The Value Added Tax (VAT) is one of the main taxes in Paraguay's system, accounting for over 40% of fiscal revenue. This consumption tax is levied on the sale of goods, provision of services, and imports, as established by laws 125/91 and 6380/19, with rates of 5% or 10% depending on the activity.
In practice, the taxpayer acts as a withholding agent: they charge VAT on their sales (tax debit) and can deduct the tax paid on purchases related to their economic activity (tax credit). The difference between the debit and the credit determines whether there is an amount to be paid to Paraguay's tax and customs authority, DNIT, or a balance in the taxpayer's favor.
For correct settlement, it is essential that all operations are documented with valid invoices. For the tax debit, proof of sale is required. The tax credit, however, requires invoices for purchases and expenses linked to the activity, correctly issued with a Tax ID (RUC), a valid stamp, and complete data. A common mistake is attempting to use poorly issued documents or those unrelated to the professional activity as credit.
Taxpayers who provide personal and professional services independently can deduct, for tax credit purposes, expenses on healthcare, food and non-alcoholic beverages (up to 30% of the VAT on these items), job-related training, public utility services such as energy and water, office rent and maintenance, office supplies, professional attire, and expenses for vehicles used exclusively for work.
The monthly VAT settlement process involves gathering all sales and purchase invoices for the period, summing the tax debit and credit values, verifying document consistency, and calculating the result. The declaration must be filed in DNIT's "Marangatu" system within the stipulated deadline to avoid fines and interest. It is recommended to consult the tax authority's official channels or seek accounting advice to stay updated on any changes to procedures.