Countries › Paraguay › Guide › 15. Exiting › Returning capital and capital reductions

Returning capital and capital reductions

Last verified: 2026-10-28 · Status: Stable

Paraguay taxes a capital reduction as a dividend to the extent it comes from capitalised profits or reserves, and the law presumes, without contrary proof, that reserves and retained profits leave before contributed capital. Only the slice that is genuinely contributed capital comes back free of the 15 percent IDU for a foreign shareholder. In an S.A. a capital return needs an extraordinary meeting decided by the majority of voting shares, and dissenting shareholders can walk away with the value of their shares.

USD figures use PYG 5,868.31 per US dollar, the Banco Central del Paraguay reference quotation for 28 October 2026 (bcp.gov.py cotización referencial). Minimum wage figures use Resolución MTESS 670/2026: monthly PYG 3,044,000, daily for monthly paid workers PYG 101,467 and daily minimum wage (jornal) PYG 117,077, from 1 July 2026. Conversions are for orientation only.

Key facts

Dividend tax (IDU) on distributions to nonresidents	15 %Ley 6380/2019 art. 43 num. 2, as of 2026-10-28 · in force
Order of capital withdrawal for IDU	Reserves, then undistributed profits, then contributed capital Ley 6380/2019 art. 40, as of 2026-10-28 · in force
Deadline to formalise a capitalisation decided by a meeting	12 monthsLey 6380/2019 art. 44, as of 2026-10-28 · in force
Withdrawal right deadline for dissenting shareholders present at the meeting	5 daysCódigo Civil art. 1092, as of 2026-10-28 · in force
Withdrawal right deadline for absent shareholders	15 daysCódigo Civil art. 1092, as of 2026-10-28 · in force

The rule

1. Reserves first presumption. A distribution of the excess legal reserve, voluntary reserves or capital reduced where that capital came from capitalised undistributed profits or reserves is a dividend for IDU purposes. The law presumes, without admitting contrary proof, that capital is withdrawn first from capital formed by reserves (including revaluation reserves), then from undistributed profits and only then from capital actually contributed, in that order. Profits sent to the legal reserve, voluntary reserves or capitalisation are not taxed until capital is redeemed.
Cost to do it: IDU 15 percent for a nonresident (8 percent for a resident) on the reserve and profit slice.
Example: Capital PYG 1,500,000,000, of which PYG 500,000,000 came from capitalised reserves. A reduction of PYG 800,000,000: the first PYG 500,000,000 is a distribution (IDU PYG 75,000,000 for a nonresident); the remaining PYG 300,000,000 is contributed capital. / About US$136,325 returned, US$12,781 IDU, US$123,545 net.Ley Nº 6380/2019 De modernización y simplificación del sistema tributario nacional, Art. 40 and 42, 2019-09-25 official text · verified 2026-10-28

2. When IDU arises on a capital return. For a capital redemption, the obligation arises when the shareholders meeting or the body with that authority resolves the redemption, whatever the payment date. The company withholds and is jointly liable; for a nonresident the IDU is single and final. When a meeting decides to capitalise profits instead, the capital increase must be formalised within twelve months.
Cost to do it: Tax at the decision date, not at payment.
Example: A meeting on 30 April resolves a redemption paid in August: IDU is due by reference to 30 April. / Timing only.Ley Nº 6380/2019 De modernización y simplificación del sistema tributario nacional, Art. 41, 43 and 44, 2019-09-25 official text · verified 2026-10-28

3. Resident individuals. Total or partial redemption of shares or quotas of Paraguayan entities is IRP capital income on the part above contributed capital and on reserves, except where IDU already applies; the base is the redemption amount less the amount the holder actually paid in. The IRP rate is 8 percent.
Cost to do it: IRP 8 percent where IDU does not apply.
Example: A resident who paid in PYG 100,000,000 and receives PYG 150,000,000 on redemption, with no IDU slice, has PYG 50,000,000 of IRP base: IRP PYG 4,000,000. / About US$682.Ley Nº 6380/2019 De modernización y simplificación del sistema tributario nacional, Art. 57 num. 10, 59 num. 4 and 60, 2019-09-25 official text · verified 2026-10-28

4. Corporate approvals in an S.A. Total or partial return of capital (reintegración del capital), early dissolution, merger, transformation and change of corporate purpose require an extraordinary meeting resolution adopted, at first or second call, by the majority of voting shares, without applying plurality of votes. Dissenting shareholders may leave with reimbursement of their shares: present dissenters who recorded their opposition within five days and absent shareholders within fifteen days of the meeting's end. Shares are reimbursed at the last approved balance sheet value unless dissenters ask for a readjustment to real values, which the meeting must approve within three months. Clauses excluding or worsening this right are void.
Cost to do it: Notary, publication and registry costs, market priced; possible cash outflow to dissenters.
Example: A 70 percent foreign parent can pass a capital return alone; a 20 percent minority that votes against may exit at book value. / Plan cash for dissenters as well as for the return.Ley Nº 1183/1985 Código Civil, Art. 1090, 1091 and 1092, 1985-12-18 official text · verified 2026-10-28

5. Capital returned in kind and IVA. Transfers made as a consequence of a company's capital reduction are exempt from IVA up to the amount of the in kind contribution made earlier and subject to that treatment. Beyond that, delivering company goods to owners or shareholders on dissolution or liquidation is treated as a sale for IVA, and for IRE the difference between market price and tax value of goods awarded to shareholders is taxable income.
Cost to do it: IVA 10 percent general rate on taxable deliveries; IRE 10 percent on the market value gain.
Example: A vehicle contributed in kind at PYG 200,000,000 goes back to the shareholder on a capital reduction: IVA exempt up to PYG 200,000,000. / About US$34,081 covered by the exemption.Ley Nº 6380/2019 De modernización y simplificación del sistema tributario nacional, Art. 8 num. 3, 81 num. 1 a) and 100 num. 1 k), 2019-09-25 official text · verified 2026-10-28

Slice withdrawn (in this order)	IDU for a nonresident
Capital formed by reserves, including revaluation	15%
Undistributed profits	15%
Capital actually contributed	Not a distribution

How a capital reduction is taxed for a nonresident shareholder (Ley 6380/2019 art. 40, 43)

Worked example

Capital return of PYG 800,000,000 (about US$136,325) to a foreign parent from a company whose capital includes PYG 500,000,000 of capitalised reserves: IDU PYG 75,000,000 (about US$12,781).

Step by step

Reconstruct the capital account: contributed capital versus capitalised profits, reserves and revaluations.
Size the return; remember the reserves first order cannot be rebutted.
Hold the extraordinary meeting (majority of voting shares), record dissent and register the bylaw change.
Withhold IDU on the distribution slice as of the meeting date and remit the net through a bank.

Common traps

Capitalising profits and later reducing capital does not avoid IDU; the presumption sends the reserve and profit slice out first.
Revaluation reserves count as reserves for the ordering rule.
A capital reduction approved in April and paid in August is taxed in April.
Dissenters can exit at book value; a large minority can turn a capital return into a partial buyout.

Sources

← Selling listed shares and taking a company off the marketDissolution and solvent liquidation of an S.A., S.R.L. or EAS →

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