Maquila in Paraguay: Law 1064/97, tax benefits and how to apply

The Law 1064/97 "On the Export Maquiladora Industry" turned Paraguay into one of South America's most competitive destinations for export industries and offshore-based services. Its central advantage is a flat 1% rate on the value added in Paraguayan territory, combined with the temporary import of inputs free from tariffs and IVA. In this guide we break down who can use the regime, what steps are required at the CNIME and which use cases offer the greatest scope in 2026.

What is the maquila regime

The maquila is an industrial contract under which a foreign parent company —the "matriz" or "comitente"— hires a Paraguayan company —the "maquiladora"— to process, assemble, repair or render services on goods or intangibles that are subsequently re-exported. Inputs enter the country under a scheme of temporary admission for inward processing: no tariffs or IVA are settled at the time of import, on the understanding that the goods do not remain on the domestic market.

The legal framework combines Law 1064/97, its Implementing Decree 9585/2000 and successive updates issued by the CNIME (National Council of Export Maquiladora Industries). The contract is approved on a case-by-case basis and sets out the production plan, projected investment, jobs to be created and export forecast.

Flat 1% rate: how it is calculated

On the value added in Paraguay —wages, rents, local services, depreciation, domestic inputs— the maquiladora pays a single rate of 1%. That figure replaces virtually every national tax that an ordinary industrial company would pay: IRE (10%), IVA on sales, customs duties on inputs and, in most cases, ISC (selective consumption tax).

"The 1% maquila rate is not applied to the export invoice but to the cost added locally. A company with 60% imported inputs and 40% effective local value added has an effective rate of around 0.4% on the total invoice."

The regime is compatible with Paraguayan tax residency for the partners, who continue to pay IRP only on Paraguayan-source income. It is an attractive combination for founders and family offices operating from abroad.

Who can use the regime

The following entities may apply to the CNIME:

• Public limited companies (SA) or limited liability companies (SRL) incorporated in Paraguay.
• Branches of foreign companies registered with the General Directorate of Public Registries.
• The contracting parent company may be any foreign business with the capacity to sign a maquila contract.

There is no requirement regarding the nationality of the capital: 100% may be foreign-owned. Nor is any minimum investment amount stipulated, although projects below USD 100,000 tend to be challenged at the technical evaluation stage.

Eligible sectors in practice

• Textiles and apparel: the historically strongest sector. Regional brands manufacture in Ciudad del Este and Luque for export to Brazil, Argentina and the United States.
• Auto parts and assembly: wiring harnesses, seats, technical plastics. Strong demand from Brazilian parents in the automotive belt.
• Electronics and components: board assembly, wiring and testing.
• Agro-industry and food processing: packaging, dehydration, premium chocolate, speciality coffee.
• Exportable services under "service maquila": BPO, bilingual call centres, software development, data entry, animation and video editing. This sub-regime is growing at 20% annually and represents the principal entry point for digital businesses.

CNIME registration process — step by step

1. Company incorporation. Set up the SA or SRL in Paraguay (10 to 15 working days). Register with the DNIT to obtain an industrial RUC.
2. Investment project. Draft the technical memorandum: investment, jobs, timeline, contracting parent, description of the process, flow of inputs and outputs.
3. Maquila contract. Signed between the foreign parent and the local maquiladora. Attached to the file.
4. Submission to the CNIME. The one-stop window at the Ministry of Industry and Commerce receives the file. Estimated approval time: 45 to 90 working days.
5. Bi-ministerial resolution. Signed by the Ministers of Industry and Commerce and of Finance (now the Ministry of Economy and Finance). It sets the benefits and the programme's horizon.
6. Customs clearance. The DNIT authorises the bonded warehouse and the temporary admission regime for the company.
7. Start of operations. First import of inputs under the active regime. The first export must take place within the deadline set in the programme (usually 12 months).

Real costs and timeframes

• Company incorporation: USD 1,500 to 3,500 in fees and charges.
• Preparation of the CNIME file (lawyers and accountants): USD 4,000 to 8,000.
• Total time to first export: 4 to 6 months in well-structured projects.
• Mandatory resident chartered accountant: USD 500 to 1,500 per month.

Post-approval obligations

The maquiladora must submit quarterly reports to the CNIME detailing imports, exports, jobs created and value added. Repeated breaches may result in revocation of the programme. The DNIT audits the correspondence between imported inputs and exported products, with defined tolerances for wastage.

Use cases that work in 2026

The profiles that reduce the most friction under this regime are:

• Regional DTC brands sourcing fabrics in Brazil or China that wish to assemble in Paraguay for re-export to Argentina, Chile and Uruguay.
• Software studios or video-editing houses with clients in the United States and Europe seeking to bring their effective tax burden down to 1%.
• Family offices combining tax residency with a service maquila as their operating vehicle.
• Brazilian industries decentralising assembly to take advantage of labour costs and preferential MERCOSUR tariffs.

What complements the maquila

To make the most of the structure, it is typically combined with:

• A solid grasp of the tax system (IVA, IRE and INR) so as not to lose benefits when invoicing ancillary services locally.
• An exporter RUC and DNIT licences to operate the customs flow.
• A specialist legal firm from the services directory to manage the CNIME file.

Frequently asked questions

Can a maquila sell on the domestic market? Yes, but only a small percentage (usually up to 10%), with express CNIME authorisation and on payment of all suspended taxes.

How long does it take to approve a service programme? Between 60 and 90 days, slightly faster than industrial programmes thanks to the lighter customs load.

Is the 1% applied to turnover or to value added? To value added: wages, rents, services, depreciation and local inputs.

Can I have employees on a dependent employment contract in a maquila? Yes, and it is in fact one of the regime's hallmarks. Wages count as value added. Employer contributions to the IPS continue under the general scheme (16.5% employer + 9% employee).

Is there a cap on how long a company may operate under the maquila regime? No. The initial programme is usually approved for 3 to 5 years and is renewed for as long as the company meets its production and reporting obligations.

Does a maquila pay IVA when buying locally? Yes, but it can apply for a refund of the IVA credit linked to exports, under the same mechanism as any other exporter.

Can an ordinary SRL switch to the maquila regime? Yes: there is no need to incorporate a new company. The programme is submitted to the CNIME and, once approved, the same company operates under the maquila regime for that line of business.

Comparison with regional regimes

The Paraguayan maquila competes with similar arrangements in the region. In summary:

• Paraguay (Law 1064/97): 1% on value added, 0% tariffs on imported inputs, recoverable 10% IVA, low-cost local accountants and lawyers.
• Uruguay (free zones): full IRAE exemption, higher operating costs, similar tax treatment for partners' income.
• Mexico (IMMEX): mature regime, with stricter compliance requirements and a significant administrative burden.
• Argentina (Tierra del Fuego): incentive limited to a single geographic area; complex logistics.

For companies wishing to serve the MERCOSUR bloc with flexibility and a low cost of entry, Paraguay generally wins on a head-to-head comparison.

Combining with an LLC / foreign holding

A common structure for international founders combines:

• A holding company (Delaware LLC, Uruguayan capital company, UAE holding) as the parent.
• A Paraguayan maquila that invoices the holding for the services rendered.
• The holding then invoices the end client abroad.
• The partners are tax residents in Paraguay and receive dividends subject to a limited INR or via the appropriate channel depending on the holding's domicile.

Each structure is modelled with an international tax adviser to bridge the gap between jurisdictions without unnecessary friction.

Risks and points to watch

• CNIME controls: quarterly reports are mandatory; repeated delays can lead to revocation of the programme.
• Economic substance: avoid purely artificial structures; the parent's home tax authorities (BEPS, CFC) may challenge the operation if there is no genuine activity.
• Transfer pricing: transactions between the maquila and its principal must be priced at arm's length (the local value added must make economic sense).
• Labour turnover: certain sectors (textiles, assembly) experience high turnover; budget for the total cost of continuous training.