Paraguay – Transfer Pricing (2025)

Legal framework and scope

Paraguay’s transfer pricing framework is primarily established in Law N° 6380/2019, Book I, Chapter III, titled “Special Rules for Valuation of Operations,” and is complemented by Decree N° 4644/2020 and implementing general resolutions, notably General Resolution N° 96/2021 and General Resolution N° 115/2022. The Arm’s Length Principle is enshrined in Article 35, Book I, Chapter III, “Independence Principle”, of Law N° 6380/2019. The rules apply to taxpayers that enter into transactions with related parties resident in Paraguay and abroad, and in specified cases to transactions with residents in low- or no-tax jurisdictions, free zone users or maquila companies, as set out in Article 37, Book I, Chapter III, “Linked or Related Parties”, of Law N° 6380/2019 and further developed in the resolutions.

Taxpayers are required to prepare and retain a Transfer Pricing Technical Study (ETPT) subject to a size threshold: taxpayers whose gross income in the immediately preceding fiscal year did not exceed PYG 10 000 000 000 (approximately EUR 1 293 496) are not required to prepare the ETPT, except where the presumption of linkage with low- or no-tax jurisdictions applies under the penultimate paragraph of Article 37 of Law N° 6380/2019.

Arm’s Length Principle and the role of the OECD Guidelines

The Arm’s Length Principle is explicitly adopted in domestic law through Article 35, Book I, Chapter III, “Independence Principle”, of Law N° 6380/2019. During the drafting of the implementing regulations (Decree and Resolutions), Paraguay worked collaboratively with OECD experts and considered the OECD Transfer Pricing Guidelines in preparing the regulations; however, the profile notes that “there is no express mention of the Guidelines in the Law or in the Decree and Resolutions.” Therefore, while the domestic framework is technically aligned with the OECD guidance, the Guidelines are used as a substantive reference rather than being incorporated literally into statute.

Definition of related parties (thresholds, control, kinship, PEs)

Related parties are defined in Article 37, Book I, Chapter III, “Linked or Related Parties”, of Law N° 6380/2019, and further elaborated in Article 3 of General Resolution N° 96/2021. The law provides that two or more persons are related when a person or group of persons participates directly or indirectly in the administration, control or capital of another. Ownership of more than 50% of capital stock with voting rights, directly or indirectly, is treated as participation in capital; the same percentage applies where capital is not represented by shares. Participation in administration or control includes practical capacity to influence commercial decisions, e.g., via appointment of managers or directors, contractual dominant influence, functional influence or credit rights that can direct or define the activities of the IRE taxpayer.

The definition of “person” includes natural persons, legal entities, permanent establishments of non-residents, trusts or similar legal figures, domestic or foreign. Related parties of a permanent establishment include the parent company and other permanent establishments. There is a legal presumption that transactions of residents in Paraguay with residents in low- or no-tax jurisdictions, including free zone users and maquila companies, are transactions between related parties, unless rebutted; in such cases the taxpayer must comply with the obligation established in Article 35 of the Law. General Resolution N° 96/2021 lists additional assumptions that establish a relationship of linkage, such as functional influence through contractual clauses, minority administration, a common person influencing multiple parties, joint ownership exceeding 50%, capacity to direct corporate will through voting, common ownership of an entity with controlling votes, and decisive participation in setting business policies or supply/production/marketing.

Methods and criteria for application (hierarchy)

Paraguayan legislation provides a set of transfer pricing methods in Article 38, Book I, Chapter III, “Valuation Methods”, of Law N° 6380/2019, and in Article 21 of Decree N° 4644/2020. The law establishes a hierarchy of methods: the Comparable Uncontrolled Price (CUP) method, enumerated as numeral 1 of Article 38, must be applied first. If the CUP method is not appropriate to determine whether operations are at market prices, taxpayers may apply the methods set out in numerals 2 to 6 of Article 38, which include the Resale Price Method, the Cost Plus Method, the Profit Split Method, the Residual Profit Split Method and the Transactional Net Margin Method. Article 38 also contains an additional method in numeral 7 related to goods with public international prices, as further developed in Decree N° 4644/2020 and Article 21 of that Decree; per instruction of this assignment, commodities-specific methodology is not elaborated here.

Hence, the domestic criterion for selecting a method follows a hierarchy (CUP first), then alternative methods when CUP is not appropriate, consistent with the structure set out in Article 38 of Law N° 6380/2019.

Comparability and ranges (preference for comparables, adjustments, statistical ranges)

Comparability analysis in Paraguay follows principles aligned with Chapter III of the OECD Guidelines and is regulated in Articles 8–10 of Decree N° 4644/2020 and Articles 9, 10, 15, 16 and 17 of General Resolution N° 96/2021. These provisions implement a structured comparability analysis: determine the fiscal year for analysis, assess the environment and economic circumstances, perform a detailed functional analysis to identify relevant comparability factors (functions, assets and risks, and any unique or valuable contributions), review internal comparables where available, examine external comparable sources, select the most appropriate method and financial indicator, identify potential comparables, determine necessary adjustments to improve comparability and apply the most reliable comparables.

Domestic comparables are preferred when both internal and external comparables exist: Article 7 of Decree N° 4644/2020 requires taxpayers to prefer internal comparables when available. If the functional analysis indicates that the foreign related party is the appropriate party to analyze, documentary evidence certified in the country of origin by an independent auditor must be provided, under conditions to be determined by the Tax Administration.

Comparables that reflect operating losses should generally be excluded: Article 16 of General Resolution N° 96/2021 provides that operations or companies with operating losses should not be used as comparables unless inclusion is justified and documented in the ETPT due to sectoral characteristics or business strategy.

The domestic rules allow and prescribe statistical measures for ranges: Article 11 of Decree N° 6644/2020 states that when two or more comparable transactions are identified, the interquartile range and the median of prices, consideration amounts or profit margins must be determined. If the taxpayer’s price or margin lies within the interquartile range, it will be considered consistent with the Arm’s Length Principle. If it falls outside the range and affects the IRE tax base, the arm’s length amount is deemed to be the median of that range.

Comparability adjustments are required when differences materially affect price or margin: Article 36, Book I, Chapter III, “Comparability”, of Law N° 6380/2019 establishes that differences that significantly affect the price, consideration or profit margin must be eliminated through reasonable adjustments. Article 13 of General Resolution N° 96/2021 provides that adjustments should only be performed when they improve reliability, must be quantitatively and qualitatively justified, and cannot be applied routinely without proper documentation and formulas demonstrating their impact.

Documentation and reporting (Master, Local, CbC, thresholds, language, deadlines, forms)

Article 39, Book I, Chapter III, “Technical Study”, of Law N° 6380/2019 requires taxpayers conducting transactions with related parties to obtain and keep a Transfer Pricing Technical Study (ETPT) that documents compliance with the Arm’s Length Principle. The ETPT must include identification of related parties and ownership links, functional analyses (functions, assets and risks), detailed transaction listings and amounts per related party and per transaction type, and the selection and application of the method with identification of comparables.

General Resolution N° 115/2022 specifies the taxpayers obliged to submit the ETPT: IRE taxpayers with cross-border related-party transactions (or domestic transactions that are exempted from IRE for one party) whose gross income in the prior fiscal year exceeded PYG 10 000 000 000 (approx. EUR 1 293 496), as well as taxpayers engaged in transactions with residents of low- or no-tax jurisdictions or with free zone users or maquila companies when the presumption of linkage applies.

The domestic legislation, as reported in the profile, requires a Local File consistent with Annex II to Chapter V of the OECD TPG. The profile does not indicate a requirement to prepare a Master File consistent with Annex I to Chapter V nor a Country-by-Country Report consistent with Annex III to Chapter V in domestic law. Therefore, there is no specific domestic Master File or CbC-reporting obligation reported in the profile.

Form and timing: Article 7 of General Resolution N° 115/2022 mandates that the ETPT be submitted in portable document format (.pdf) and that the working papers used be submitted in spreadsheet format (.xls, .xlsx or .ods) including formulas for verification. A qualitative and quantitative summary of related-party transactions for the reported fiscal year must be filed in the “Marangatu” System. Deadlines depend on the taxpayer’s fiscal year end: taxpayers with fiscal year ending 31 December must submit the ETPT in July of the following year; those ending 30 April must submit in November of the fiscal year being declared; those ending 30 June must submit in January of the following fiscal year, under Article 9 of General Resolution N° 115/2022. The ETPT must be presented in Spanish.

Administrative treatment and forms: Decree N° 4644/2020, Article 30, specifies that the amount resulting from price adjustments under the Arm’s Length Principle constitutes net income of the Paraguayan entity for IRE purposes and that payment of IRE on such adjustments is performed annually through Form 500, “General Business Income Tax”, version 2, item 3(b), box 263. The Tax Administration will determine applicable forms and conditions.

Safe harbours / exemptions / materiality

The profile indicates that Paraguay does not have rules on safe harbours for certain industries, taxpayer types or transactions, nor other simplification measures of the kinds surveyed. The principal statutory exemption from ETPT preparation is the gross income threshold (PYG 10 000 000 000) described above, with the important caveat that taxpayers dealing with presumed related parties in low- or no-tax jurisdictions are not exempt regardless of size.

Advance Pricing Agreements (APAs) and Mutual Agreement Procedures (MAP)

The profile reports that the Mutual Agreement Procedure (MAP) is available in Paraguay and refers to “Paraguay’s OECD MAP Profile” for further information. The profile does not indicate that APAs (unilateral, bilateral or multilateral) are available domestically; the corresponding boxes are not checked. The profile does not provide procedural details, timeframes or domestic guidance on APAs or MAPs; therefore, No domestic procedural guidance is provided in this profile and users should consult Paraguay’s OECD MAP Profile and international OECD resources for procedural details.

Penalties and other considerations (secondary adjustments, re-characterisation, year-end adjustments, PEs)

General Resolution N° 115/2022 sets out penalties for formal non-compliance with ETPT obligations. Article 13 of General Resolution N° 115/2022 prescribes fines: late submission of supporting documents that distort presumed relations with foreign residents results in a fine of PYG 900 000 (approx. EUR 116); late submission of DJI-Num 7 likewise incurs PYG 900 000; submission of ETPT with inaccurate data, late submission of the ETPT outside the due date, and failure to preserve supporting documentation for the limitation period may give rise to the maximum fine established by the Executive Branch for contraventions in force at the expiration of the submission period. The profile does not specify the precise maximum monetary amounts for those maximum fines.

Year-end adjustments are permitted: Article 30, “Tax effect of the application of the Transaction Valuation Rules”, Decree N° 4644/2020 states that the amount resulting from price adjustments under the Arm’s Length Principle constitutes net income subject to IRE and that payment of IRE on such adjustments is made annually, with specific reporting via Form 500 as established by the Tax Administration. The Tax Administration has the authority to make secondary adjustments in the context of inspection and control under Book V of Law 125/1991 and Articles 212 and 225 of Law No. 125/1991.

Regarding profit attribution to permanent establishments (PEs), Paraguay follows the Authorised OECD Approaches (AOA) and reports implementation of these approaches in 5 out of 5 tax treaties in force. The profile does not provide detailed domestic implementation guidance for older treaties lacking the updated Article 7 language; therefore, No specific domestic guidance on case-by-case implementation is provided in the profile.

Other relevant rules

Financial transactions are specifically addressed in Decree N° 4644/2020: Article 10(3)(a) includes comparability criteria for financial operations, taking into account principal amount, term, guarantees, solvency of the debtor, effective repayment capacity, interest rate, commissions, administrative charges and other payments or charges. In addition, Article 15, Book I, Title I, Chapter I, numeral 23, “Deductible Expenses”, of Law N° 6380/2019 sets conditions for deductibility of interest, royalties and technical assistance payments to related parties: such payments are deductible provided they do not exceed market price or interest rates that exceed average deposit rates published by the Central Bank of Paraguay for comparable operations, that the taxes thereon have been entered, and that deductible amounts do not exceed 30% of net income for the year before calculating the deduction. Withholding obligations apply regardless of deductibility.

Paraguay does not have domestic regulation on Cost Contribution Arrangements (CCAs) according to the profile, and no simplified approach for low value-adding intra-group services is reported.

Conclusion

Paraguay’s transfer pricing regime, enacted through Law N° 6380/2019 and implemented by Decree N° 4644/2020 and supporting resolutions, adopts an arm’s length framework consistent in substance with the OECD Guidelines and sets out a clear method hierarchy, comparability rules, documentation obligations (local file), and statistical treatment of ranges. Important operational details, such as specific APA procedures and step-by-step MAP timelines, are not included in the country profile and should be sought in Paraguay’s OECD MAP Profile or through direct consultation with the Tax Administration. Key practical features include the gross income threshold for ETPT obligations (PYG 10 000 000 000), the use of interquartile ranges and medians for statistical assessment, the preference for domestic comparables, and limits on interest deductibility tied to market rates and a 30% net income cap.

References

For more information and country profiles consult: https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html