The 2012 worldwide VAT, GST and sales tax guide

P ARAGUAY 507
The definition of a VAT taxpayer applies to a permanent establishment
of a foreign business in Paraguay.
Group registration. VAT grouping is not allowed under the
Paraguayan VAT law. Legal entities that are closely connected
must register for VAT individually.
Nonestablished businesses. A “nonestablished business” is a
business that has no fixed establishment in Paraguay. A nonestablished
business is not required to become a taxpayer by obtaining
a fiscal number in Paraguay.
Late-registration penalties. Penalties and interest are assessed for
late registration for VAT if the taxable person owes VAT.
D. VAT rates
The term “taxable supplies” refers to supplies of goods and services
that are liable to VAT. The term “exempt supplies” refers to
supplies of goods and services that are not liable to tax. Exempt
supplies do not give rise to a right of input tax deduction (see
Section F).
In Paraguay, the standard rate of VAT is 10%. Law 2421/04 provides
for a reduced tax rate of 5% for certain products and services. The
5% rate applies to basic family products, pharmaceutical goods,
real estate, leasing and interest on loans or debts. In addition, a
reduced tax base applies to certain supplies, thereby reducing the
effective rate of VAT.
The following tables list examples of exempt supplies of goods
and services, and supplies of goods and services that have a
reduced tax base for VAT (these lists are not exhaustive).
Examples of exempt supplies
Unprocessed agriculture and livestock products
Foreign currency
Oil by-product fuels
Interest on public securities
Interest on bank deposits
Books
Certificates and shares*
* The share transfer is exempt if the seller communicates with the tax authorities
regarding the transaction.
Examples of goods and services with a reduced tax base
International freight services
Certain imports of goods under specified tax treatment (Decree
6.406/05)
Financial intermediary services
Real estate
E. Time of supply
The time when VAT becomes due is called the “time of supply” or
“tax point.” The basic time of supply for goods is when they are
transferred and, for services, when they are performed. The
invoice for the transaction must be issued during the tax period in
which the tax point occurs and must indicate the due date for VAT.