Countries › Paraguay › Guide › 6. Taxes › Payroll taxes and social security in Paraguay: IPS at 9 percent for workers and 16.5 percent for employers

Payroll taxes and social security in Paraguay: IPS at 9 percent for workers and 16.5 percent for employers

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

Paraguay has no separate payroll tax: the employer cost is the Instituto de Previsión Social (IPS) contribution of 14 percent plus an additional 2.5 percent, 16.5 percent in total, and workers contribute 9 percent, withheld from salary. Ley 7446/2024 moved the extra 2.5 percent into the IPS law and is shifting it into the IPS health fund by 0.5 points a year over five years. Salaries are deductible for IRE only if IPS has been paid, and workers' own contributions are excluded from their IRP base.

USD figures use PYG 5,868.31 per US dollar, the Banco Central del Paraguay reference quotation for 28 October 2026 (planilla de cotizaciones of that day). Conversions are for orientation only.

Key facts

Employer IPS contribution including the additional 2.5 percent	16.5 %Ley 98/1992 art. 2 (DL 1860 art. 17 b); Ley 7446/2024 art. 7 (art. 17 bis), as of 2026-10-28 · in force
Worker IPS contribution	9 %Ley 98/1992 art. 2 (DL 1860 art. 17 a), as of 2026-10-28 · in force
State contribution to IPS on salaries	1.5 %Ley 98/1992 art. 2 (DL 1860 art. 17 c), as of 2026-10-28 · in force
Total employer plus worker IPS contributions	25.5 %Ley 98/1992; Ley 7446/2024, as of 2026-10-28 · in force

The rule

1. Base contributions. Workers contribute 9 percent of salary each month and employers 14 percent of their workers' salaries; the State adds 1.5 percent. Teachers and domestic workers have special rates.
Cost to do it: Employer 14 percent plus the additional 2.5 percent below.
Example: Monthly salary PYG 10,000,000: worker PYG 900,000, employer PYG 1,400,000 base. / Salary US$1,704: worker US$153, employer base US$239.Ley Nº 98/1992 (rewrites Decreto Ley 1860/1950 art. 17), Art. 2 (DL 1860/50 art. 17 a, b and c), 1992-12-03 official text · verified 2026-10-28

2. Additional 2.5 percent employer contribution. Ley 7446/2024 adds art. 17 bis to the IPS law: the additional employer contribution of 2.5 percent, previously collected by IPS for the Health Ministry and the Labour Ministry, becomes a complementary IPS resource for the sickness and maternity fund, allocated gradually at 0.5 percentage points a year over five years from the fiscal year after promulgation, with IPS transferring the difference to the ministries monthly. The sickness and maternity fund itself moves from 10 percent towards 12 percent of salaries over five years. The law entered into force the day after publication.
Cost to do it: Total employer rate stays 16.5 percent; only the allocation between IPS and the ministries changes.
Example: Monthly salary PYG 10,000,000: additional employer contribution PYG 250,000. / Salary US$1,704: additional US$43.Ley Nº 7446/2024 Por el cual se sustituyen, modifican e incorporan varias disposiciones del régimen legal del Instituto de Previsión Social, Art. 7, 8, 9 and 12, 2024-12-30 official text · verified 2026-10-28 · changed: Ley 7446/2024 (December 2024) moved the 2.5 percent additional employer contribution into the IPS law as art. 17 bis and phases it into the IPS sickness and maternity fund by 0.5 points a year over five years.

3. Tax treatment. Employer salaries and contributions are deductible for IRE only if paid to a social security scheme created or admitted by law. For IRP, the worker's own contributions are excluded from gross income and the employer's contribution is a deduction item.
Cost to do it: Unregistered workers cost an extra 10 percent IRE on their salaries through lost deductions.
Example: A salary of PYG 10,000,000 paid without IPS is not deductible: extra IRE PYG 1,000,000 a month. / Without IPS a US$1,704 salary loses US$170 of IRE deduction value.Ley Nº 6380/2019 De modernización y simplificación del sistema tributario nacional, Art. 15 num. 4, 63 and 64 num. 5, 2019-09-25 official text · verified 2026-10-28

Item	Rate	PYG	USD
Worker contribution (withheld)	9%	900,000	US$153
Employer contribution	14%	1,400,000	US$239
Employer additional contribution	2.5%	250,000	US$43
Total employer cost above salary	16.5%	1,650,000	US$281
Net salary before IRP		9,100,000	US$1,551

IPS contributions on a monthly salary of PYG 10,000,000 (Ley 98/1992, Ley 7446/2024)

Worked example

A Paraguayan subsidiary hires a manager at PYG 10,000,000 (US$1,704) a month.
It withholds 9 percent, PYG 900,000, and pays the IPS PYG 2,550,000 in total each month.
Annual employer cost: salary PYG 120,000,000 plus IPS PYG 19,800,000, total PYG 139,800,000 (US$23,823), before the thirteenth month salary.
Both salary and employer IPS are IRE deductible, worth PYG 13,980,000 (US$2,382) of IRE a year.

Step by step

Register the company as an employer with the IPS before the first hire.
Register each worker with the IPS and the Labour Ministry.
Withhold 9 percent and pay the 25.5 percent total to the IPS monthly.
Keep IPS receipts: they support the IRE deduction.
Check the employee's IRP position if gross service income may exceed PYG 80,000,000.

Common traps

No IPS, no IRE deduction for the salary (Ley 6380 art. 15 num. 4).
The rate split between IPS and ministries changes yearly until the five year phase in of Ley 7446 ends; the 16.5 percent employer total does not.
For teachers and domestic workers different rates apply (DL 1860/50 art. 17 d and e as amended).

Sources

Related: Paraguay country profile · live dashboard · central bank and release calendar · our posts on X · where Argentina is involved, see The Argentine Thread guide

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