If you run a sole proprietorship in Paraguay and your gross revenue stays under G. 2 billion a year, the tax code hands you a choice most countries never offer: pay a flat 3% of gross revenue and skip full accounting, or pay 10% on actual net profit with full books. Pick the wrong one and you could pay double the tax you owe — or wake up one January forced onto full accounting with a quarter's worth of ledgers to reconstruct. This guide walks through how the IRE Simple regime works, when it beats IRE General, and how to keep your records ready for the threshold.
Paraguay's Business Income Tax in 30 Seconds
The Impuesto a la Renta Empresarial (IRE) is Paraguay's tax on business income, created by Law 6.380/2019 and in force since January 2020. The headline rate is a flat 10% on Paraguayan-source income, regardless of the owner's nationality or residence.
But that single rate hides three different calculation regimes for small operators:
- IRE RESIMPLE — for micro-businesses with gross income under G. 80 million a year, with the lightest obligations of all.
- IRE Simple — for sole proprietorships (empresas unipersonales) with gross annual income up to G. 2,000,000,000 (roughly USD 270,000). This is the regime this guide covers.
- IRE General — the standard regime: 10% on actual net profit, mandatory for incorporated companies (SRL, SA), for importers and exporters, and for any sole proprietorship above the G. 2 billion line.
Your IRE regime choice does not change your VAT (IVA) obligations — registration, invoicing, and filing work the same either way. It changes how your income tax is computed, what records you must keep, and how your profit distributions are taxed.
How the 3% Effective Rate Works
IRE Simple's headline appeal is its presumed-income method: instead of computing real profit, you treat 30% of gross revenue as taxable income and apply the 10% IRE rate. The arithmetic collapses to a flat 3% of gross revenue, whatever your actual margin was.
A consulting practice with G. 500 million in gross revenue pays G. 15 million in IRE under this method — whether its real profit was G. 100 million or G. 200 million.
Here is the part most summaries skip: the 3% is a ceiling, not a floor. Each year, an IRE Simple taxpayer may choose between the presumed calculation and taxation on actual net profit. If your real profit margin is below 30% of gross revenue, computing tax on actual profit lowers your bill. A trading business with G. 1 billion in revenue and a 15% margin (G. 150 million in real profit) would pay G. 30 million under the presumed method but only G. 15 million on actual profit — half the tax.
The breakeven rule
The decision reduces to one number: your net margin.
- Margin below 30% — actual-profit calculation wins.
- Margin above 30% — the presumed 3%-of-gross wins.
- Margin near 30% — the two converge, and simplicity becomes the tiebreaker.
Service businesses with few deductible costs — consultants, designers, software developers — often run margins well above 30%, which makes the presumed method attractive. Goods traders and anyone with heavy cost of sales usually do better on actual profit. Either way, you need reliable income and expense records to know which side of the line you are on. Guessing is how businesses overpay for years.
Who Qualifies for IRE Simple
Eligibility is narrower than the headline suggests. All of the following must hold:
- Sole proprietorship structure. Only empresas unipersonales qualify. The moment you incorporate as an SRL or SA — for liability protection, a partner, or an investor — IRE General applies no matter how small your revenue.
- Gross annual income of no more than G. 2 billion. The test looks at accrued (devengado) gross income in the fiscal year, excluding IVA. Cross the line and you move to IRE General starting January 1 of the following year.
- Not an importer or exporter. Paraguay's tax authority requires importers and exporters to use IRE General regardless of size.
- Registered and filing. You need an RUC registration with the DNIT (Dirección Nacional de Ingresos Tributarios, the merged tax-and-customs authority), and you file the annual IRE Simple return on Form 501.
If your revenue is under G. 80 million, check whether RESIMPLE fits instead — it is a separate, even lighter regime, not a sub-tier of IRE Simple.
IRE Simple vs. IRE General: The Full Comparison
| Factor | IRE Simple | IRE General |
|---|---|---|
| Tax computation | 3% of gross (presumed) or 10% of actual profit, your choice each year | 10% on net taxable income |
| Who can use it | Sole proprietorships up to G. 2B gross | Everyone; mandatory above the threshold |
| Accounting | Simplified income and expense records | Full accounting under Paraguayan GAAP or IFRS |
| Dividend tax (IDU) | Exempt for the sole proprietor's withdrawals | 8% for residents, 15% for non-residents |
| IVA obligations | Identical | Identical |
| External audit | Not required | Required above roughly USD 1.3M turnover |
| Advance payments | 4 quarterly installments | 4 quarterly installments |
| Compliance burden | Lower | Higher |
Two rows deserve emphasis. First, the IDU exemption: under IRE General, distributed profits face the Impuesto a la Distribución de Utilidades — 8% for resident owners, 15% for non-residents — on top of the 10% IRE. A company with G. 500 million in net profit keeps G. 450 million after IRE, then pays another G. 36 million in IDU at the resident rate, for a combined effective rate of about 17%. An IRE Simple sole proprietor's withdrawals carry no IDU at all. For an owner-operator who lives off the business, that gap can matter more than the IRE rate itself.
Second, accounting: IRE General demands full double-entry books, tax adjustments for non-deductible items (owner personal expenses, fines, undocumented spending), and professional preparation. IRE Simple requires simplified records of income and expenses — far less infrastructure, which is exactly why it suits businesses without dedicated accounting staff.
Advance Payments: The Quarterly Obligation
Both regimes require four advance payments (anticipos) against the current year's tax, each equal to 25% of the prior year's assessed tax, once that prior-year liability exceeds G. 10 million. Miss them and you face interest and penalties on top of the eventual balance.
New businesses with no prior-year assessment generally have no advance obligation in year one — but year two arrives with a full quarterly schedule based on year one's result. Budget for it from the start: a profitable first year under the presumed method means four advance payments the following year, due whether or not current-year revenue is keeping pace.
Crossing the G. 2 Billion Line
Outgrowing IRE Simple is a success problem with real transition costs. The mechanics:
- The switch is mandatory and takes effect January 1 of the fiscal year after the breach. If 2026 revenue exceeds G. 2 billion, you operate under IRE General from January 1, 2027.
- Full accounting starts immediately. You need GAAP/IFRS-compliant books from day one of the new regime — not reconstructed months later when the return is due.
- The IDU exemption disappears. Owner withdrawals that were tax-free now carry 8% withholding for residents.
- Audit exposure rises. IRE General taxpayers with deductions, related-party transactions, or cross-border payments draw closer scrutiny.
Moving the other direction — General back to Simple after revenue falls — is possible but not automatic. It requires a request to the DNIT, and businesses that previously breached the threshold face extra scrutiny on the downgrade.
The practical lesson: if your growth plan crosses G. 2 billion within a couple of years, consider starting on IRE General deliberately. A forced mid-growth migration — new chart of accounts, restated positions, new advance schedule, lost IDU exemption — costs more than beginning where you will end up.
Five mistakes sole proprietors make
- Assuming 3% always wins. With margins under 30%, the actual-profit option inside IRE Simple beats the presumed method. Run both computations every year.
- Testing the threshold on cash instead of accruals. The G. 2 billion test uses accrued income. Unbilled December work still counts.
- Including IVA in the threshold test. The limit applies to income excluding IVA. Mixing the two either panics you early or blinds you to a real breach.
- Incorporating without repricing the tax. Forming an SRL for liability protection silently moves you to IRE General plus IDU. Model the combined 17%-style burden before signing the statutes.
- Ignoring the advance calendar. The quarterly anticipos are the most common source of surprise penalties for first-time profitable businesses.
Keeping Threshold-Ready Books
Everything in this regime turns on two numbers you can only trust if your records are current: trailing-twelve-month gross revenue against the G. 2 billion line, and your real net margin against the 30% breakeven. That means recording every sale when earned, every expense when incurred, and IVA separately from income — the simplified registers the DNIT expects, maintained as you go rather than rebuilt at filing time.
A plain-text ledger is a natural fit for this discipline: each transaction is a dated, reviewable line, revenue and expense accounts roll up to exactly the totals Form 501 asks for, and version history shows when every entry was recorded. If you want to see what that workflow looks like on real books with balances and reports, the Fava web interface renders your ledger as dashboards and statements, and the documentation walks through getting started.
Simplify Your Financial Management
As you weigh IRE Simple against IRE General and track your revenue toward the G. 2 billion threshold, maintaining clear financial records is what makes the choice a calculation instead of a guess. Beancount.io provides plain-text accounting that gives you complete transparency and control over your financial data — no black boxes, no vendor lock-in. Get started for free and see why developers and finance professionals are switching to plain-text accounting.
