Published on and written by Cyril Jarnias
Looking into real estate taxation in Paraguay for French nationals means finding yourself at the crossroads of two nearly opposite tax worlds. On one side, a country with a territorial tax system, no wealth tax, no inheritance or gift taxes, and very low local taxes. On the other, France, marked by high tax pressure on wealth, heavily taxed capital gains on real estate, and a dense network of international tax treaties… which Paraguay is not part of.
A French investor in Paraguayan real estate needs to understand both Paraguayan tax rules (local taxes, capital gains) and how France treats such income, since no bilateral tax treaty exists between the two countries.
A territorial system and a very light tax environment
The starting point is the logic behind the Paraguayan system. Paraguay operates with a so-called “territorial” tax system. In practice, only Paraguayan-source income is taxable there. Foreign-source income—rent, dividends, capital gains on securities, salaries earned abroad—is taxed at 0% in Paraguay.
The tax environment is very favorable: no wealth tax, no inheritance or gift taxes. Asset transfers are not taxed, and holding real estate or financial assets is not subject to an annual surcharge like the IFI in France.
For the French, used to combining income tax (with progressivity up to 45%), social security contributions (17.2% on capital income, or even 18.6% for other passive income), and the real estate wealth tax (IFI starting at €1.3 million in net real estate assets, with progressive rates up to 1.5%), the contrast is stark.
Local taxes in Paraguay: a very moderate property tax (impuesto inmobiliario)
The main recurring tax related to owning real estate in Paraguay is the “impuesto inmobiliario”, equivalent to the French taxe foncière. It is an annual municipal tax based on the tax value—also called cadastral value—determined by local authorities.
Taxable base: a cadastral value well below market value
The calculation basis is not the market value of the property, but an administratively set tax value. This value is determined by the National Cadastre Service and municipalities, then gradually adjusted toward market value over approximately five years, with limits to prevent sudden jumps.
In practice, the tax value remains significantly lower than the actual value of the property. Estimates from available data indicate that this basis typically ranges between 25% and 40% of the market value in downtown Asunción and urban areas, and can be even lower in the interior and rural areas.
The effective property tax rate, relative to the market value of the property, often falls between 0.1% and 0.3% despite a nominal rate of 1% of the cadastral value.
Property tax rate: 1% in urban areas, 0.5% possible in rural areas
The base rate of the “impuesto inmobiliario” is set at 1% of the tax value for urban properties. For small rural properties—typically under 5 hectares used for small-scale agriculture—a reduced rate of 0.5% applies.
Another particularity for rural land: constructions and improvements (buildings, infrastructure) are generally not included in the taxable base, which mainly covers the land value. Once again, this helps keep the property tax at a very low level for farms or large land areas.
In very large rural areas, special mechanisms exist. Large properties exceeding 10,000 hectares in the eastern region and over 20,000 hectares in the western region are subject to differentiated rates ranging from 0.5% to 1%, with a 50% surcharge on the tax for large estates deemed “unproductive.” But for a French investor aiming for a home, rental property, or a standard-sized property, these provisions will rarely apply.
Reductions and early payment bonuses
The Paraguayan system allows for targeted relief. When the property is the owner’s sole primary residence and stays within certain value thresholds defined by law, a 50% reduction in the municipal property tax may be granted. This is a social mechanism designed to ease the tax burden for modest owner-occupiers.
Take advantage of a 10% discount offered by most municipalities if you pay your taxes early, typically during the first quarter of the year, further reducing an already modest charge.
Numerical illustration: France vs. Paraguay comparison
To gauge the gap with France, one need only look at an average estimate. In France, property tax (taxe foncière) commonly runs between €10 and €20 per square meter per year, with an average amount of about €298 per owner, but it can rise quickly in high-demand areas or for large properties.
In Paraguay, based on a tax value representing 30% of the market value and a rate of 1%, the annual burden remains minimal.
| Country | Taxable base | Indicative nominal rate | Effective rate on market value (order of magnitude) |
|---|---|---|---|
| Paraguay | Tax value (25–40% of value) | 1% (urban), 0.5% (rural) | ≈ 0.1–0.3% |
| France | Cadastral value (close to reality) | Highly variable, local | ≈ €10–20/m²/year (often > 0.5–1% of value) |
For an apartment with a market value of €100,000, the Paraguayan property tax could be around €100 to €300 per year, whereas in France it often exceeds that level, with the added prospect of IFI for significant real estate holdings.
Taxation of rental income: Paraguayan residents vs. non-residents
From a Paraguayan perspective, the key question for a French person renting out a property in the country is whether they are considered a Paraguayan tax resident or not. Because this status determines how rental income is taxed.
Paraguayan tax residents: individual income tax at a moderate rate
A Paraguayan tax resident is subject to the Personal Income Tax (IRP), still within a territorial framework: only Paraguayan-source income is taxable. Income from rentals in France, for example, is not taxed in Paraguay, even if the taxpayer is a resident there.
For capital income, including rents, dividends, interest, and capital gains, the tax rate is a flat 8%. In contrast, income from personal services follows a progressive scale from 8% to 10%, but rents are classified as capital income and thus subject to the flat rate.
In some setups, the practice is to apply an effective rate of around 10% on net income (rent minus deductible expenses). Available texts also mention flat-rate mechanisms where only a fraction of gross income is considered taxable profit, which effectively further reduces the rate on collected rent.
Non-residents: withholding tax and reduced effective rate
For non-residents—typically a French person who owns an apartment in Asunción while remaining a French tax resident—the treatment involves a withholding tax on rents.
Converging data indicates that the following rule frequently applies: a 15% withholding on a base deemed equal to 50% of the gross rent. The effective tax then corresponds to 7.5% of the gross rent received. Formally, this is: 15% × 50% = 7.5%.
Withholding tax rule
Some texts mention variations, for example a rate of 10% on gross rent (under the name IRNR, Non-Resident Income Tax), or scales adjusted according to services. But for residential real estate, the key idea is that Paraguay only takes a relatively small fraction of rental income from foreign owners.
In parallel, residential rental housing benefits from a reduced VAT (IVA) rate, typically 5%, further lowering the overall burden.
| Owner profile | Taxable base in Paraguay | Nominal rate | Effective rate on gross rent |
|---|---|---|---|
| Paraguayan resident | Net income (rent – expenses) | ≈ 8–10% | Variable, often < 10% |
| Non-resident | 50% of gross rent (deemed base) | 15% (INR) | ≈ 7.5% |
| Residential rental (VAT) | Rent subject to reduced VAT | 5% (reduced IVA) | Borne by tenant |
For a French non-resident in Paraguay, the local tax on rents is thus moderate. The remaining question is how France treats that same income.
Real estate capital gains in Paraguay: low rates and simplified mechanics
When a French person sells a property in Paraguay, they realize a capital gain from a Paraguayan source. Here too, the tax treatment varies depending on their status as a resident or non-resident in Paraguay.
Residents: 8% tax on the gain, with flat-rate options
For a Paraguayan tax resident, capital gains from the sale of real estate fall under capital income. The rate indicated by IRP rules for capital gains is 8%.
Two methods exist: deduction of the acquisition price or a flat-rate regime. Under this regime, the gain is set at 30% of the sale price, with an 8% tax rate, giving an effective levy of 2.4% of the sale price. This withholding is often collected by the notary and settles the tax for non-professional sellers.
The capital gain is calculated by subtracting the acquisition price and certain expenses from the sale price.
The gain is set at 30% of the sale price, with an 8% rate, i.e., 2.4% of the price, withheld by the notary to settle the tax.
In practice, for occasional sales by individuals, many situations result in very low or even zero taxation, especially if the seller is not a real estate professional or if certain administrative tolerances apply.
Non-residents: combined withholdings and effective rate around 6–7.5%
For a non-resident selling a property in Paraguay, the mechanism combines VAT and income tax, with deemed flat-rate bases.
Figures provided indicate that in practice, the notary withholds:
– 5% VAT applied to 30% of the sale price, i.e., about 1.5% of the total price, and
– 15% income tax, again on 30% of the price, i.e., 4.5% of the price.
Approximately 6% of the sale price is withheld for Paraguayan taxes, allowing the non-resident seller to pocket about 94% of the price minus agency fees.
Other sources, older or more theoretical, mention a “standard withholding” of 15% on a deemed base equal to 50% of the price, i.e., 7.5% effective. In reality, recent notarial practice seems to converge around the order of magnitude of 5–7% of the price, depending on the structure and nature of the transaction.
| Situation | Deemed base | Applied rate | Effective rate on sale price |
|---|---|---|---|
| Resident, occasional sale | 30% of price (profit) | 8% | ≈ 2.4% |
| Non-resident (practical scheme) | 30% of price | 5% VAT + 15% IT | ≈ 6% |
| Non-resident (generic rule) | 50% of price | 15% IT | ≈ 7.5% |
Compare to France: on a capital gain realized by a non-resident when selling a property located in France, the base rate is 19% tax + 17.2% social levies, i.e., 36.2%, plus an additional progressive surtax of 2% to 6% on gains exceeding €50,000.
France does provide allowances for holding period (full exemption after 22 years for tax, 30 years for social levies), but over shorter periods, the burden is considerable. In Paraguay, even without seniority, rates remain modest.
No tax treaty between France and Paraguay: a crucial point for the French
One of the most sensitive elements for a French investor is the complete absence of a double taxation treaty between France and Paraguay. Paraguay has signed a few such agreements with other states (Chile, Qatar, Taiwan, United Arab Emirates, Uruguay), and France has over 120 bilateral tax treaties, but none link the two countries.
Direct consequence: for a French tax resident, Paraguayan-source real estate income and capital gains are, in principle, fully taxable in France, without an automatic treaty mechanism to eliminate double taxation.
French rule: worldwide taxation and treatment of foreign real estate income
French law is based on a principle of worldwide taxation for residents: a person who is a tax resident in France must declare all their income, regardless of its nature or country of origin. This obligation applies both to recurring income (rent) and to capital gains (real estate gains), even if these incomes have been taxed abroad.
When a tax treaty exists, the right to tax is determined between the source country and the residence country, often with a tax credit to avoid full double economic taxation.
In the absence of a treaty—which is the case with Paraguay—the logic changes: Paraguayan-source income remains taxable in France like any other foreign income, without a treaty mandating a tax credit. France thus retains the ability to fully tax this income, without taking into account the tax paid in Paraguay, except possibly under internal mechanisms.
Paraguayan rental income from a French perspective
For a French tax resident who receives rent from a property located in Paraguay, French rules are clear: foreign property income must be declared in France, regardless of the amount, and whether or not it is taxed abroad.
If the property in Paraguay is rented unfurnished, France classifies this income as property income (revenus fonciers). The taxpayer may use the micro-foncier regime (if total property income, France + foreign, does not exceed €15,000, with an automatic 30% allowance) or the actual regime (detailed declaration of expenses on Form 2044, result reported on Form 2042).
In parallel, this income is subject in France to social levies on property income. Historically at 17.2%, these were raised to 18.6% for certain passive income from 2026 onward, although property income and real estate capital gains often remain at the 17.2% rate under transitional rules.
Rents are added to the base of income tax, subject to the progressive scale (up to 45%) and, for high incomes, to an additional exceptional contribution. The maximum effective rate on unfurnished rental income in France can reach 66.2% (45% IT, 4% exceptional contribution, 17.2% social levies). Paraguayan rents, as foreign property income, are added to this system.
Without a tax treaty with Paraguay, French tax logic does not automatically provide a tax credit equal to the tax paid in Paraguay. The risk of real double taxation (7.5% in Paraguay + full French scale) is therefore high.
Paraguayan real estate capital gains for a French resident
Regarding capital gains, French rules are equally strict. A resident of France who sells a property located abroad, in a country without a protective tax treaty, is taxable in France as if selling a property located in national territory, unless specific provisions apply.
In the absence of a treaty, the capital gain from the sale of a building located in Paraguay is therefore taxable in France, under the same regime as for a property in France:
– 19% tax on real estate capital gains,
– 17.2% social levies, i.e., 36.2% total,
– plus, where applicable, a surtax of 2% to 6% for gains exceeding €50,000.
However, allowances for holding period apply: from the 6th year of holding, an annual allowance gradually reduces the taxable base until full exemption after 22 years for the 19% tax, and 30 years for social levies.
The sensitive point lies in the absence of a treaty: aside from certain internal rules that may allow deducting foreign tax or partially crediting it (unilateral tax credits), the taxpayer may end up first paying tax in Paraguay (e.g., 6% effective on price as a non-resident), then a full tax in France on the capital gain, calculated under French rules. Without a treaty mechanism, the French administration is not obliged to grant a full credit for Paraguayan tax.
Absence of tax treaty and management of tax residency
Beyond the treatment of each flow, the absence of a treaty raises another strategic question: that of tax residency status. Because France, for its part, considers as residents those meeting certain criteria (home, main place of stay, principal professional activity, or center of economic interests in France).
Since 2025, if a tax treaty qualifies a taxpayer as a non-resident of France, this qualification prevails over domestic French law, in accordance with the “tie-breaker rules” used to resolve residency conflicts between states.
With Paraguay, no such treaty exists: French tax residency rules thus apply without a treaty counterpart. A French person who acquires residency in Paraguay, pays taxes there, and holds assets there, but still keeps a home in France, children in school, or the center of their activities, will not necessarily be considered a non-resident by the French administration. They may therefore face worldwide taxation in France, even though Paraguay applies a zero rate to their foreign income.
To benefit from the Paraguayan exemption (0% on foreign income), one must be a tax resident in Paraguay (cédula, RUC) and document foreign income, but above all, one must not neglect their tax status in France; otherwise, Paraguayan advantages could be offset by French law.
Inheritance and gift taxes: a Franco-Paraguayan gap
Even if it is not the core of rental real estate investment, estate aspects matter for large portfolios. On this point too, the contrast is stark.
Paraguay: no wealth tax on transfers
In Paraguay, there is no true inheritance tax or gift tax comparable to what is known in Europe. Transfers of assets, including real estate, whether inter vivos or upon death, do not generate inheritance or gift tax at the national level.
A specific tax of about 2.5% may be mentioned on the value of inherited assets for registration purposes, but it is not a progressive inheritance tax on heirs. Various fees (lawyer fees, notaries, publications) add up, but the system remains infinitely lighter than the French mechanism.
In Paraguay, there is no inheritance tax, but civil law imposes a distribution among heirs according to a specific order (descendants, ascendants, spouse, collaterals) and a strong forced heirship reserve in favor of children or parents. Thus, freedom of disposition is limited, even though transfers are tax-exempt.
France: progressive taxation up to 45% and inclusion of foreign assets
In France, by contrast, direct-line transfers are subject to a progressive scale after an allowance of €100,000 per parent and per child. Brackets range from 5% to 45% beyond €1.8 million in net share. And France taxes, in principle:
– all assets, French or foreign, if the deceased (or donor) was a French tax resident,
– or all assets, French or foreign, if the heir or donee has been a French tax resident for at least six of the last ten years,
– or only assets located in France if neither the deceased nor the heir is a French tax resident.
This means that a French person with real estate in Paraguay but remaining a French tax resident at the time of death will see this property included in the base for French inheritance tax, even if Paraguay imposes nothing on the transfer. The absence of a specific inheritance treaty between France and Paraguay thus leaves France free to tax these assets.
For a taxpayer who has shifted their tax residency to Paraguay and meets the criteria for French non-residency, the rules become more complex (notably the condition of six years of French residency for heirs), but again, risks of French taxation on foreign assets remain.
Advantages and limitations of Paraguayan real estate for a French person
At the end of this overview, the assessment is mixed. From a strictly Paraguayan standpoint, real estate appears as an attractive asset for a French person:
– very low property tax, calculated on a cadastral value well below market,
– moderately taxed rents, with a limited withholding tax for non-residents,
– lightly taxed real estate capital gains, especially for residents,
– no wealth tax, no inheritance or gift taxes.
For a French tax resident in Paraguay, the absence of a double taxation agreement exposes local income (rent, capital gains) to potentially cumulative French taxation without an automatic tax credit.
This gap creates a paradoxical situation: Paraguayan real estate is very tax-light locally, but can be heavily taxed overall once filtered through French rules. Only those who truly manage to organize their tax residency outside France, in compliance with the rules of both countries, can fully benefit from the advantage of the Paraguayan territorial system.
Even while remaining a French tax resident, a real estate project in Paraguay can be attractive thanks to favorable local taxation: low property tax, moderate transfer and registration fees, and little capital gains tax on site. However, the absence of a tax treaty between France and Paraguay makes it necessary to build a particularly careful strategy regarding assets, inheritance, and tax residency.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
