Personal Income Tax Deductions: Comparison Paraguay-Brazil 2022Brazil 2022

Abstract

Personal Income Tax (IRP) in Paraguay has evolved since its implementation over a decade ago, transitioning from a formalizing tax to a revenue-generating one. This study focuses on comparing IRP deductions between Paraguay and Brazil in 2022, with particular attention to the limitations on foreign expenses. The research was conducted as a comparative tax law study, utilizing an analysis of the current legal provisions in Paraguay and Brazil. The current regulations were reviewed to identify the deductibility of expenses and the methods of calculating the IRP in both countries. Additionally, interviews were conducted with twenty accounting professionals with experience in the tax field to obtain their opinions and recommendations regarding the deductibility of foreign expenses. The analysis revealed that both Paraguay and Brazil have specific provisions for the deductibility of expenses in the IRP. However, in Paraguay, the 2019 reform introduced significant limitations on the deduction of expenses incurred abroad. Interviews with accounting professionals indicated a general perception that foreign expenses should be considered deductible as long as they meet the minimum requirements established for local expenses. The research concludes that foreign expenses, like local ones, meet the minimum requirements to be considered deductible in the IRP in Paraguay. The current limitation imposed by the 2019 tax reform does not adequately reflect the reality of necessary expenses for generating income. It is recommended that the Tax Administration of Paraguay consider expanding the deductions for foreign expenses to ensure greater equity and efficiency in the application of the IRP.