Paraguay proposes 5% VAT for electric and hybrid vehicles

The National Directorate of Tax Revenues (DNIT) in Paraguay is advancing a fiscal reorganization strategy that includes modifying the incentive regime for electromobility. The proposal suggests applying a 5% Value Added Tax (IVA) on the import and first sale of electric and hybrid vehicles.

This initiative aims to gradually phase out the complete tax exemptions currently granted to these vehicles, which were originally implemented to stimulate energy transition. Following negotiations with the Chamber of Automotive and Machinery Distributors (CADAM), the Executive Branch softened its initial stance. While the DNIT originally considered a 10% customs tariff, the preliminary agreement maintains a zero-rate customs tariff during the initial stage, limiting the immediate fiscal impact to the 5% IVA.

Subsequent sales of the same vehicles will be subject to the general 10% tax rate. The government has outlined a five-year transition period to mitigate the impact on the local automotive market, with a definitive regime expected to be fully implemented by 2032.