We are delighted to introduce you to Paraguay: the world’s easiest, fastest, and most affordable tax residency with a 0% tax rate.
It’s no wonder that more and more tax nomads are asking us to help them obtain this residency!
Located in the heart of South America and bordering Argentina, Brazil, and Bolivia, Paraguay is one of the hidden gems of international taxation.
Its most notable feature is that it belongs to the select group of countries with territorial taxation, thereby opening up multiple opportunities to pay fewer taxes.
Moreover, Paraguay offers a series of other vital advantages for Tax Nomads: cost of living, ease of obtaining residency and access to citizenship, minimal requirements, and enormous flexibility.
With this article, you will gain an in-depth understanding of the benefits Paraguay has for you, as well as the requirements, processes, and peculiarities of life in the country.
Benefits of Tax Residency in Paraguay
As previously mentioned, Paraguay is a jurisdiction with territorial taxation, and thus, its tax residency exempts individuals from any taxes on income that is not earned WITHIN Paraguay.
It is important to emphasize that this territorial advantage only applies to personal income, as currently, companies in Paraguay do not benefit from it.
Therefore, it is advisable to operate through companies and structures outside the country with Paraguayan tax residency.
But its territorial tax system is not everything. Paraguay itself offers very competitive tax incentives:
- Personal Income Tax: 10%
- Capital Gains Tax: 10%
- Corporate Tax: 10%
- VAT: 10%
- Gift Tax: 0%
- Inheritance Tax: 0%
- Wealth Tax: 0%
- No exit tax
- No CFC Rules
So, with Paraguayan tax residency, depending on the source of your income, you could end up paying very little or, most likely, NO TAXES at all.
Requirements to become a Tax Resident in Paraguay
We understand that this tax residency is top-notch. But is it difficult to obtain?
It’s one of the easiest!
I’m going to go into great detail in this section because I want you to fully understand how it’s achieved and why it’s so beneficial.
Residency Permit
First, to become a tax resident of Paraguay, you obviously need a valid residency permit in the country.
Paraguay’s immigration policy is very open, and many nationalities (including Europeans) can enter the country for the first time with just their passport.
Other countries may require a visa for this initial entry.
After arriving in the country, you can proceed to apply for a temporary residency permit:
- It is valid for 2 years, and in its last 3 months, it allows you to apply for permanent residency.
- The requirements to obtain it are as simple as providing some documents (birth certificate, marriage certificate if applicable, and criminal record).
- No other ties to the country are necessary, such as having a property available, opening a business, or utility bills.
Identity Document and Tax Identification (RUC)
Once you obtain temporary residency, you can apply for your Paraguayan identity document, known as the “Cédula de identidad”.
This document is essential for your transactions and life in the country, as well as for opening bank accounts.
With your Cédula, you can apply for your other identification: your tax ID!
This is the “Registro Único de Contribuyentes” (RUC), which identifies you as a “taxpayer.”
With it, you can register a business, invoice as a freelancer, pay taxes in Paraguay, and… request your tax residency certificate!
Tax Residency Certificate
This document is especially useful if you are a tax nomad and need to prove that you are no longer a tax resident in other tax-heavy jurisdictions because you are now a taxpayer in your new tax residency.
The downside is that Paraguay does not have many international tax treaties.
This does not invalidate the document within Paraguay, but recognition of it by other countries may vary.
Therefore, it is important to get thorough advice to ensure that in your case, the change of tax residency is secure.
How long will it take to obtain tax residency in Paraguay?
This question has two different answers depending on how you handle the procedures for your residency.
As you have seen previously, the process to obtain it involves four stages: temporary residency, identity card, tax identification, and tax residency certificate.
These procedures can take you over 7 months in Paraguay if you handle them personally.
On the other hand, by hiring our services for residency management, you can obtain all the documents within a maximum period of 3 months.
Additionally, you won’t need to stay in Paraguay the entire time; you can be present only for the procedures and document collection that require your presence.
Finally, we want to inform you that, for the past year, the Paraguayan identity card has been issued with a chip, and residents are required to collect it in person.
This is why, although many services previously offered the possibility of completing the residency process in a single 2-day trip, this approach is no longer advisable, and we recommend avoiding this service.
How to Maintain Tax Residency in Paraguay
At this point, you would have already obtained your residency and tax residency in Paraguay, and you might be wondering, what now?
Paraguay does not require you to have any other ties to the country or to spend a certain number of days per year to maintain your residency. This makes it one of the most flexible tax residencies.
However!
THERE ARE CERTAIN ASPECTS TO KEEP IN MIND
Paraguay can revoke your residency permit if you go more than 3 years without visiting the country.
If you wish to change your temporary residency permit to a permanent one, you will need to visit Paraguay at the end of your second year of temporary residency.
If you need Paraguay to issue you a tax residency certificate in any given year (for example, if you need to present it to another country), you must meet at least one of these two requirements:
- Have an ACTIVE RUC (tax identification number).
- Spend more than 120 days in the country that year.
So, if your plan is to rarely set foot in Paraguay, you must have your RUC active to be entitled to your tax residency certificate.
What does “Active” mean?
Your RUC in Paraguay can be active or “frozen.”
Being active means submitting monthly VAT returns (even if they are blank, because you do not have any business in Paraguay).
Being frozen exempts you from any returns, but you won’t get a tax residency certificate unless you spend 4 months per year in the country (which is the day criterion for being a tax resident in Paraguay).
It will depend on your profile:
- If you plan to spend time in Paraguay, establish a certain base there, and enjoy the low cost of living, freezing the RUC would be a viable option.
- If you prefer to live outside Paraguay and only “pass through,” it is highly recommended to keep the RUC active.
Whatever your case may be, you can contact us as we offer a full range of services.
Permanent Residency and Citizenship in Paraguay
In the last 3 months of your temporary residency permit, you can travel to the country to obtain your permanent residency permit.
This permit will be valid for 10 years, and to maintain it, you only need to visit Paraguay once every 3 years.
One notable aspect of permanent residency is that after 3 years, it allows you to apply for Paraguayan citizenship.
Lastly, it is possible to obtain permanent residency directly (without the 2 years of temporary residency) through Paraguay’s investment residency program:
- Investment of $70,000 over 2 years
- Creation of 5 jobs within those 2 years
Living in Paraguay
Climate
Paraguay has a subtropical climate characterized by two main seasons: a warm and humid season from October to March, and a cooler, drier season from May to August.
Overall, temperatures tend to be warm as winters are not particularly cold (averaging around 10°C), and summers can reach up to 40°C.
It is recommended to visit the country in spring or autumn, when the weather is more moderate and extreme weather phenomena such as droughts or floods (which are not uncommon in Paraguay) can be avoided.
Cost of living
This is undoubtedly one of the greatest attractions for Tax Nomads.
Paraguay has a lower cost of living compared to its surrounding countries (20-25% lower).
Compared to Spain or destinations in Europe, Paraguay is up to 60-70% cheaper.
Currently, the minimum wage is around €350 per month, and its GDP per capita is twelve times lower than that of United States.
It is possible to find decent apartments in Asunción (the capital) for €300 per month.
Safety
Paraguay is considered a relatively safe country compared to some of its neighbors in South America.
However, like most destinations in Latin America, its crime rate is clearly higher than in European countries.
Some factors contributing to this high crime rate include drug trafficking, an inefficient judicial system, and undertrained police forces.
Interesting factors
In Paraguay, there are public healthcare and education systems, but their private counterparts offer significantly better services.
The political landscape is predominantly “right-wing,” and the current government considers it important for the country to be attractive to entrepreneurs and investors.
The official currency is the Guarani (PYG), but the use of the US Dollar is widespread.
Paraguayans are known for their hospitality and joyfulness. The official language is Spanish, and their proficiency in English is improving above the average of other countries.
Our review on Paraguay Tax Residency
We consider Paraguay a low-cost and flexible tax residency option.
Among its main advantages are territorial taxation, low internal tax pressure, low cost of living, minimal requirements, and the opportunities to obtain an additional nationality.
Its main drawback is the limited number of double taxation treaties, but the country is working on it—and it just signed a treaty with Spain!
Without a doubt, it is one of the best tax residency options for tax nomads.
Paraguay thus joins the list of countries with territorial taxation and stands as an option to consider alongside others like the Dominican Republic, Panama, or Costa Rica.
Are you interested in obtaining tax residency, citizenship, or setting up a company in Paraguay?
Or would you prefer a complete analysis of your situation to discover the best option for you?
In either case, we can help!
Simply request your FREE INITIAL CONSULTATION BY CLICKING HERE, or contact us directly via WhatsApp or through the form below.
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In Paraguay, the main taxes include Personal Income Tax (10%), Capital Gains Tax (10%), Corporate Tax (10%), VAT (10%), and other taxes such as Donations, Inheritance, and Wealth Tax do not exist.
Territorial taxation exempts income earned outside of Paraguay from taxes, making the country attractive for minimizing tax burdens.
To obtain tax residency in Paraguay, the process involves 4 stages: temporary residency, identity card issuance, tax identification (RUC), and tax residency certificate.
Presence in Paraguay for a certain number of days is required to complete the procedures.
After two years of temporary residency, one can apply for permanent residency, which is valid for 10 years and allows for citizenship application after three years.
There is also an investment residency program where an investment of $70,000 over two years and job creation can expedite the process.
The time to obtain residency can vary from 7 months to 3 months, depending on whether you complete the process on your own or hire a residency service.
Currently, it is recommended to avoid services that promise to complete all procedures in 2 days.
Obtaining a Paraguayan passport follows a process related to residency and citizenship.
First, you must obtain permanent residency in Paraguay, which requires having held temporary residency for at least 2 years (or accessing the accelerated process for permanent residency through investment).
After three years with permanent residency, you can apply for Paraguayan citizenship.
Paraguay is relatively safe, but it has a crime rate higher than the average in European countries.
Caution is advised, especially in urban areas, due to factors such as drug trafficking and limitations in the judicial system and police.
Despite these challenges, many residents live safely in Paraguay.
