Our guide to Payroll in Paraguay

Doing Business in Paraguay

Investing in Paraguay

Paraguay presents a compelling landscape for foreign investment, characterized by a stable economy, favorable tax conditions, and abundant natural resources. The government actively promotes foreign direct investment (FDI) through various incentives, making it an attractive destination for international businesses.

General Information

Full name: Republic of Paraguay

Population: 6.19 million

Capital: Asunción

Major Language(s): Spanish and Guaraní

Major Religion(s): Christianity

Monetary Unit: Guaraní (PYG)

Main Exports: Soybeans, Electrical Energy, Meat Products, Maize (Corn), Yerba Mate.

GNI Per Capita: $6,200. USD (2023)

Internet Domain: .py

International Dialing Code: +595

Registrations and Establishing an Entity

To manage payroll, companies must comply with tax and social security regulations. This involves obtaining a Tax Identification Number (RUC) from the Secretaría de Estado de Tributación (SET) and registering with the Instituto de Previsión Social (IPS). The RUC is essential for tax compliance, requiring documents such as articles of incorporation and proof of address. Social security registration with IPS ensures employers can legally contribute to employee benefits. Employers must then process payroll in compliance with regulations, including withholding taxes, remitting social security contributions, and submitting monthly reports to SET and IPS.

Banking

Paraguay's banking sector features a mix of local and international banks, including notable institutions like the state-owned Banco Nacional de Fomento, known for its stability, and private banks such as Banco Itaú, Banco Continental, and Sudameris, each offering diverse financial services. International payments to Paraguayan banks are possible, with transactions typically conducted in Paraguayan guaraníes or US dollars.

Working Week

In Paraguay, the standard work week consists of 48 hours, typically distributed as 8-hour days over six days, from Monday to Saturday. For night shifts between 8:00 p.m. and 6:00 a.m., the weekly limit is reduced to 42 hours, with a premium compensation of 130% of the regular salary.

Overtime is capped at 3 hours per day and 9 hours per week, with a total work week limit of 57 hours, including overtime.

Employment Law

Annual leave

Workers are entitled to paid vacation based on their years of service: 12 days for up to 5 years, 18 days for 5-10 years, and 30 days for over 10 years. The vacation must be paid in advance, and if not used, it will be compensated in money upon termination.

Maternity leave

In Paraguay, female employees are entitled to 18 weeks of paid maternity leave, consisting of 4 weeks of prenatal leave and 14 weeks of postnatal leave, with a 2‑week extension in cases of multiple or premature births. The maternity benefit is paid at 100% of salary by the Instituto de Previsión Social (IPS). During maternity leave, the employee retains social security coverage and has the right to return to her job under the same conditions.

Paternity leave

In Paraguay, employees are entitled to 2 working days of paid paternity leave upon the birth of a child.

Sick leave

Sick leave benefits in Paraguay are administered by the Instituto de Previsión Social (IPS). Medical care is provided for up to 26 weeks, with possible extensions in special cases. Cash benefits generally range between 50% and 66% of the employee’s average salary, subject to regulatory conditions. Eligibility requires compliance with contribution requirements, and employment is protected during the covered period.

Overtime

Overtime work hours will be paid with 50% (fifty percent) at least, on the salary agreed for the ordinary day. Night work will be paid at 30% (thirty percent) of the regular salary set for daytime work. Nighttime overtime will be paid with a surcharge of 100% (one hundred percent) on the ordinary nighttime salary. The hours worked on holidays will be paid with a surcharge of 100% (one hundred percent) over the ordinary hourly salary of the business day.

Christmas bonus

A complementary annual remuneration or bonus is established, equivalent to one twelfth of the remuneration earned during the calendar year in favor of the worker in all respects (salary, overtime, commissions, or others), which will be paid before December 31, or at the time the employment relationship ends if it occurs before that time of the year.

Tax & Social Security

Income tax

Personal Income Tax in Paraguay is levied on income from Paraguayan sources obtained by individuals, including income and capital gains.

Scope of Taxation

The tax applies to income not otherwise taxed under the IDU and excludes:

• Income derived from the rendering of independent personal services
• Income earned under a relationship of dependency (employment income), which is taxed separately

Tax Base

The Personal Income Tax is calculated on net income, after allowable deductions.

Progressive Tax Rates

The tax is applied progressively according to the following brackets:

• 8% on net income up to 50 million Guaraníes
• 9% on net income from 50 million to 150 million Guaraníes
• 10% on net income above 150 million Guaraníes

Social Security

The Instituto de Previsión Social (IPS) is responsible for administering Paraguay’s mandatory social insurance system for dependent workers in the private sector, including domestic workers. The IPS provides healthcare coverage and long‑term economic benefits such as retirement, disability, and survivors’ pensions to eligible contributors and their beneficiaries.

Mandatory social insurance covers risks including non‑work‑related illness and accidents, maternity, workplace accidents, occupational diseases, disability, old age, and death. Benefits include medical care, short‑term subsidies, and long‑term pensions and retirement benefits.

Employers are required to contribute 16.5% of the employee’s gross salary to IPS (14% for pension‑related benefits and 2.5% for employer‑specific contributions). Employees contribute 9% of their gross salary, which is withheld from their wages.

Reporting

Monthly

The employer must make monthly contributions to the Instituto de Previsión Social (IPS), which include:

• Employer's contribution and worker's contribution.
• The employer is obliged to submit monthly payrolls, which include information on employees and workers, salaries and wages.
• This submission must be made through the Payroll Submission System, available 24 hours a day, every day.

Yearly

The IRP is settled annually. Taxpayers (which may include employees and self-employed workers) must file a tax return once a year, usually in March, after the end of the tax year. This return includes all taxable income less allowable deductions.

Payroll

In Paraguay, it is possible to provide online payroll to employees through the Marangatu System, which is administered by the Subsecretaría de Estado de Tributación (SET). This system allows businesses to manage payroll and perform manual uploading of personnel data.

Reports

Payroll reports must be retained for a period of five years from the date of issuance. This obligation is derived from the Code of Commerce, which establishes that accounting and labor documentation must be preserved during this time to ensure that it is available in the event of audits or review by labor or tax authorities.

New Starts

Before hiring employees, the employer must register as such with the Labor Administration Authority. This registration must be completed within 60 days from the start of employment. Requirements include:

• Complete a registration form.
• Submit an authenticated photocopy of the signatory's identity card.
• Proof of registration in the RUC (Registro Único de Contribuyentes).

Once registered, an employment contract must be drawn up, which may be verbal or written. However, it is mandatory that contracts stipulating a remuneration higher than the legal minimum wage must be in writing. The contract must include:

• Place and date of execution.
• Names, surnames, age, sex, marital status, profession or trade, nationality and domicile of the contracting parties.
• Type of work or services to be rendered and the place or places where they are to be rendered.
• Amount, form and period of payment of the agreed remuneration.
• Duration and division of the working day.

To start the process of hiring an employee in Paraguay, it is essential to gather information and documentation specific to the candidate:

• Full name
• Date of birth
• Marital status
• Nationality
• Identity card
• Residence address
• Telephone number and e-mail address
• Position or function to be performed
• Base salary and form of payment
• Starting date
• Working day
• Contractual modality
• Curriculum vitae (CV)

Leavers

In Paraguay, the deadline for paying the final settlement to an employee whose contract has been terminated depends on the reason for termination. Generally, the settlement must be made within 10 business days from the contract termination date, in accordance with the Labor Code and current regulations.

Employers are also required to notify the Directorate of Employer-Employee Registration of the Ministry of Labor, Employment, and Social Security about the employee's termination. This notification must include details such as the termination date and the reasons for contract termination.

Employee Benefits

Employers in Paraguay have the flexibility to offer a variety of additional benefits to their employees, from health insurance to reimbursement for mobility expenses, all with favorable tax implications that may encourage their implementation.

Visas & Work Permits

Processing Times

Visa applications for Paraguay are processed within 5 to 30 business days.

Requirements

Applicants must provide:

• A completed visa application form
• A passport valid for at least six months
• A recent photo (taken within the last three months)
• Flight itinerary
• Proof of sufficient funds
• Proof of accommodation
• An employer invitation letter
• Visa fee ($65 USD for short-term, $100 USD for long-term visas)

Work Permit Details

• Work permits are valid for up to 90 days after entry.
• Visas remain valid for six months after issuance.
• Family members cannot be included in the application.

Work Permit Conditions

Validity is not universal across companies.

Changing employers requires reapplication with the new employment contract.

Paraguay applies specific surcharges for night and holiday work. Public holidays and employment bonuses are strictly regulated. Employment contracts involving compensation above the minimum wage must be in writing. Employer records are subject to audits under commerce law.