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The latest addition to our series of brief insights into the workings of the UK and supranational bodies reviewing the taxation of digitalisation of business.

29 June 2021

The withholding in Paraguay of Non-Resident Income Tax (INR) by various retention agents in relation to digital services has been delayed by Decree 5373/2021 because of COVID-19. It will now begin on 1 January 2022, having been previously delayed until 1 July 2020 and then 1 January 2021. It has also been clarified that it is applicable when the user of the digital services uses a credit or debit card as a means of payment to acquire them

Under a tax reform that was enacted to take effect from 1 January 2020, digital services supplied by non-residents to local consumers became liable to 4.5% INR (and 10% VAT). Under the new rules, banks, financial institutions, exchange houses, cooperatives, payment processors or similar entities, and telephone companies or other entities that mediate for the provision of digital services, must act as a withholding agent in respect of collecting the tax due. 

Digital services will be understood to be provided in the national territory when they are used or effectively used in the country. For this purpose, it will be understood that the service is used or effectively used in the country when any of the following are located in Paraguay: