A company in Paraguay is not an LLC with a different accent: it is a different piece, for a different problem. It is set up as a sole trader, an EAS (a simplified joint-stock company) or an SRL, and its tax treatment is territorial: IRE, the corporate income tax, runs at 10% on Paraguayan-source profit only, and profit earned outside the country generally falls outside that base, with one exception written into Article 6(4) of Law 6380/2019, which pulls foreign dividends and foreign bank deposits back into the Paraguayan base when the investing entity is resident here. If you are also tax resident here, your personal IRP runs 8-10% and is likewise limited to what you earn inside the country. The advantage is not a headline “0% tax” (that never exists without caveats anywhere); it is a territorial system that is predictable and cheap to maintain. The limit is no secret either: a Paraguayan company does not give you USD banking or the credibility with US clients that a US LLC does. This guide is the vehicle and its tax treatment, with the honest comparison against the LLC that almost nobody gives you.
What this guide is, and is not
Two things worth separating before the vehicle itself.
First: this page is about the company, not the residency. If what you are trying to understand is when Paraguay treats you as its tax resident, how the 120-day myth actually works, or which residency routes exist, that lives in a US LLC when you live in Paraguay, which covers the residency side in depth. Here we cover the corporate vehicle: what it is, how it is taxed, and what it costs to run.
Second: if your real question is “LLC or something local?”, that is answered with the full framework in where to set up your company, which compares all six real structures on the table today. This page is the detailed profile of one of them (Paraguay as a local jurisdiction), not the whole map.
Paraguay is one of the twenty jurisdictions scored in the Global Incorporation Index, where you can see how it compares on effective tax, incorporation bureaucracy, treaty network and list exposure, and change the weights to test how much the ranking depends on them.
The vehicle: sole trader, EAS or SRL
Paraguay offers three real forms to operate a business, and the choice turns on scale and whether you will have partners.
Sole trader (Unipersonal). The simplest form: you operate as an individual business owner without full asset separation. It fits modest, fast-starting activity, but it does not shield your personal assets from the business’s risk.
EAS (Empresa por Acciones Simplificada). Built to be incorporated online, with far less notarial process than a traditional company. It is currently the fastest route to a separate legal entity with limited liability, without the weight of a classic corporation. For a solo founder who wants the most agile formal vehicle, this is usually the starting point.
SRL (Sociedad de Responsabilidad Limitada). The more traditional form for two or more partners, or when you want a somewhat more formal capital structure than the EAS offers. It requires more setup formality than the EAS in exchange for a more established company type with a longer track record in the Paraguayan system.
None of the three is “best” in the abstract. Sole trader to start solo and cheap, EAS for asset separation with a fast process, SRL when there are partners or you want a more formal capital structure. We confirm the choice with our legal partners in Paraguay based on your case, not a template.
How it is taxed: territorial, in two layers, with one exception
Paraguay taxes in two separate layers, both starting from a territorial rule. The difference between them is what decides whether incorporating here beats invoicing as an individual.
IRE (corporate income tax): paid by the company on its Paraguayan-source profit, at 10%Confirm the current IRE rate with a local accountant before incorporating: stable over recent years but worth a yearly check. Profit the company earns outside Paraguay does not enter this base: with one exception written into the law itself. Article 6(4) of Law 6380/2019 treats as Paraguayan-source «interest, commissions, returns or gains on capital deposited with banking or financial institutions abroad […] and dividends or net profits obtained as a partner or shareholder of foreign entities, where the investing or benefiting entity is incorporated or resident in the country».
In plain terms: if you make your Paraguayan company a member of your US LLC, or have it hold deposits abroad, those dividends and returns fall inside the IRE base. Territoriality does not cover that arrangement, and it is precisely the structure many people think they are building when they incorporate here.
IRP (personal income tax): if you, as a resident individual, earn income inside Paraguay, it is taxed on an 8-10% scale, and only on what you earn inside the country. Your foreign-source income (dividends from abroad, fees from international clients, the profit of an LLC you run in parallel) generally falls outside this base.
A 10% VAT applies on top of taxable sales, with the ordinary pass-through and credit rules your accountant will walk through against your specific activity.
The honest part almost nobody says out loud: a territorial system that is cheap to maintain is exactly why the residency behind it has to be real. It is not the company that makes you territorial: it is that you, as a person, are taxed on what you earn inside the country and not on what you earn outside it. If your actual life (your days, your centre of interests, your family) stays somewhere else, that other country can still claim that foreign income regardless of whether you own a Paraguayan company. The company does not replace the residency; it sits alongside it.
What it costs to set up and maintain
Setup: for an EAS or SRL through the online process, cost runs in the low hundreds of dollars between fees and registry chargesConfirm current Public Registry and legal fees before starting the process: it varies by vehicle and how much handling you delegate. That is not comparable to the $1,400-1,500 of a Panamanian corporation or the thousands of a UAE free zone: proportionally, it is one of the cheapest jurisdictions to incorporate in the region.
Annual upkeep: a local accountant handling bookkeeping and filings (IRE, VAT and, where relevant, IRP), plus IRE itself at 10% on Paraguayan-source profit and 10% VAT on taxable salesConfirm current accountant fees and filing calendar for your specific vehicle. There is no mandatory registered agent as in the US, and no fixed flat fee as in Panama: the recurring cost here is mostly professional (accounting) plus tax on actual profit, rather than a flat fee for merely existing.
The comparison with a US LLC is not simply “which is cheaper”: the costs are different in kind. The LLC has a fixed maintenance floor (registered agent, address, Form 5472) that you pay whether or not there was any profit. The Paraguayan company has a cost that grows with what it invoices locally and shrinks when there is no local activity. That favours someone who genuinely operates in Paraguay; it does not favour someone who just wants a paper entity.
Substance: why the residency has to be real, not a document
This is the single most important point in the whole guide, and the least explained. Paraguay being territorial for the company does not automatically mean you, as a person, stop owing tax in your home country simply because you set up an EAS or SRL here.
If you remain tax resident in Spain, Mexico or elsewhere (because you spend most of the year there, because your family and centre of economic interests stay there), your home country can keep treating your worldwide income as its own, including the profit of your Paraguayan company, regardless of what Paraguayan IRE says about that same income. The company resolves the company’s tax treatment in Paraguay. It does not resolve your personal tax residency, which is a separate and earlier question. That side is covered properly in tax residency for founders, it is, almost always, step one, not the last step.
The combination that actually works is someone who genuinely relocates (days, home, family) and then sets up or keeps the Paraguayan company as the vehicle for their local activity. A Paraguayan company with no real residency behind it is a folder with a tax ID. With the real residency behind it, it is a genuine, cheap-to-maintain territorial piece.
Company in Paraguay vs. US LLC: the honest comparison
The table above summarises the contrast, but it is worth spelling out because it is the question we get asked most. They are not competing for the same job.
The Paraguayan company wins when you genuinely live in Paraguay and your activity, at least in part, is invoiced or takes place inside the country: there, 10% IRE on local-source profit and 8-10% IRP on what you earn inside the country are a cheap and predictable territorial system.
The LLC wins when what you need is USD operations and credibility with US or European clients (Stripe, Mercury, an invoice a US procurement department recognises without pushback) regardless of where you are resident. It is transparent: no federal tax of its own without ETBUS, but it also does not lower anything if you remain tax resident in a worldwide-income country.
The mistake we keep seeing: someone sets up an LLC expecting it to solve their Paraguayan tax position, or sets up a Paraguayan company expecting it to deliver American banking. Neither does what the other does. For a fair number of founders already living here, the real combination is both pieces at once: the LLC as the USD-facing operating layer, the Paraguayan company (or simply you as a resident individual) for whatever you invoice or earn inside Paraguay.
Not sure how this applies to your case?
Eleven questions and we tell you whether the LLC fits, and if it does not, that too.
Who this fits, and who it does not
Probably yes, if:
- You already genuinely live in Paraguay, or you are relocating for real and can document it.
- Some of your economic activity is actually carried out or invoiced inside the country.
- You value a predictable territorial system over any unqualified “zero tax” promise.
- You want to separate personal assets from business risk with a local entity (EAS or SRL).
- You will combine it with a USD-facing structure (typically a US LLC) for your international billing, rather than expecting it to replace one.
Probably not, or not yet, if:
- You are chasing “zero tax” without genuinely relocating: the company does not do that job. A real move does.
- Most of your revenue comes from US or European clients and you need Stripe, Mercury or a US-facing presence: that is a US LLC’s job, not this company’s.
- You remain tax resident in your home country with no real plan to relocate: a Paraguayan company with no residency behind it is cost without an advantage.
- You are still validating the business and have no real activity to register anywhere yet.
How we handle this at Cheq
We coordinate both pieces (the Paraguayan company and, where relevant, the US LLC) alongside our of-counsel legal partners in Paraguay, so they are designed to fit each other rather than two separate filings that never speak to one another. We choose the vehicle (sole trader, EAS or SRL) based on your scale and ownership structure, and we check with your tax adviser how it interacts with your actual residency: both the one you are leaving and the Paraguayan one.
What we will not do is sell the Paraguayan company as a tax shortcut if you remain, in fact, living somewhere else. If that is your case, we say so in the assessment and explain what has to happen before the corporate piece: almost always, the residency.
In summary
A company in Paraguay (sole trader, EAS or SRL) is taxed under a territorial system with one exception for foreign dividends and deposits: 10% IRE on Paraguayan-source profit, 8-10% IRP on your personal Paraguayan-source income, and your foreign income generally stays outside both. It is cheap to set up and to maintain relative to other jurisdictions in the region. What it will not do is replace a US LLC if your business needs dollars and credibility with American clients, or replace a genuine tax residency move if you remain, in fact, living elsewhere. Properly combined with whichever piece you are missing (an LLC, a real residency move, or both), it is one of the more efficient and honest structures available today for someone who genuinely lives in Paraguay. If you want to see how it fits your case, that is what the assessment is for.
Explore the full guide
Frequently asked questions
Is this the same as tax residency in Paraguay?
No. This guide is about the company: the vehicle (sole trader, EAS or SRL), how it is taxed, and what it costs to keep. Tax residency is a separate question: whether Paraguay treats you as its tax resident, which depends on your actual life there, not on a company registration. You can have the company without the residency, and the residency without the company. That side is covered in a US LLC when you live in Paraguay.
Do I need to be resident in Paraguay to set up the company?
Not strictly to incorporate: the vehicle can be formed before you have relocated. But the real benefit (the territorial rate, the low IRP, the coherence between the company and the person) only lands once your tax residency has genuinely moved too. A Paraguayan company with no resident behind it is a folder with a tax ID, not a finished structure. (confirm exact ownership requirements for non-residents with the legal partner, by vehicle type.)
Which vehicle should I choose: sole trader, EAS or SRL?
It depends on scale and whether you will have partners. Sole trader status is the simplest for a single owner with modest activity. The EAS (a simplified joint-stock company) is built to be incorporated online, quickly, with less corporate formality: the usual starting point for a solo founder who wants a proper legal entity fast. The SRL suits a business with more than one partner, or one that wants a more conventional capital structure.
Does a Paraguayan company let me invoice US clients properly?
You can invoice with it, but it does not solve the same problem as a US LLC. It gives you no native access to Stripe or the USD banking a US client expects, and a Paraguayan invoice does not always clear a US company's procurement system. If most of your revenue is US or European clients paying in dollars, the operational piece is usually the LLC; the Paraguayan company handles your local operation and your territorial tax position as a resident.
Can I run a Paraguayan company and a US LLC at the same time?
Yes, and for a fair number of founders that is exactly the combination that works: the LLC as the USD-facing operating layer, the Paraguayan company (or simply you as a resident individual, depending on the case) for whatever you invoice or earn inside Paraguay. What it will not do is change your tax position if you remain, in fact, resident somewhere else.
How long does it take to become operational?
Online incorporation of an EAS or SRL is usually a matter of days rather than months. The real bottleneck is almost never the registry: it is opening a bank account and, where relevant, migratory residency. We confirm exact timelines for your case with our legal partners in Paraguay.
