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Paraguay delays financial intermediary Digital Services Tax

Paraguay to withdraw Jan 2022 withholding tax on foreign digital services

Paraguay is to suspend from January 2022 the reach on intermediaries of its Digital Services Tax – withholding tax on non-resident income (INR). The 4.5% INR was introduced at the start of 2021 as income tax – calculated as: 15% withholding x 30% of income = 4.5% tax.

Instead of the intermediaries being responsible, taxpayers will be able to act ad the INR agent.

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The obligations for financial intermediaries had been postponed until 1 January 2022 due to the COVID-19 crisis and to give time to affected banking institutions to adapt their systems. Aside from direct providers of digital services, telecoms companies and marketplaces remain liable from 2021 for the new withholding tax.

INR is levied on digital services provided by non-resident entities at a 4.5% rate. If financial intermediaries are involved in the transaction, this tax will not be applicable until January 2022. Nevertheless, entities engaged in the provision of digital services (e.g. telecom companies, resellers of digital services) are still obliged to withhold INR.

Americas Digital Services Taxes (DST)

Country Status Rate Annual sales threshold Scope
In-country income Global income
Argentina Dec 2020 5%, 10%, 15% Online gambling
Brazil - 1 Proposed 1-5% BRL 100m BRL 3bn Advertising; user data; interfaces;
Brazil - 2 Proposed 3% on COFINS BRL 78m $240m Advertising; platform services for selling goods and services
Brazil - 3 Proposed 3% BRL 4.5bn Advertising; platform interaction services; data
Brazil - 4 Proposed 3% - 10% BRL 100m Media; apps; gaming; gambling (10%); software
Brazil - 5 Proposed 3% Advertising; user data; payment platforms; media
Canada Jan 2022 proposal 3% CAD 20m €750m Advertising, online marketplaces, social media and the sale/licensing of user data.
Costa Rica Nov 2019 Tourist accommodation rentals
Paraguay Jan 2021 4.5% Non-resident: media; gaming; data processing; advertising; gambling; software
Uruguay Jan 2018 Income Tax Digital services Non-residents

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