Tax Information Exchange in Paraguay

September 4, 2023

Paraguay has implemented the Convention on Mutual Administrative Tax Assistance in its regulations through the enactment of Law No. 6656/2020. In this regard, TPC Group explains the most important amendments and expectations concerning the Convention. 

1. Background 

Since the effectiveness of Law No. 6656/2020 in January 2022, Paraguay joins the network of 147 jurisdictions with information available for tax purposes. This is due to the constant problem of information dissymmetry between tax authorities and taxpayers when collecting taxes.  

This is why the OECD created the Global Forum on Transparency and Exchange of Information for Tax Purposes. Paraguay has been a member of the Global Forum since 2016. In the same line, it signed the Convention on May 29, 2018; therefore, it will be able to exchange information as of tax periods started on January 01, 2018. 

2. Taxes Included in the Convention 

Paraguay can only apply the information received regarding the taxes indicated as follows: Individual and Corporate Income Tax, Dividends and Profits Tax, Value Added Tax, and Excise Duty. Likewise, Paraguay may only request assistance for these taxes. 

3. Accepted Modalities of Exchange 

The Paraguayan Tax Authority may exchange information under any of the following modalities: 

  • At the request of a party: There must be a prior tax investigation or audit relating to a specific person or entity carried out by the tax authority of the requesting State.  
    • Automatic exchange of information: Paraguay has not yet adhered to a multilateral or bilateral agreement with other tax authorities, so it remains to be explained the procedures for this exchange and its application.  
      • Spontaneous exchange of information: This may be carried out when a tax authority of one State identifies the information that may be valuable for another tax authority of another State and decides to send it spontaneously without prior request.   
        • Tax audits abroad: Officials of the tax authority of the Paraguayan State may investigate (interviews, analysis of documents, and participation in tax audits) in the territory of a foreign State upon the consent of the latter. 

        4. Exception to the Request for Assistance 

        Firstly, Paraguay may refuse assistance to the requesting State when the request is contrary to the provisions of domestic law, and infringes public order, among others. Secondly, this may be denied for collecting taxes from States, notifying documents from other States, and applying preservation measures for foreign taxation.  

        Finally, Paraguay may refuse assistance regarding taxes established on behalf of political subdivisions of the State or its local authorities, social security contributions, taxes on real estate, taxes on donation, property, or inheritance, and taxes on the use or ownership of motor vehicles.