Buying a house in Paraguay: free for Dutch buyers, with the notary as gatekeeper

As a Dutch citizen you may freely buy a house or land in Paraguay. The law that restricts foreigners, Ley 2532 of 2005, concerns a strip of 50 kilometres along the border. There, nationals of the neighbouring countries may not own land outside town. Dutch citizens are not covered by it. The purchase itself goes through a notary, the escribano, and is only registered once the seller's tax has been paid. After that you pay 1 % property tax every year.

What	Who	How much
Tax on the sale, seller lives in Paraguay with a residencia permanente	seller, withheld by the notary	8 % on 30 % of the price: 2.4 %
The same, seller without a residencia permanente	seller, withheld by the notary	15 % INR and 5 % IVA, each on 30 % of the price: 6 % in total
Impuesto inmobiliario	owner, every year	1 % of the fiscal value
Likewise, land outside town under 5 hectares	owner, as sole property used for farming	0.5 %
Rent, if you let and have a residencia permanente	owner	8 % on half the rent, or on the actual profit

Who may not buy in the border strip?

Ley 2532 calls the strip of 50 kilometres along the land and river borders a security zone. There, foreigners from one of the neighbouring countries, and companies mostly owned by them, may not be owner, co-owner or holder of a usufruct of land outside town. The government can make exceptions by decree. Paraguay borders Argentina, Brazil and Bolivia.

An amendment from the same year, Ley 2647, exempts among other things inheritance rights, and the rights of nationals of the neighbouring countries who hold a permanent residencia in Paraguay.

If you buy together with a partner from Argentina, Brazil or Bolivia, co-ownership counts too. A purchase that breaks the law is void, with a fine of twice the value of the transaction, and a notary may not execute such a deed. Ask for an extract from the Catastro: it states whether the plot lies wholly or partly in the zone.

How does the purchase work?

Through a public deed before a notary, who has it entered in the public registers. The notary also withholds tax. If the seller lives in Paraguay with a residencia permanente, he withholds the income tax on the sale: 8 % on 30 % of the price. If the seller doesn't have one, the notary withholds two taxes: 15 % income tax for non-residents (INR) and 5 % VAT (IVA), each on 30 % of the price. Together that is 6 % of the price. The registers do not enter the deed without proof that this tax has been paid.

That tax falls on the seller. If you later sell yourself, the same applies. For these rules you only count as a resident with a residencia permanente: then it is the 8 % on 30 %. With only a temporal you count on the 6 %. As a resident the law also lets you use the actual gain as an alternative, the difference between sale price and purchase price plus costs, if that comes out lower and you can prove it with documents. So keep your own deed and invoices, and ask the notary how he handles that.

What do you pay every year?

The impuesto inmobiliario: 1 % of the fiscal value set by the Servicio Nacional de Catastro. For land outside town under 5 hectares it is 0.5 %, if that is your only property and you use it for farming. Since Ley 5513 of 2015 the fiscal value rises every year with the consumer price index. The Catastro calculates the tax, the municipality where the house stands sends the bill and collects it.