In September 2025, Paraguay passed Law 7547/2025, formally expanding the Maquila program — which had previously been focused on manufacturing — to include digital services, software development, BPO operations, and other knowledge economy activities. The tax rate on all exported services and goods produced under the regime: 1%.
That is not a headline rate with a list of exceptions. It is a flat 1% on gross revenue from exported services, with a formal 20-year guarantee issued as an administrative act of the Ministry of Industry and Commerce (MIC). This article explains exactly how it works.
1. What Is the Maquila Program?
The Maquila program is a special economic regime administered by Paraguay's Ministry of Industry and Commerce (MIC). It was created in 1997 under Law 1064/97 to attract foreign investment by offering preferential tax treatment to companies that produce goods or services primarily for export.
Under the regime, a company establishes a Paraguay-registered legal entity (or a branch) and conducts qualifying operations. Revenue from exported production is taxed at 1% instead of the standard 10% corporate tax rate (IRE). Revenue from domestic sales, if any, is taxed normally.
The key structural feature of the Maquila program is that it is company-specific: each company receives its own administrative resolution from MIC, which sets out the approved activities, the tax treatment, and the guarantee period. This is not a general zone or industrial park — it is a per-company authorization that travels with your entity regardless of physical location.
Important distinction: Paraguay also has Export Processing Zones (ZPE). The Maquila regime is different — it operates nationwide, requires no physical location in a designated zone, and is available to service companies and remote operations. ZPE requires physical presence within a designated park.
2. Law 7547/2025: What Changed for Digital Services
The original Maquila Law (1064/97) was designed primarily for manufacturing operations: assembly, processing, and production of physical goods for export. While some service companies were included, eligibility was uncertain for purely digital operations.
Law 7547/2025, passed in September 2025 and in force since October 2025, resolved this ambiguity definitively. The new law:
Explicitly includes digital services and software
Software development, SaaS platforms, digital consulting, data processing, and technology services delivered remotely are now explicitly listed qualifying activities.
Includes BPO and knowledge-based services
Business process outsourcing, customer service operations, accounting services, legal support, and other knowledge-based services provided to foreign clients are included.
Extends the guarantee to 20 years
The previous law offered stability provisions. Law 7547/2025 formalizes this as a 20-year guarantee issued as an individual administrative act — meaning the conditions cannot be altered unilaterally by a future government without triggering a legal remedy process.
Confirms the 1% rate on gross exported revenue
The 1% is calculated on gross revenue from qualifying exports — not net profit. This is a significant structural difference from corporate income taxes and makes planning completely predictable.
Why this matters for European companies specifically
European companies exporting digital services typically pay 19–25% VAT on domestic operations plus 23–35% corporate tax on profits. Moving a service operation to Paraguay under the Maquila regime reduces the total tax burden on exported revenue to 1% of gross — regardless of margin levels.
A European software company with €5M in exports and 30% margins pays approximately €350K–€525K in corporate tax at home. The same revenue exported from a Paraguay Maquila entity: €50,000.
3. Who Qualifies — Eligible Activities
The following categories of activity qualify under Law 7547/2025. The key requirement is that the service or product must be exported — the end client must be outside Paraguay.
| Category | Specific Examples | Export Requirement |
|---|---|---|
| Software & Technology | Development, SaaS, platforms, APIs, mobile apps | Client outside Paraguay |
| Digital Services | Design, UX/UI, digital marketing, content production | Client outside Paraguay |
| BPO / Shared Services | Finance, HR, customer support, data entry | Client outside Paraguay |
| Manufacturing | Assembly, processing, production for export | Goods exported |
| Agro-industrial | Processing of agricultural products for export | Goods exported |
| Engineering Services | Technical consulting, CAD, infrastructure design | Client outside Paraguay |
| Financial Services | Back-office finance, reporting, analysis for foreign entity | Client outside Paraguay |
What Does Not Qualify
Revenue from sales to Paraguayan clients does not qualify for the 1% rate and is taxed under standard IRE (10% on net profits). Companies with mixed domestic/export revenue must maintain clear accounting separation. MIC monitors the export ratio — a company with more than 20% domestic revenue may face additional scrutiny.
4. The Numbers: 1% vs. What You Pay Now
Let us construct a concrete comparison for a European digital services company with €5 million in annual exported revenue and 40% operating margins.
| Tax Element | Paraguay Maquila | Spain | Germany | Netherlands |
|---|---|---|---|---|
| Corporate Tax Rate | 1% on gross revenue | 25% | ~30% | 25.8% |
| Tax base | Gross exported revenue | Net profit | Net profit | Net profit |
| Tax on €5M revenue / 40% margin | €50,000 | €500,000 | €600,000 | €516,000 |
| Annual tax savings vs. origin country | €450K–€550K/year | — | — | — |
| Dividend repatriation tax | 8% withholding (IRACIS-NR) or treaty rate | — | — | — |
| Capital exit tax | None | Capital gains | Capital gains | Capital gains |
Note on dividend repatriation: Paraguay applies an 8% withholding tax on dividends paid to non-residents (IRACIS-NR). This can be reduced or eliminated under Paraguay's bilateral investment treaties. Paraguay has 24 BITs, the majority with European countries. The effective total tax on repatriated profits: 1% (Maquila) + 8% on dividends = single-digit total effective rate.
5. The 20-Year Guarantee — Why This Is Unusual
European companies evaluating special economic zones and preferential regimes globally encounter a consistent problem: the regime looks excellent until a new government changes it. Ireland's corporate tax rate changed. Portugal's NHR regime was altered. UAE free zone rules have been modified. This is the standard risk of special tax regimes.
Paraguay's Maquila guarantee is structurally different from most comparable regimes. Here is why:
It is an individual administrative act, not a legislative promise
When your company is approved for the Maquila program, MIC issues an individual administrative resolution specific to your company. This document specifies your approved activities, the 1% rate, and the 20-year guarantee term. Revoking or modifying this requires a formal legal process against the specific company — it cannot be done by simply passing a new general law.
The program has survived six presidential administrations
The Maquila program has operated since 1997 through governments from multiple parties, including political transitions that were contentious. The benefits have never been revoked for compliant companies. This is the operational track record that matters — not just the legal text.
The EU-Mercosur Agreement adds an external anchor
The EU-Mercosur Economic Partnership Agreement signed January 17, 2026 includes investment protection provisions backed by EU institutional enforcement. European companies operating in Paraguay after this date have an additional layer of protection beyond bilateral investment treaties.
The guarantee in practice
If Paraguay were to attempt to modify the Maquila tax rate during your guarantee period, your company could: (1) invoke the administrative resolution as a binding contract, (2) seek compensation under the applicable bilateral investment treaty, (3) engage EU-Mercosur dispute settlement mechanisms. No realistic government would initiate this — the political and financial cost far exceeds any tax revenue gain.
6. How to Register: The Maquila Process
The Maquila registration process runs in parallel with company formation and bank account opening. Total timeline from starting the process to MIC approval: approximately 30–45 days for companies with complete documentation.
Company Formation (Day 1)
Register your Paraguayan legal entity via the EAS (Empresa en el Día) online system. This takes one business day and is free of charge. The RUC (tax ID) is assigned automatically.
Prepare Maquila Application Package (Days 2–15)
This is where most of the work is done. Required documents include: corporate statutes, shareholder documentation (apostilled), description of qualifying activities, export projections, employment plan, and a technical-financial feasibility report. This report must be prepared in a specific format that MIC accepts.
Submit to MIC and REDIEX (Days 15–20)
The application is submitted to the MIC's Maquila department with a copy to REDIEX (Paraguay's investment promotion agency). REDIEX formally supports the application. MIC assigns an expedient number and begins review.
MIC Review and Questions (Days 20–35)
MIC reviews the technical-financial feasibility report and may request clarifications. Having a local representative who knows the review officers significantly accelerates this phase.
Administrative Resolution Issued (Days 30–45)
MIC issues the formal administrative resolution approving your Maquila status. From this date, your company can invoice exports at the 1% rate. The resolution specifies the 20-year guarantee period.
Common mistake: The most frequent error European companies make is treating the Maquila application as a formality after company formation. It is not — it requires a substantive technical-financial report that must be prepared correctly. Applications with errors or insufficient detail are sent back, adding 30–60 days to the process. We prepare these reports as part of our Setup Complete service.
7. Paraguay Maquila vs. Other LATAM Regimes
| Regime | Tax Rate | Digital Services | Guarantee | Setup Time |
|---|---|---|---|---|
| Paraguay Maquila | 1% on gross revenue | ✓ Explicit (Law 7547) | 20 years, per company | 30–45 days |
| Uruguay (Zonas Francas) | 0% within zone | Partial | Not guaranteed | Months |
| Colombia (ZEC) | 15% corporate | Partial | 15 years | Months |
| Panama (ZLC / SEM) | 0% on foreign income | Partial | No formal guarantee | Months |
| Honduras (ZOLI) | 0% within zone | No | 20 years | Months |
| Costa Rica (Zonas Francas) | 0% for 8 yrs, then 50% | Yes | 8 years then steps up | Months |
The key differentiators for Paraguay: (1) the 1% applies everywhere in Paraguay, not only within designated zones; (2) the guarantee is company-specific and legally binding; (3) registration takes weeks not months; (4) digital services are explicitly included by law, not interpreted in.
8. Frequently Asked Questions
Ready to Register Your Company Under the Maquila Regime?
Paraguay Entry Partners manages the full Maquila registration process as part of our Paraguay Setup Complete service — from technical-financial report preparation through MIC approval. Most clients receive their administrative resolution within 30–45 days.
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