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Hiring in Paraguay

Paraguay, officially known as the Republic of Paraguay, is a country in South America. Asunción is the capital and the largest city of Paraguay. Spanish and Guarani are the official languages. Agriculture is one of the largest sectors. This is followed by the mineral industry that includes the production of cement, steel and iron ore. Paraguay is one of the largest exporters of soybean, stevia and beef. Its main trading partners are Brazil, Argentina, Russia, Chile and Turkey. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Paraguay’s legal and tax regulations. Labor Code stipulates that employees are entitled to 12 days of annual leave. Residents and Non-residents are taxed on Paraguay-source income. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Paraguay’s Labor Code and tax laws.

statutory labor requirements

Probation Period

  • Unskilled workers have a trial period of 30 days, while skilled workers have a trial of 60 days. 
  • For highly skilled employees, the probation period is presumed to be six months, though the exact terms may be negotiated by employee and employer prior to finalizing their contract.

Annual Leave

  • In Paraguay, vacation days are earned after working for one year for the employer. 
  • Employees earn 12 days if they worked from one to five years, 18 days for five to 10 years and 30 days for 10 years of employment.

Public Holidays

  1. New Year's Day (1st January)
  2. Heroes' Day (1st March)
  3. Maundy Thursday (9th April)
  4. Good Friday (10th April)
  5. Labor Day (1st May)
  6. Independence Day (of Paraguay) (14th to 15th May)
  7. Chaco Armistice
  8. Founding of Asunción (15th August)
  9. Boqueron Battle Victory Day (29th September)
  10. Virgin of Caacupe Day (8th December)
  11. Christmas Day (25th December)

Maternity Leave

  • In Paraguay, maternity lasts for 18 weeks and is paid at a rate of 100% of the gross salary by IPS.
  • In the event of multiple births, the woman receives an additional 30 days per child.

Paternity Leave

  • A new father can take 2 weeks' paid paternity leave after the delivery of the child.

Sick Leave

  • In terms of sick leave, workers that have a justified illness are entitled to take medical leave, with 50% of their salary paid by the government.

Work Hours

  • The standard work week in Paraguay is 48 hours
  • For employees who work nights, the work week is 42 hours.

Overtime

  • Overtime is paid at different rates:
  • 150% of the regular pay rate for overtime during daytime hours

200% of the regular pay for overtime during night hours and public holidays.

Notice Period

  • In Paraguay, notice of termination must be delivered to the employee in writing.
  • Mandatory notice period is 1 day.

Severance

  • If the cause for termination is justified (misconduct or poor performance), the employee is not entitled to severance pay.
  • An employee who is terminated without cause is entitled to 15 days of severance pay for every year of service.
  • For an employee who has over 10 years of employment with a company- If an employer is not able to prove a just cause to a labor court, the employee might either be reinstated or would have the right to double the regular severance pay.

13th / 14th Month Pay

  • Yes (Mandatory)
  • There is a statutory requirement to pay the 13th month.
  • This is a Christmas bonus usually paid in December called Aguinaldo.

income tax

  • Individuals with residence in Paraguay and/or abroad are taxable on Paraguayan-source income.
  • The personal income tax is imposed on Paraguayan source income derived from services rendered by individuals and on other certain types of income
  • The personal income tax calculation is based on the difference between the actual income received and expenses incurred in Paraguay (cash basis) during the fiscal year (January through December).
  • The general PIT rate is 10% for individuals with residence in Paraguay who obtain an annual income equal to or higher than 36 monthly minimum salaries (approximately 13,000 United States Dollars [USD] annually). 
  • The salary to be used is that which is in force on 1 January of every year.

Income Tax

Flat Rate

10%*

*if annual income equal to or higher than 36 monthly minimum salaries (approximately 13,000 United States Dollars [USD] annually).

deductible expenses

  • Travel expenses and other similar payments are deductible, as long as they are necessary to produce such taxable income and comply with certain conditions established in the regulations.
  • Donations to the state, municipalities, and religious entities recognized by competent authorities are deductible, as well as donations to legally constituted entities dedicated to social welfare, education, cultural development, charity, or philanthropy previously recognized by the administration as public service organizations. 
  • Individuals who do not contribute to the social security system can deduct up to 15% of the gross income placed in:
    • A saving account at financial and banking entities regulated by law 861/96.
    • Cooperatives that carry on activities of saving and credit.
    • Investments in nominated shares in entities with open capital in the country.
    • Private retirement or pension funds in the country with at least 500 active payers.
  • Family expenses and personal investments, such as education, health, clothing, housing, and own and family entertainment, are deductible as long as the titular is not a taxpayer of any other tax in which the expenses have already been deducted. 

Deductible Expenses

Employment Deductions: -

  • Travel expenses and other similar payments are deductible, as long as they are necessary to produce such taxable income and comply with certain conditions established in the regulations.

Personal Deductions: -

 

Charitable Contributions

  • Donations to the state, municipalities, and religious entities recognized by competent authorities are deductible, as well as donations to legally constituted entities dedicated to social welfare, education, cultural development, charity, or philanthropy previously recognized by the administration as public service organizations. 

Savings Deduction

  • Individuals who do not contribute to the social security system can deduct up to 15% of the gross income placed in:
  • A saving account at financial and banking entities regulated by law 861/96.
  • Cooperatives that carry on activities of saving and credit.
  • Investments in nominated shares in entities with open capital in the country.
  • Private retirement or pension funds in the country with at least 500 active payers.

Family Expenses

  • Family expenses and personal investments, such as education, health, clothing, housing, and own and family entertainment, are deductible as long as the titular is not a taxpayer of any other tax in which the expenses have already been deducted. 

 immigration

  • All foreigners wishing to maintain residency in Paraguay must obtain residence permits. 
  • The Paraguayan migratory legislation does not provide for work visas. 
  • Individuals may enter as tourists for a maximum period of 90 days (renewable).
  • During this period, they can start the process to obtain temporary or permanent residence permits. 
  • Temporary residence permits allow their holders to reside in Paraguay. 
  • They are valid for a period of one year and may be renewed for a period of up to six years. 
  • The generally required documents to reside in Paraguay are the following:
    • Identity card or passport from the country of origin 
    • Birth certificate 
    • Marriage certificate or divorce decree (to demonstrate civil status) 
    • Police or criminal records (from the age of 14) from the country of origin or residence during the previous five years 
    • Police records certificate for foreigners issued by the Department of Informatics of the National Police (from the age of 14) 
    • Health certificate from the Ministry of Health, mentioning psycho-physical health and confirming absence of infectious diseases 
    • Certificate of life and residence, issued by the police department of the country of origin 
    • Certificate of entrance and permanence in Paraguay 
    • Consular visa for countries that require it (verified by the Paraguayan Ministry of Foreign Affairs) 
    • Two passport-size photos (2.5 cm x 2.5 cm) in color 
    • Work promise, mentioning the salary, with a signature certified before a notary public 
    • Commercial patent, Tax Identification Number and identity card of the employer 
    • Professional and/or technical title (legalized) or an official education certificate 
    • Proof of maintenance (for adults) 
  • An individual with temporary residence must renew his or her permit each year.
  • For obtaining permanent residence, the following additional documents are required: 
    • Proof of economic solvency, which is USD5,000 or the equivalent in a bank, credit union or financial entity, or a university title with a work promise mentioning the salary to be received (same as for temporary residence; see above). 
    • Signed affidavit with the promise to obey Paraguayan laws, signed before a notary public. 
  • Permanent residence permits are valid for 10 years and may be renewed.
  • Neither permanent nor temporary residents need to obtain a work permit in Paraguay. 
  • The residence permit is sufficient for performing gainful activities in the country

Type of Visa/ Permit

Documentation

Validity

Eligibility

Temporary Residence Permit

  • Identity card or passport 
  • Birth certificate 
  • Marriage certificate or divorce decree  
  • Police or criminal records (from the age of 14) from the country of
  • Police records certificate for foreigners issued by the Department of Informatics of the National Police (from the age of 14) 
  • Health certificate from the Ministry of Health
  • Certificate of life and residence, issued by the police department of the country of origin 
  • Certificate of entrance and permanence in Paraguay 
  • Consular visa for countries that require it (verified by the Paraguayan Ministry of Foreign Affairs) 
  • Two passport-size photos 
  • Work promise, mentioning the salary, with a signature certified before a notary public 
  • Commercial patent, Tax Identification Number and identity card of the employer 
  • Professional and/or technical title (legalized) or an official education certificate 
  • Proof of maintenance (for adults) 

1 year (can be renewed for up to 6 years)

  • As work permits do not exist in Paraguay, individuals who wish to work in Paraguay must obtain a temporary residence permit or permanent residence permit

Permanent Residence Permit

  • Identity card or passport 
  • Birth certificate 
  • Marriage certificate or divorce decree  
  • Police or criminal records (from the age of 14) from the country of
  • Police records certificate for foreigners issued by the Department of Informatics of the National Police (from the age of 14) 
  • Health certificate from the Ministry of Health
  • Certificate of life and residence, issued by the police department of the country of origin 
  • Certificate of entrance and permanence in Paraguay 
  • Consular visa for countries that require it (verified by the Paraguayan Ministry of Foreign Affairs) 
  • Two passport-size photos 
  • Work promise, mentioning the salary, with a signature certified before a notary public 
  • Commercial patent, Tax Identification Number and identity card of the employer 
  • Professional and/or technical title (legalized) or an official education certificate 
  • Proof of maintenance (for adults)
  • Proof of economic solvency, which is USD5,000 or the equivalent in a bank
  • Signed affidavit with the promise to obey Paraguayan laws, signed before a notary public. 

10 years (may be renewed)

  • As work permits do not exist in Paraguay, individuals who wish to work in Paraguay must obtain a temporary residence permit or permanent residence permit
  • Individuals must reside in Paraguay for at least 3 years in order to apply for a permanent residence permit

 value added tax

  • The standard rate of VAT is 10 percent, a differential (reduced) VAT rate of 5 percent applies to:
    • lease and transfer of properties
    • transfer of agricultural products, fruits, horticultural products in their natural state and live animals; products obtained from hunting and fishing, live or not; vegetable oil, virgin or crude degummed; certain products from the ‘family basket’: rice, noodles, mate (yerba mate), edible oils, milk, eggs, raw meat, flour and iodized salt
    • transfer of pharmaceutical products.

VAT

Standard Rate

10%

Reduced Rate

5%

 

withholding tax

Dividends

  • Dividends distributed to residents and nonresidents are subject to withholding tax at rates of 8% and 15%, respectively

Interest

  • A 15% withholding tax rate applies on 30% of the gross amount of interest or commissions on loans or credit operations paid to unrelated nonresident public or private entities and multilateral credit organizations, including interest from the placement of bonds abroad through recognized stock markets.

Royalties

  • Royalties paid to residents and nonresidents are subject to withholding tax at rates of 8% and 15%, respectively.

Fees for Technical Services

  • A 15% withholding tax applies to the gross amount of payments to non-residents

Branch Remittance Tax

  • A 15% withholding tax applies to gross amounts made available, remitted or paid to partners, shareholders, a parent company, or other related companies/ entities.

WHT

Dividends

Residents

8%

Nonresidents

15%

Interest

15%

Royalties

15%

Fees for Technical Services

15%

Branch Remittance Tax

15%

termination

  • In Paraguay, notice of termination must be delivered to the employee in writing.
  • Mandatory notice period is 1 day.
  • If the cause for termination is justified (misconduct or poor performance), the employee is not entitled to severance pay.
  • An employee who is terminated without cause is entitled to 15 days of severance pay for every year of service.
  • For an employee who has over 10 years of employment with a company- If an employer is not able to prove a just cause to a labor court, the employee might either be reinstated or would have the right to double the regular severance pay.

statutory benefits

  • These are mandatory benefits as postulated by law
  • This includes probationary period, annual leave, public holidays, maternity leave, paternity, sick leave, overtime pay, notice period, severance pay, and 13th month pay
  • Statutory benefits also include social security benefits

Statutory Benefits

Probationary Period

Annual Leave

Public Holidays

Maternity Leave

Paternity Leave

Sick Leave

Overtime Pay

Notice Period

Severance Pay

13th Month Pay

Social Security Benefits

 payments and invoicing

  • The tax year in Paraguay is the calendar year (1 January through 31 December). 
  • Individuals must file a tax return by March of the following year. 
  • The exact date depends on the taxpayer’s Tax Identification Number.
  • Joint filing is not allowed. 
  • Each person must file a tax return individual income exceeds the threshold

ease of doing business

  • The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • According to the World Bank Paraguay ranked 125th in the World in 2019 in terms of ease of doing business.

 employee accruals

 
   
Christmas Bonus%

Based on one month bonus (paid in December)
8.33%

Christmas Bonus Over Vacations %

0%

Severance per Year %

Applies only if the employee is dismissed for an unjust cause, if that is the case they will be entitled to 15 days per each year worked.

Vacations % Employees are entitled to 12 days of annual leave (3.29% of annual salary)
Notice %

Employees are entitled to a 45 day notice period after one year of service or more (12.26%)

Christmas Bonus Over Notifications% 0%
Vacations Plus% 0%
Total percentage of Salary (yearly) The total employment accruals as a percentage of salary per anum are equal to 23.98%

 

employer accruals

Additional information (Country Accruals)

   
Superannuation 16.50%
Maternity leave 90 days
Christmas Bonus 8.33%
Vacations 6.03%
Description Screenshot_9 (1)

 

 

 

Employer Accruals Additional information

    Employment Accruals
Annual Leave Employees earn 12 days if they worked from one to five years, 18 days for five to 10 years and 30 days for 10 years of employment. This equals 3.28% (12/365 days) of annual income
Maternity Leave In Paraguay, maternity lasts for 18 weeks and is paid at a rate of 100% of the gross salary by IPS. This equals 34.6% (18/52 weeks) of annual income
Paternity Leave A new father can take 2 weeks' paid paternity leave after the delivery of the child. This equals 3.84% (2/52 weeks) of annual income
Overtime Overtime is paid at different rates:
• 150% of the regular pay rate for overtime during daytime hours
• 200% of the regular pay for overtime during night hours and public holidays.
Depends on the numbe rof overtime hours worked
Severance An employee who is terminated without cause is entitled to 15 days of severance pay for every year of service. This equals 4.1% (15/365 days) of annual income
13th Month Pay The 13th month salary is mandatory is Paraguay and is equivalent to one month’s salary that is paid out in December (before Christmas This equals 8.33% (1/12 months) of annual income
Social Security The employer´s contributions are computed on total payroll and are paid together with the employee´s withholding to the Social Security Institute. The contribution rate is 16.5%. This equals 16.5% of annual income

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