe for Notification

The law sets out a period of 90 business days as a maximum term for the resolution of the merger control filing, counting from the date the Department of Merger Control declares that the filing is complete and all required documents were filed. The evaluation is divided into two phases. The maximum duration for Phase 1 is 30 business days and the maximum duration for Phase 2 is 60 business days.

CONACOM may issue a clearance decision during Phase 1 if the merger does not lead to a significant impediment to effective competition. Phase 2 applies to those mergers that require more in-depth analysis and to those that were not resolved during Phase 1.

If CONACOM issues a request for information (RFI) during Phase 1, the parties must respond without a specific timeframe (albeit within a maximum of six months, or else the filing will lapse). If the RFI is sent during Phase 2, the parties must respond within 15 days. This 15-day timeframe may be extended once for the same period. The issuance of an RFI stops the terms for analysis of the filing. CONACOM has five days for each RFI, to determine whether the documents submitted are complete. All timeframes should be counted as business days.

The opening of Phase 2 is normally ordered due to the complexity of the transaction, but this does not mean that a competition concern has arisen. Prima facie, merger control filings are ex post under Paraguayan merger control rules. However, in a ruling issued in July 2020, CONACOM expressed an opinion that can be interpreted to mean that the Paraguayan merger control regime is ex ante (based on CONACOM’s reading of Article 14.1 of the Regulatory Decree).

Mergers are evaluated considering market structure, the need to maintain effective competition, the market power and financial strength of the participants, and access to supply and demand. Factors such as consumer interests and technical progress are also considered.

Mergers are permissible if they do not create or strengthen a dominant position nor significantly hinder competition. CONACOM may reject or impose measures on mergers that threaten competition by reinforcing market dominance.

In addition to being able to reject merger operations that pose a significant obstacle to effective competition, CONACOM may impose appropriate measures for the establishment of effective competition, including banning the merger operation or approving the merger operation but imposing conditions that make a sufficient contribution to compensating for the restrictive effects on competition.

CONACOM has the ability to refuse the authorisation of a merger, before or after the merger has taken place. In this scenario, the ultimate decision-maker is the Tribunal de Cuentas, which is the competent court to consider the substantiation and resolution of contentious administrative appeals. Its resolutions may be challenged in the Supreme Court of Justice.

Consequences of Making an Investment Without Prior Approval

If CONACOM takes notice of a transaction that was required to be filed but was not, it may summon the parties to notify the transaction within a maximum term of 20 days, and may also impose penalties. It is worth noting that the fines imposed under Paraguayan Competition Law are set for any breach of the law, including merger control rules, which can consist of cease-and-desist orders, declaring the transaction null or imposing monetary fines.

To that end, fines may amount to up to 150% of the profits obtained from the infraction or up to 20% of the gross turnover relating to the sales of products affected by the infraction during the last 12 months (excluding tax) following the beginning of administrative proceedings. No penalties for failing to notify a transaction seem to have been issued to date.

Foreign Investment/National Security Review Regime in Paraguay

Paraguay does not have a specific foreign investment or national security review regime that applies to FDI, but it does have a generally open and welcoming approach to foreign investment, with few restrictions. The country aims to attract foreign investors by providing a favourable legal framework and various incentives.

Relevant Authority

While there is no dedicated authority for a national security review of FDI, the MIC and the BCP are the primary institutions involved in overseeing and facilitating foreign investments. The Investment Promotion Agency also plays a significant role in promoting and supporting foreign investments.

Types of FDI Subject to Review

Since there is no specific national security review regime, there are no particular types of FDI that are subject to such a review. However, certain sectors may have specific regulations or require additional approvals, such as telecommunications, banking and financial services, energy and natural resources, and defence and security.

Exemptions for Foreign Investors

Paraguay does not generally impose significant restrictions on foreign investors. However, certain exemptions and incentives are available to encourage investment, including the following.

• The Maquila Regime (Law 7547/2025) promotes production and export from Paraguay through tax and customs benefits, including duty-free import of inputs/machinery, a 1% tax on national added value/export invoice, and permits up to 10% domestic sales. It also supports service maquila abroad.
• FTZs provide tax benefits and simplified customs procedures.
• The New Fiscal Incentive Regime (Law No 7548/2025) establishes a modern framework of tax benefits for national and foreign investment, replacing Law No 60/90. It provides exemptions from customs duties, VAT on capital goods importation, INR on external financing and IDU for foreign investors, subject to specific conditions.

Requirements, Process and Timeframes

There is no formal notification requirement for most foreign investments, but investors may need to register their investment with the BCP for statistical purposes. For investments in regulated sectors, investors may need to obtain specific licences or approvals from relevant authorities (eg, telecommunications, banking). If investors seek to benefit from specific incentives, they must apply to the relevant authorities and meet the necessary criteria.

The timeframe for obtaining sector-specific approvals or incentives can vary depending on the complexity of the investment and the efficiency of the relevant authorities. Generally, the process can take several weeks to a few months. In most cases, clearance is not required prior to making the investment, except for regulated sectors where specific licences or approvals are necessary.

General Criteria and Considerations

The primary legislation governing foreign investment in Paraguay is Law 117/91 on Investments, which provides for equal treatment of foreign and domestic investors. Law 7548/2025 on the New Fiscal Incentives Regime for National and Foreign Investment offers various tax incentives to promote investment in specific sectors.

Certain sectors may have restrictions or require special permits, such as telecommunications, banking, energy and natural resources, and the Constitution and specific laws impose restrictions on foreign ownership of land in border areas.

Investments in regulated industries may require approval from relevant regulatory bodies, such as the National Telecommunications Commission (CONATEL) for telecommunications or the National Electricity Administration (ANDE) for energy projects.

Environmental impact assessments may be required for projects that could significantly affect the environment.

Specific Considerations for Different Types of Investments

Partnerships and joint ventures are generally treated the same as other forms of investment. The structure of the partnership or joint venture must comply with Paraguayan corporate laws, and any agreements should be registered with the relevant authorities.

While there is no specific regime for reviewing acquisitions by foreign governments or government-affiliated entities, these investments may attract additional scrutiny, particularly in strategic sectors. The government may consider national security implications, especially if the investment involves critical infrastructure or natural resources.

Analyses Involved

The potential economic benefits of the investment are considered, such as job creation, technology transfer and contribution to GDP growth. Although there is no formal national security review process, investments in strategic sectors may be evaluated for potential national security risks. Investors must ensure compliance with all relevant local laws, including corporate, tax, labour and environmental regulations.

The relevant authority overseeing foreign investment in Paraguay is the MIC, along with other sector-specific regulatory bodies.

Types of Remedies or Commitments

Environmental and social commitments will include adherence to specific environmental standards and practices, and the implementation of corporate social responsibility (CSR) initiatives that benefit the local community. Regular reporting to the relevant authorities on the progress and impact of the investment should be carried out, and local laws and regulations should be complied with, including those related to anti-corruption and fair competition.

Investments in telecommunications and media may be subject to additional scrutiny and specific conditions to ensure national security. Investments in the mining, oil and gas sectors may require adherence to stringent environmental regulations and commitments to local community development. Foreign investments in the banking and financial services sector may be subject to regulatory approval from the BCP and other financial regulatory bodies.

Paraguay does not generally require prior approval for most foreign investments. However, certain sectors may require specific licences or permits, such as telecommunications, banking and insurance. Law 642/95 on Telecommunications requires foreign investors to obtain licences from CONATEL before operating in the sector.

Investments in sensitive areas such as national security, natural resources and public utilities may be subject to additional scrutiny and require prior approval from relevant authorities. Law 294/93 on Environmental Impact Assessments mandates that investments in natural resources undergo an environmental impact assessment and obtain approval from MADES.

After the investment is made, the relevant authorities continue to monitor compliance with local laws and regulations. Law 1015/97 on the Prevention of Money Laundering requires ongoing compliance and reporting by foreign investors to the Secretariat for the Prevention of Money Laundering.

Process for Challenging FDI

A challenge can be initiated by the relevant regulatory authority if there is evidence of non-compliance with legal requirements, national security concerns or violations of anti-corruption laws. The process typically begins with an investigation and a formal notice to the foreign investor outlining the concerns. The ultimate decision-maker on such challenges is usually the MIC, in co-ordination with other relevant authorities. For example, Law 7548/2025 on the New Fiscal Incentives Regime for National and Foreign Investment grants the MIC authority to make final decisions on investment-related challenges. In cases involving national security or significant public interest, higher governmental bodies or even the President may be involved in the decision-making process. Law 1337/99 on National Defence and Internal Security allows the President to intervene in cases where national security is at risk.

Foreign investors have the right to appeal decisions made by the regulatory authorities. Law 6715/21 on Administrative Procedures provides a framework for appealing administrative decisions, including those related to FDI. Appeals can be made to administrative courts or higher judicial bodies, depending on the nature of the challenge and the specific regulations involved. Law 879/81 on the Judicial Code outlines the process for appealing administrative decisions to higher courts.

Consequences of Non-Compliance

If an investment is made in a sector that requires prior approval without obtaining the necessary permits, the investment may be deemed illegal. For example, Law 642/95 on Telecommunications stipulates that operating without a licence from CONATEL can result in fines and the revocation of operational rights. In severe cases, consequences can include the revocation of investment incentives and the obligation to repay previously exonerated taxes, including interest, surcharges and fines, as stipulated by Law 7548/2025.

Non-compliance with local laws and regulations after the investment is made can result in similar penalties, including fines, operational restrictions or forced divestment. Law 1015/97 on the Prevention of Money Laundering outlines penalties for non-compliance, including fines and operational restrictions. Continuous violations can lead to legal actions and potential expulsion from the market. Moreover, Law 195/93 on the Promotion of Competition allows for legal actions and market expulsion for continuous violations of competition laws.

Investment Law

The Investment Law (Law 117/91) grants equal guarantees, rights and obligations for both domestic and foreign investment. It guarantees the protection of property rights, a free trade regime (production, commercialisation, pricing and import/export, with exceptions), and an unrestricted free exchange regime.

Law 117 also ensures an unrestricted free exchange regime for capital entry and exit, and for the remittance abroad of dividends, interest, commissions and royalties.

Law 5542/15 on Guarantees for Investments and Promotion of Employment Generation and Economic and Social Development encourages investment in industries and production activities in Paraguay, fostering job creation and economic development through added value to raw materials. An important benefit of Law 5542 is the possibility of a fixed income tax rate for up to ten years, extendable to 20 years depending on the sector and investment amount. In addition, if a company under this regime is sold or its shares transferred, the obligations and benefits remain in effect for new purchasers throughout the project’s established period.

Law 7548/2025 on the New Regime of Fiscal Incentives for National and Foreign Investment promotes national and foreign investment to boost production, generate formal employment and foster technological incorporation. This law offers key benefits such as exemption from customs duties on capital goods, Value Added Tax (IVA) exemptions and, in specific cases, exemption from INR on interest and fromIDU for significant investments. These benefits are time-limited and subject to compliance with investment project objectives and legal requirements.

Acquisition of Rural Real Estate Located in the Border Security Zone

There are no major restrictions on foreigners purchasing land in the country, except for those imposed by Law 2532/05, which establishes the border security zone of the Republic of Paraguay, and its amendment, Law 2647/05.

According to Article 1 of Law 2532, the border security zone includes the 50 km strip adjacent to the land and river border lines on the side of the national territory. Article 2 specifically establishes that – unless authorised by decree of the executive branch based on reasons of public interest – foreigners from any of the neighbouring countries of the Republic of Paraguay (Argentina, Bolivia, Brazil) or legal persons formed mainly by foreigners from any of the neighbouring countries may not be owners, condominium owners or usufructuaries of rural real estate located in the border security zone, unless these foreigners have a permanent residency permit in the country.

Furthermore, the law provides that the shares of joint stock companies that intend to acquire real estate located in the border security zone must be registered and non-endorsable. Therefore, if a company is interested in acquiring rural real estate in the border security zone and its shareholders are mostly foreigners from Brazil, Argentina or Bolivia, the shareholders must obtain permanent residency permit in the country and the company will have registered and non-endorsable shares.

Despite this, there is a divided interpretation among legal professionals in Paraguay regarding the border security laws. Some argue that companies acquiring rural real estate in the border security zone must have registered and non-endorsable shares, regardless of the shareholders’ nationality or domicile.

This regulation prohibits public notaries from issuing public deeds for non-compliant legal transactions, rendering such proceedings null, and potentially incurring sanctions for those involved.

Paraguayan Real Estate Regime

Law 7.424/25 establishes the National Unified Registry and Cadastre System (RUN), which was enacted in January 2025 and came into effect in January 2026. This law integrates surveying, cadastral and real estate registry services into a single system to simplify procedures, modernise management and improve legal certainty. The RUN consolidates the General Directorate of Public Registries (DGRP), the Directorate of Geodesy (MOPC) and the National Cadastre Service (MEF). Its implementation includes the Unique Cadastral Registration Identification Code (CUICR), designed to reduce data overlap and property conflicts.

Immigration Regime

Law 6.984/22 (the Immigration Law) sets out the categories for the admission of foreign nationals, which may include temporary stay or residence. Temporary stay is permitted for a maximum of 90 consecutive days, which may be extended once for a period not exceeding another 90 consecutive days. This type of admission does not authorise the foreigner to engage in paid activities within the country.

Foreign nationals wishing to remain in the country with the intention of establishing residence may be admitted under the following categories:

• spontaneous or occasional residence, valid for up to 90 days and extendable for the same period within the same year;
• temporary residence, which allows the foreigner to reside in the country for a period of two years, extendable for an additional two-year period; or
• permanent residence, which is granted to individuals who express their intention to settle permanently after completing the temporary residence period.

A notable provision of Law 6.984 is that foreign nationals who can demonstrate investment in the Republic of Paraguay, in accordance with Law 4.986/13 Creating the Unified System for Business Assistance for the Opening and Closing of Companies (SUACE), are exempt from the temporary residence requirement as a prerequisite for obtaining permanent residence. The process is carried out through SUACE. An investor certificate must be obtained as an initial step, followed by the application for permanent residence. The applicant is required to make a minimum investment of USD70,000 or its equivalent in local currency, and to create five jobs for local employees.

Corporate Income Tax (IRE)

IRE is a tax applied to companies that are resident in Paraguay, including branches of foreign companies. It is imposed on income and any capital gains (in some cases at the time of realisation), including exchange rate differences. The tax is calculated annually (based on the accrual criterion for the fiscal year) at a rate of 10% on the fiscal net income, with specific exceptions.

IRE applies the “source principle” for income attribution and, in certain cases, taxes income earned abroad (mixed-source income).

There are specific rules regarding deductible expenses, including thin capitalisation rules, transfer pricing regulations, etc, and the compensation of tax losses is allowed for up to five fiscal years at a rate of 20% per year.

Finally, the law requires advance payments or instalments on account of the tax for the fiscal year. These are paid in four instalments per year and are calculated based on the average IRE paid over the last three fiscal years. Furthermore, a withholding rate of 0.4% IRE is imposed at customs upon importation.

Tax on the Distribution of Dividends and Profits (IDU)

IDU applies to profits distributed by Paraguayan companies to their partners or shareholders, taxed at the level of the latter. The rate is 8% for residents in Paraguay and 15% for non-residents, and is payable at source at the time of the corporate decision, the availability of funds or the payment of dividends, whichever occurs first.

Among Paraguayan shareholder companies, a fiscal compensation mechanism is applied to avoid double taxation.

Non-Resident Income Tax (INR)

INR applies to Paraguayan-source income earned by non-residents, through withholdings made by the paying Paraguayan entity.

The INR rate is 15%, with effective rates ranging between 4.5% and 15% of gross income.

In the specific case of interest payments to foreign investors, the local company must withhold from the lender:

• 15% if it is a related company (grossing up to an effective rate of 17.65%); or
• 4.5% if it is not a related company (grossing up to an effective rate of 4.71%).

Value Added Tax (VAT)

Financing will be considered to occur in the national territory when the borrower is a resident of Paraguay. The rate of VAT is 10%.

Reduction or Elimination of Withholding Rates Through International Treaties

Paraguay has signed double taxation avoidance treaties with Chile, Taiwan, Qatar, the UAE, Uruguay and Spain, which allow for the reduction or elimination of withholding rates on dividends and interest.

In Paraguay, corporate tax planning is based on Law 6380/19 and other regulations that facilitate tax optimisation, supported by a growing network of double taxation treaties. Common strategies include the following.

Increase in the Depreciable Asset Base

In acquisitions, the tax base of the assets can be adjusted to market value, allowing greater tax depreciation. The sale of real estate is subject to IRE at an effective rate of 3%.

Elimination of Profits Through Intercompany Debt

Interest paid between related parties is deductible as long as it complies with transfer pricing regulations and thin capitalisation rules.

Cross-Licences and Similar Agreements

Royalties and payments for the use of intangible assets are deductible if they meet the requirements of economic substance and transfer pricing rules.

Tax Benefits in Business Reorganisation

Although direct fiscal consolidation does not exist, processes like mergers or spin-offs can offer tax advantages, depending on the specific context.

Sectoral Tax Incentives

Paraguay has several sectoral regimes aimed at promoting industrialisation, tourism and international events, including:

• Law No 7547/2025 (Maquila Regime);
• Law No 7548/2025 (New Fiscal Incentive Regime for National and Foreign Investment, also for tourism);
• Law No 7546/2025 (Production and Assembly of Electrical, Electronic, Electromechanical and Digital Equipment);
• Law No 7467/2025 (International Sporting Events); and
• Law No 4838/2012 (National Automotive Policy).

Paraguay’s Double Taxation Treaty Network

Paraguay has an active network of double taxation treaties with countries like Chile, Qatar, Uruguay, Spain, the UAE and China (Taiwan), and is in negotiations with several other countries for similar agreements. The use of these strategies must align with Paraguayan legislation and the applicable double taxation treaty provisions, ensuring proper management of international operations and tax cost optimisation.

Paraguay has implemented a favourable regulatory framework for FDI, offering various incentives and a simple and competitive tax system compared to other jurisdictions. This framework includes four income taxes and two consumption taxes, including IRE, IDU and VAT with rates of 5% and 10%.

Paraguay promotes investment, industrialisation and job creation through various fiscal and productive regimes, including:

• the recently modernised Maquila Regime (Law No 7547/2025);
• Free Trade Zones;
• Law No 7548/2025 (New Fiscal Incentive Regime for National and Foreign Investment); and
• Law No 7546/2025 (National Policy for Production and Assembly of Electrical, Electronic, Electromechanical and Digital Equipment).

These 2025 reforms enhance competitiveness and productive integration, positioning Paraguay as an attractive destination for industrial relocation and foreign investment, backed by robust tax incentives and a modern, transparent and predictable legal framework.

However, as a general rule, there are no exemptions benefitting foreign direct investment regarding capital gains, which are usually subject to INR for both non-resident legal entities and individuals.

The following are exempt from INR:

• interest on public debt securities issued by the state (the Ministry of Economy and Municipalities), as well as any other capital income or capital gains derived from holding or transferring these instruments; and
• returns from investment funds provided for in the Capital Markets and Products Law (Law No 7572/2025).

Paraguay has specific regulations designed to prevent tax evasion in transactions related to FDI. These include transfer pricing, thin capitalisation rules and provisions regarding low or no taxation jurisdictions (BONT).

The main regulations are as follows.

Transfer Pricing

Taxpayers must submit a transfer pricing technical study demonstrating that transactions with related parties comply with the arm’s length principle.

Thin Capitalisation Rules

These rules limit the deductibility of interest generated by loans between a local taxpayer and its related parties, in order to prevent companies from financing operations through excessive debt instead of equity.

Provisions for BONT Jurisdictions

Transactions with residents of BONT countries or jurisdictions are presumed related unless proven otherwise.

Commitment to Tax Information Exchange

Paraguay leads efforts in Latin America regarding tax information exchange, consolidating its role in implementing measures to facilitate co-operation between jurisdictions to combat tax evasion.

In Paraguay, labour and employment matters are governed primarily by the Labour Code and the Constitution, which guarantee fundamental workers’ rights, such as the right to unionise, engage in collective bargaining, and strike. Paraguay has also ratified several international conventions backed by the International Labour Organisation (ILO) that protect workers from discrimination, ensure equal pay, and establish guidelines related to freedom of association.

However, in the private sector, unionisation and collective bargaining agreements are relatively rare, as companies typically adopt an internal work regulation to govern the employment relationship between the parties. In addition to these regulations, there are specific laws addressing the rights of working mothers and breastfeeding women, as well as issues related to workplace health and safety.

In Paraguay, employee compensation generally follows a system based on cash payments, which not only includes physical cash but also bank wire transfers, cheques and other methods that can be converted into cash. There are also mandatory benefits and statutory contributions, such as vacation and end-of-year bonuses. In the case of dismissal without cause, employees are entitled to receive severance payments and notice period compensation, both of which are calculated based on the employee’s tenure with the company.

In the event of a merger or acquisition that involves a change of control or investment, the employer substitution mechanism may apply, which means that employees retain their labour conditions and the terms of their employment contracts, without changes to their working conditions.

Article 28 of the Labour Code regulates the principle of employer substitution in cases of company transfers, such as mergers, acquisitions or other changes in company ownership. This principle establishes the following.

• Continuity of employment contracts – employees’ contracts continue with the new employer, meaning that ownership changes do not extinguish the labour contracts.
• Responsibility of the new employer – the new employer assumes all labour obligations of the previous employer, including the payment of wages and accumulated benefits for employees.
• No termination of employment contracts – unlike other legal systems, the employment contract in Paraguay does not terminate with a change of employer. However, if an employee does not wish to continue, they have the right to terminate the contract and receive the corresponding compensation.

For a foreign investor, this means that they must assume all pre-existing labour responsibilities upon acquiring a company in Paraguay, as the change of ownership does not affect employment contracts. It is crucial to ensure compliance with employees’ labour benefits, such as unpaid wages, severance payments and other acquired rights. This principle protects employees, ensuring that their labour rights remain intact even when the employer changes.

IP is not an important aspect in screening FDI in Paraguay.

Paraguay offers a robust legal framework for intellectual property protection, having ratified and incorporated various international treaties. The Dirección Nacional de Propiedad Intelectual oversees IP rights in the country.

Trade Marks

Paraguay’s Trademark Law (Law 1.294/98) governs trade marks, which are valid for ten years and can be renewed indefinitely. The registration process includes filing, examination, publication, opposition and registration. However, examiners are stringent about non-traditional trade marks and those not listed in the Nice Classification. Trade mark owners can record their marks with customs in order to monitor imports.

To enforce trade mark rights, owners can pursue civil and criminal actions. Remedies for infringement may include cease-and-desist orders, damages, the seizure of infringing goods, and import and export prohibitions. Administrative proceedings, oppositions, cancellations and nullity actions are also available to address disputes and maintain trade mark integrity.

Patents

The Patent Law (Law 1.630/00) protects inventions and utility models, excluding simple discoveries, aesthetic creations and certain methods. The patent term is 20 years, with annual maintenance fees. The application process involves filing, examination, publication, opposition and issuance, typically taking five to six years. Enforcement includes civil actions and precautionary measures like cease-and-desist orders.

Industrial Designs

Law 868/81 protects new and original industrial designs, excluding those serving solely technical functions. The registration process takes about two years including filing, examination, publication, opposition and registration, with protection lasting five years, and this can be renewed twice. Enforcement options include civil actions and criminal complaints.

Copyright

Copyright law in Paraguay protects original literary, artistic and intellectual works, including software, for 70 years after the author’s death. Registration is not mandatory but serves as evidence of ownership. Enforcement includes civil actions and criminal penalties for severe infringements.

Additional Protections

Software and databases are protected under the Copyright Law.

In terms of undisclosed information, Law 3283/07 protects industrial and trade secrets.

Law 385/94 and Law 995/96 protect new plant varieties, requiring applications to the Ministry of Agriculture.

No specific IP protection exists for AI-generated works in Paraguay.

Under the Paraguayan Constitution, the right to privacy and the integrity of records has been specifically protected. Paraguay also enacted a specific data protection and privacy regime through Law 6534/20 on the Protection of Personal Credit Data, which aims to safeguard the personal credit data of individuals, regardless of their nationality, residence or domicile. It regulates the collection, access and treatment of credit information, ensuring the protection of fundamental rights, privacy, informational self-determination, freedom, security and fair treatment.

The law is mandatory for the treatment of personal data in public or private records collected or stored within Paraguay. It applies to data in physical, electronic or digital formats, managed through manual, automated or partially automated mechanisms. The law does not explicitly mention extraterritorial scope, meaning it primarily governs data within the national territory. However, foreign investors operating within Paraguay must comply with these regulations.

The law grants individuals the right to access, rectify, cancel and oppose the use of their data. It also mandates that data must be accurate, complete and up to date. Entities handling data must implement technical and organisational measures to ensure data security and confidentiality.

The Paraguayan Congress is currently reviewing a specific bill that will further regulate the treatment of data in general.