Transfer Pricing in Paraguay

The legal framework

Paraguay's transfer pricing rules are recent, statutory and prescriptive. They sit in articles 35 to 39 of Law No. 6380/2019, Chapter III of Book I. Article 35 calls the standard the Principio de Independencia: IRE taxpayers dealing with related parties must price by reference to what independent parties would have agreed, failing which the administration may determine income and deductions itself. The chapter applies from fiscal years beginning 1 January 2021, and the operating detail sits in Decree No. 4644/2020 and General Resolutions 86/2021, 96/2021, 115/2022 and 118/2022.

Scope is narrower than it looks. The regime bites where an IRE taxpayer transacts with a related party abroad, or with a Paraguayan related party where the transaction is exempt, exonerated or outside IRE for one side; purely domestic dealings between two fully taxed parties are excluded, as are SIMPLE and RESIMPLE taxpayers. Article 37 defines relatedness by participation in administration, control or capital, capital being more than 50 per cent of voting stock, and article 3 of RG 96/2021 adds a functional-influence list that catches minority shareholders holding management rights. Dealings with residents of low or no-tax jurisdictions, free zone users and maquiladoras are presumed related unless rebutted through Marangatu.

The OECD Guidelines have no formal status: nothing in the Law, the Decree or the resolutions mentions them, and Paraguay's own OECD profile concedes as much. They persuade; they do not bind. The authority is no longer SET but the Dirección Nacional de Ingresos Tributarios, created by Law No. 7143/2023, and pre-2024 SET resolutions are now applied by DNIT.

Methods, comparables and benchmarking

Paraguay applies a method hierarchy, not a most appropriate method rule. Article 38 lists six ordinary methods plus the numeral 7 commodity rule and requires CUP to be tried first; resale price, cost plus, profit split, residual profit split and TNMM become available only where CUP cannot establish market pricing. The study must therefore evidence the rejection of CUP first.

Numeral 7 is the regime's sharpest edge. Exports of soy, soy derivatives, maize, rice and wheat must be priced at the quotation ruling on the date shipment is completed, or the last preceding quoted day, with the contract-date price available only where the contract has been registered. RG 86/2021 designates the Bolsa de Cereales de Buenos Aires and CEPEA as reference sources, permits freight, insurance and quality adjustments to an FOB Paraguayan port basis, requires contract registration in Marangatu within fifteen business days of the month following execution or price fixing, and imposes a monthly DJI-Num 7 return.

Elsewhere, where two or more comparables are found the taxpayer must compute the interquartile range and the median. A result inside the range is arm's length; a result outside it that reduces the IRE base is reset to the median, so the mechanism runs one way only. Either the Paraguayan entity or the foreign related party may be tested, but testing a foreign party requires evidence certified in its country of origin by an independent auditor, a real brake. Internal comparables take priority where both types exist. Usable Paraguayan financial data barely exists, so sets are built regionally, and RG 96/2021 then bites: comparable data should be same-year, with information from other years usable only where business cycles or atypical sector conditions justify it and the justification is set out in the study; loss-making comparables are barred unless justified in the study; multi-segment data must be shown not to distort the analysis; and related-party transactions inside comparable results must be stripped out.

Documentation: what DNIT expects

The single documentation instrument is the Estudio Técnico de Precios de Transferencia. There is no master file, no country-by-country report and no separate transfer pricing return. Master-file content is folded into the ETPT: article 3 of RG 115/2022 lists twenty-four minimum items, from group background and value drivers through to method selection, comparable rejection reasons and the range workings. CbC reporting appears only as a question: whether the group files one, and where.

Filing is required where prior-year gross income exceeded G. 10,000,000,000 and, irrespective of income, where the taxpayer dealt with residents of low or no-tax jurisdictions, free zone users or maquiladoras and the presumption of relatedness was not rebutted. Below the threshold no study is due, but article 11 of RG 115/2022 lets DNIT demand substantiation from any taxpayer within Chapter III: the threshold exempts from filing, it is not a safe harbour.

Everything runs through Marangatu. The study is uploaded in PDF, the working papers as spreadsheets with live formulas so calculations can be recomputed; both have the status of a sworn declaration. A separate summary functions as the de facto transfer pricing return, capturing each related party, each transaction and amount, the tested party, method, margin and any adjustment. Deadlines run off the accounting year-end and the last RUC digit: July of the following year for a 31 December close, November for a 30 April close, January for a 30 June close. The obligation must be registered in the RUC under code 957-ETPT within thirty business days of year-end. Nothing is discharged until a registered Authorised Transfer Pricing Professional confirms the filing in Marangatu, in Spanish, with their own credentials.

Audits, penalties and the enforcement climate

Formal breaches are contraventions under article 176 of Law No. 125/1991. RG 115/2022 sets the tariff: G. 900,000 for late filing of the evidence rebutting presumed relatedness and for a late DJI-Num 7, and the maximum contravention fine for a late study, a study containing inaccurate data, or failure to retain supporting documents. The maximum is indexed annually; the last verifiable figure is G. 1,530,000 under Decree No. 5046/2021, so treat it as a floor.

Substantive exposure is larger. Where an adjustment produces underpaid tax, omisión de pago carries up to 50 per cent of the tax omitted and defraudación 1 to 3 times the tax defrauded, with intent presumed from an understated base; mora runs from 4 to 14 per cent by delay band, plus interest, cumulatively. There is no documentation-based penalty protection: a compliant ETPT does not defeat a penalty. The only mitigation is article 175, which credits spontaneous regularisation, unavailable once an audit has been ordered. Limitation is five years from 1 January following the year the obligation fell due, interrupted by assessment notification, acknowledgment or part payment.

Enforcement is still maturing. DNIT has taken Tax Inspectors Without Borders assistance, with Chile's Servicio de Impuestos Internos, on risk analysis and case selection, with a further mission in April 2026, and reported 203 specific audits in 2025. Activity has concentrated on formal compliance and commodity price adjustments rather than contested margins, and no Paraguayan decision on the substance of Chapter III is publicly identifiable.

Dispute resolution and advance certainty

Paraguay operates no advance pricing agreement programme of any kind, no transfer pricing rulings and no safe harbours. The only forward-looking instrument is the general binding consultation, and DNIT is using it on intra-group flows: its published index records Consulta Vinculante No. 694 of May 2025, under the income tax, VAT and non-resident income tax heads, on the tax treatment of reimbursements made by a foreign head office to its Paraguayan branch. The full text is not published and the entry carries no transfer pricing head, so it shows that head-office recharges are being examined rather than settling how they must be priced.

Cross-border relief depends entirely on treaty. Mutual agreement procedure is the only mechanism Paraguay reports, available under Article 25 of the treaties in force with Chile, Taiwan, the United Arab Emirates, Uruguay, Qatar and, following Law No. 7271/2024, Spain. There is no domestic implementing regulation and no published DNIT guidance. Corresponding adjustments are treaty-only and Paraguay has not signed the BEPS multilateral instrument, so an adjustment against a non-treaty counterparty is unrelieved double taxation.

Domestically the path is fixed and slow: audit, a sumario administrativo with a ten-day transfer of the file, a recurso de reconsideración within a strict, non-extendable ten business days that suspends enforcement and is a precondition to further challenge, then the Tribunal de Cuentas and finally the Supreme Court's Sala Penal. Four to five years from audit to judgment is the reported norm. One point is unsettled: Paraguay told the OECD that secondary adjustments are available under articles 212 and 225 of Law No. 125/1991, but both are purely procedural, so the exposure is asserted rather than established.

Pillar Two and what changes in 2026

Paraguay has not enacted Pillar Two. There is no income inclusion rule, no undertaxed profits rule and no qualified domestic minimum top-up tax. With IRE at 10 per cent and maquila taxed at 1 per cent of Paraguayan value added, effective rates for in-scope groups sit well below 15 per cent, so top-up tax on Paraguayan profit is presently collected by other jurisdictions. Adoption before 2028 looks unlikely, given a political commitment not to raise taxes; a QDMTT confined to in-scope groups is the option most discussed.

On Amount B, Paraguay is listed as a covered jurisdiction under the Inclusive Framework statement of 17 June 2024, for a commitment period running from 1 January 2025 to 31 December 2029, so other members undertake to respect its use of the simplified and streamlined approach; the linked commitment to relieve any resulting double taxation is the one that depends on a bilateral treaty being in force. Paraguay has not adopted Amount B domestically, and the CUP-first hierarchy in article 38 would have to be amended first.

One domestic development matters more in the near term: the September 2025 overhaul of the investment regimes, Laws No. 7546/2025 to 7548/2025, which resets the maquila and free zone landscape whose users are deemed related parties. A caution on another. The 'draft Tax Code' hosted on the Ministry of Economy and Finance's site is a second draft dated October 2006, not a 2025 proposal, and it remains unenacted; its seven-year retention duty, its extended limitation period for unregistered taxpayers and its twelve-month suspension on notification of an individualised audit are not law and should not be advised on as pending reform. Filing mechanics, by contrast, have normalised: the physical-media workarounds of RG 134/2023 and RG DNIT 16/2024 gave way to the Marangatu route set out in DNIT's January 2025 guide.

How practitioners should respond

Work backwards from ratification, not from the deadline. No study counts as filed until an Authorised Transfer Pricing Professional confirms it in Marangatu, and because DNIT does not publish the PAPT register the pool of available professionals cannot be gauged in advance. Engage the ratifier early, confirm the 957-ETPT registration is live within thirty business days of year-end, and file nil studies where there is nothing to report.

Screen counterparties early against the low or no-tax jurisdiction test in Decree No. 4644/2020 as amended and against the RG 118/2022 list, which reaches beyond classic offshore centres to entities in certain US states. A presumption not rebutted on time pulls the taxpayer into the full study obligation regardless of income, and the rebuttal deadlines fall months before the study deadline.

Build the file around the statute. Evidence the rejection of CUP transaction by transaction, keep working papers computable rather than printed, use same-year comparable data unless a business cycle or atypical industry conditions justify going wider and say so in the study, justify any loss-making comparable, and test a foreign party only where independent auditor certification can actually be obtained. For commodity exporters, contract registration and the monthly DJI-Num 7 are the highest-frequency risk in the regime.

Finally, treat published sources with care. Paraguay's OECD country profile is dated April 2023: it predates DNIT, the Spain treaty and the 2025 incentive laws, and on secondary adjustments it asserts a power the cited articles do not confer. Its Chapter III citations still hold; the commentary around them needs checking against DNIT's current resolutions. The same caution applies to secondary commentary treating the 2006 draft Tax Code as a current bill.