Taxes for freelancers in Paraguay

I am a  freelance visualiser, I work from Paraguay for companies in Europe , China, work through internet, pay no taxes, if I work for a Paraguayan company top rate is 10 % indeed overall, thats why the infra structure is so lousy here, roads, hospitals, education etc etc
good luck

Hey arnoldus, thanks for the reply! When you say "pay no taxes", do you mean that it's not required by law if the money comes from abroad? Sounds too good to be true.    Most countries consider that domestic-sourced income regardless of the source of money transfer, as you're getting it in exchange for labour performed on the country's territory...

Hi , no its not the case in Paraguay, zero, procent, very bad for the infrastructure off course as I mentioned before, financing road maintenance, schools , healthcare etc, I work from Holland 6 months a year and from Paraguay six month a year, both by internet, in Paraguay its zero ,

If you don't register your business with the taxes people, you don't pay anything for work done abroad: it all depends how you are going to invoice for your work. But, even if you open a position to be able to invoice from here, taxes are so low that it doesn't really mean much: 10% VAT and 10% and  10% on net income: but it is incredible what you can deduct. And another thing: to register an individual company and pay the taxes is really easy. On top, a good accountant can take care of all the details for a monthly fee of 200,00 Gs or less. I am in the process of opening a big thing, but being registered as an individual, the only thing I am required to do is to keep a VAT register and make one monthly declaration. And a yearly one, of course. You are considered "small" contributor, which is my case, if you invoice up to 500,000,000 Gs.

Don't worry too much about taxes and find a good accountant.

Well, dont forget to get accurate information as to "cheap cost of living" .
Making a decision based on tax policy of destination, with formal or informal legal existence of company is redunctant.

You may quickly regret your decision coz of too many "lousy" aspect in loco.

Are you aware of money transfer fees ?
How will you transfer income there ?
Will you need at some point justify income sources ?

Be prudent...

Thank you all for your responses, you're very helpful! 

paulopereirra, you're raising some valid concerns. Taxes influence like 40% in my decision. I wouldn't consider a third world country, if I wasn't prepared for an adventure... By cheap I meant much cheaper than UK, Scandinavia, Switzerland. Hungary/Budapest is very difficult to beat in living costs, in cheaper countries you'd have to give up a lot in comfort and convenience...

Not sure what you mean by this:

"How will you transfer income there ?
Will you need at some point justify income sources ?"

My customers would be wiring into my paraguayan bank account, all that officially, with invoices, etc.

Sorry to disillusion you: it is not that easy to open a bank account in Py.

Normally, you can open only savings accounts and only with fully justified funds, that means a lot of paperwork from your actual bank. It is possible, but just don't think that you walk into a bank branch and solve all your problems.

And for a checking account, that's a different kettle of fish altogether.  You need to have local income, and to prove it you must be registered with the taxes people and produce you VAT register.

So, my advice is: have your payments deposited into you actual bank account, and then transfer the money to Py using any wire transfer like Western Union and the like. And, once you are sorted out with all the paperwork, residence, legitimacy of your funds, etc., only then aproach a bank manager.

Hahaha a lot of questions,
Banking is nor realy easy, dont forget it is an informal society, haha that means Cash ! check out the internet for that !! easy to find, and allso be a member of paraguay expats , Lonnie can interdruce you .I have a bank account in Holland and  get my money out of an ATM in Paraguay, and allso easy for me is I travel  from Holland to Para , 6 months in and out, so no problems with  visa etc,and please learn Spanish, but you do I think
And in a way its a third world country, filled with  nice people !! infra structure is off course lousy but it fits the livingstyle of te people and me . mild form of masochisme haha,
I  am not registered as a company, so dont pay any taxes on money earned abroad, [ internet]
good luck

Yepp I'm at the very beginning of my Paraguay-investigation, lots of things to find out...    Unless I change my mind, I'm planning to move in about 10-12 months, I should become fluent in spanish by then.

Bank accounts are a PITA to set up even in some western european countries for a new resident, I expected that to be even more complicated in Paraguay. 

One more question about that VAT. On this site I see that exports are VAT exempt:

http://taxsummaries.pwc.com/uk/taxsumma … incentives

I thought that if I work for USA customers, then I'm exporting services and this I'd be VAT exempt, does anyone know about this?

Hi, sorry no info on that, i deliver services,

I can advise you to visit Para first, realy

One more thing: when I was living in Uruguay, I needed a regular tax and VAT number, otherwise my clients in europe would not accept the invoices as their taxes people would suspect money laundering. Better you inquire about this with you clients beforehand.

"I can advise you to visit Para first, realy" - yes, I should probably spend there 1-3 months first, get advice from local accountants and authorities, see how things go...

chicchera: that's what I've been referring to by "official invoices", with tax/VAT number and whatever local law requires...

Thanks again! 

Ask for or even hire remotly some tecnical know-how regarding your tax structure worries and practical implications. Search for in clasipar.paraguay.com accountants or attorneys for company formation, hire them using elance.com platform or such.

Again its not really a "tax heaven" and are you sure you will have a long lasting relationship with current customer base, that supports such a choice ?

Check out spanish section forum for paraguay, where european citizen from spain comment about real cost of living in py ( yeap its more expensive that Portugal ), what´s offered and whats not.

If you dont have valid strong reason for that destination, you will not achieve your expatriation project with sucess.
And beware of too entusiastic users comments, coz it might not reflect your point of vue or impression once in place.

"Ask for or even hire remotly some tecnical know-how regarding your tax structure worries and practical implications. Search for in clasipar.paraguay.com accountants or attorneys for company formation, hire them using elance.com platform or such."

Wow I haven't thought of that! I tried to hire remotely accountants over some freelance sites, didn't find any, but advertising on a paraguayan site makes sense, I'll try this once my spanish is good enough.

"Again its not really a "tax heaven" and are you sure you will have a long lasting relationship with current customer base, that supports such a choice ?"

There is nothing to be supported by my customers, like I stated several times, I'm planning to do everything legally with taxes paid. The only thing my customers care about is that I give them valid, official invoices, complying with local law...

Cost-wise, it seems to me that around 2.5 mil PYG per month you can rent huge apartments with huge balconies in Asuncion, and they're even cheaper in the sorrounding areas. Look at this one, for instance: http://clasipar.paraguay.com/alquilo_li … 72386.html In Budapest I'd have to pay at least 50% more.

I really appreciate your comments, it's good to have someone trying to bring more realism and balance into highly subjective discussions. 

@atomheart: it took me one year of comings and goings from Uruguay to buy a house. I don't find cheap the ad you point to, but then, each of us gives a different meaning to the word "cheap".

Follow the advice that's been given to you already in this thread and visit the country beforehand. I like it and am very comfortable here, but it can also be maddening.

use the clasipar platform to reach for professionals, rather than posting your add.
Many business lawyers and accountants [ contable ]  listed there easily reach by email. For example, do a search using term "radicacion" to filter adds and get results of professional assisting on the residency aplication process ( probably the unique advantage of that country for expatriation purposes ). Many are able to write in English and will advice you for free regarding prospective foreigner.

Anyways, the example you gave for that one bedroom unfurnished flat , you could get much better and bigger in Portugal.

Been there back in 2012, shop for grocery in "superseis" store on that neighboorhood,  stayed in place 05 months time enought to make my own judgement. Wish i had save time and money on that experience...
Good luck for you.

"Anyways, the example you gave for that one bedroom unfurnished flat , you could get much better and bigger in Portugal." - and lose 10 times the money I save on living costs on taxes.  It's a complex equation...

Thanks!

GOOD LUCK ANYWAY

So personal income tax is just on Paraguay-source income? How about dividends payed by non Paraguay company to permanent resident? Zero?

Just my "two cents" to add to other comments, which I think have covered it very well.   

We've lived here for 3 years so far and normally just get our expense money via ATM's from our US bank.    There is a 25,000 Gs fee for each ATM transaction (about $4.75) plus my bank in the US charges us about $5 also.  You are limited ot 3,000,000 Gs a day in ATM withdrawals though, so if your going to spend for a major purchase you have to plan in advance by withdrawing over a period of days.  For big purchases, car for instance, we wired money from our US bank to our Paraguayan bank.   It was quiet easy to do and just took 3 days to complete the transaction.   

And regarding getting a Paraguayan bank account, we found it wasn't really that difficult for us, although we did get only a savings account, an ATM card and a credit card.   If one needs a checking account maybe it's more difficult but I wouldn't know.  Anyways we can get official bank drafts (checks) issued to us if we need and can draw money out of the account at any time with the ATM card.  As checks are seldom used here, except in business cases I guess, it seems sort of pointless to get a checking account.

To get the account we simply had to show ID, proof of residency (utility bills if I recall worked for this) and proof of income/solvency.  As I'm retired we just provided a copy of my US monthly pension payment reciept (printed out from online) and a copy of our US bank statement also printed out from online.  We got our account at Itau Bank, a large regional S. American bank.  As long as we keep a balance of 4,000,000 Gs there are no fee's or costs for the account.

In terms of cost of living, you will find rents much lower further out of the Asuncion central area.  The surrounding towns of Luque, Capiata, San Lorenzo for instance are MUCH cheaper than the places in the centro.   Looking at the online ads is the quickest and surest way of getting an idea regarding prices.  But once you get here for a visit it's even better to just walk or drive around the neighborhoods or towns your interested in to see the many rent or sale signs.

It sounds as if you've already figured out the main hurdle for many regarding Paraguay.  And that is that it is a third world country with a limited social safety net and no where near the infrastructure your used to in the first world.  It is NOT a good place to come if you must work for a living locally or have high expectations or needs of a first world living environment.  It IS a good place to come live in if your a bit adventurous, have an income from outside the country.  As for infrastructure, as others have pointed out it's pretty basic but just in the 3 years we've lived here things have improved.  And in the 16 years we've been coming here it's improved a lot.  Although I'm not happy with all the first world businesses and habits that have shown up along with the improvements.  But that's just my personal opinion.