Under a tax reform that took effect from 1 January 2020, digital services supplied by non-residents to local consumers became liable to 10% VAT and 4.5% Income Tax for Non-Residents (INR). 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. However, Regulatory Decree No. 3181 establishes a transitional provision under which mandatory withholding for digital services will become effective as of 1 July 2020.
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:
– The IP address of the device used by the customer or country code of the SIM card.
– The billing address of the customer, or the bank account used for the remittance of the payment, or the billing address of the customer available to the bank.
– The financial entity issuing the credit or debit card with which the payment is made.
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