The income tax treaty between Paraguay and Spain took effect on 14 October 2024.

This agreement aims to enhance economic relations, encourage investments, and enhance bilateral cooperation in tax matters between the two countries. It seeks to prevent instances of non-taxation or reduced taxation, particularly through tax evasion or avoidance tactics.

This tax agreement, signed on 25 March 2023, is the first between the two nations. The treaty addresses income taxes for individuals and businesses in Paraguay and Spain, including personal, business, and non-resident income taxes.

Earlier, Paraguay officially ratified its pending income tax treaty with Spain on 29 May 2024.

The treaty applies from 1 January 2025.

Withholding tax rates

  • Dividends: The tax rate is 5% for companies owning at least 50% of the paying company’s capital over a year, 0% for pension funds, and 10% in other cases.
  • Interest: 5%
  • Royalties: 5%