Are you looking for a tax-free country to grow your wealth while keeping full lifestyle flexibility? If your ideal life means spending winters in Bali, summers in Europe, and the rest of the year travelling the world, Paraguay tax residency is built exactly for that.
This South American country, bordered by Brazil, Argentina, and Bolivia, offers a favorable tax regime with its territorial taxation system, making it the perfect legal tax haven due to its low taxation. Furthermore, it is one of the safest countries in the region.
Paraguay’s economy is on the rise, with a GDP growth rate of 1.24% in March 2024, and GDP per capita was $6,415.43 by December 2023. The growing economy makes it an attractive destination for digital nomads, entrepreneurs, and globetrotters.
The country has simple tax requirements, including a 0% tax on income earned outside Paraguay and no wealth, gift or inheritance taxes. If you’ve ever dreamed of a nomadic lifestyle combined with a tax residency that requires minimal physical presence, Paraguay could be exactly what you’re looking for.
In this article, we cover Paraguay’s tax system along with its benefits and how to obtain tax residency.
Paraguay tax benefits
The Paraguay tax residency offers several benefits, making it an attractive destination for individuals and companies seeking favorable tax conditions:
- Taxable Income: Only Paraguayan-source income is subject to tax; foreign-source income is exempt.
- Corporate Income Tax (CIT): Foreign-source income is not taxed. Paraguayan-source income is taxed at a 10% rate.
- Personal Income Tax (PIT): Foreign-source income is exempt from tax. Paraguayan-source income is taxed at progressive rates ranging from 8% to 10%.
These features contribute to Paraguay’s reputation as a legal tax haven.
Taxation in Paraguay
Paraguay is known for its territorial tax system similar to other countries in the region like Panama, Uruguay, Costa Rica and with some nuances, the Dominican Republic, which offers significant benefits for tax residents.
Under this system, residents are only taxed on income earned within Paraguay. This means that any income earned outside the country is exempt from Paraguayan taxes.
Tax Rates
All the following tax rates apply only to Paraguayan-source income:
Corporate Income Tax (CIT)
- CIT rate: 10%.
Personal Income Tax (PIT)
- PIT rate: 10%.
Value-Added Tax (VAT)
- Standard VAT rate: 10%.
- Reduced VAT rate: 5% (applicable to sale and rent of immovables, some medicines, and agricultural, horticultural, and fruit products).
Withholding Tax (WHT)
- Residents: 8% on dividends.
- Non-resident corporations:
- Dividends: 15%.
- Interest: 6% (banks/financial institutions), 15% (commercial entities), 30% (head office/direct shareholder).
- Royalties: 15% (commercial entities), 30% (head office/direct shareholder).
Capital Gains Tax (CGT)
- Corporate capital gains: Subject to the normal CIT rate.
- Individual capital gains: Subject to the normal PIT rate.
Other Taxes
- Net wealth/worth tax: Not applicable.
- Inheritance tax: Not applicable.
- Gift tax: Not applicable.
These favorable tax rates can result in very low or free taxes, depending on the sources of your income.
How to Obtain your Tax Residency in Paraguay?
The following is the step-by-step process of obtaining tax residency in Paraguay:
Secure a Residency Permit
To become a tax resident, the first is that you first need to secure a residency permit. Paraguay’s immigration policy is relatively open. Most nationalities, including Europeans, can enter with just a passport. However, some nationalities may need a visa for initial entry.
How Can You Apply For Termporary Residency in Paraguay?
Once in Paraguay, you can apply for a temporary residency permit, which is valid for two years. After the first two years, you can apply for permanent residency.
The requirements for a permanent residency include:
- Documents Needed: Birth certificate, marriage certificate (if applicable), and criminal record.
- No Additional Requirements: You do not need to own property, open a business, or have utility bills in your name.
Identity Card
After obtaining temporary residency, you can apply for your Paraguayan identity card, known as the “Cédula de Identidad.” This card is essential for various transactions within the country, including opening bank accounts.
Tax Identification (RUC)
With your identity card, “Cédula,” you can then apply for a tax ID number or “Registro Único de Contribuyentes” (RUC). This number is necessary for:
- Registering a business.
- Invoicing as a freelancer.
- Paying taxes.
- Requesting a tax residency certificate.
Tax Residency Certificate
A tax residency certificate is important if you need to demonstrate to other jurisdictions that you are a tax resident of Paraguay. However, Paraguay has limited international tax treaties, so the recognition of this certificate by other countries might vary.
Duration of the Tax Residency Process
Establishing tax residency in Paraguay involves going through four official stages: obtaining temporary residency, getting your national ID, registering for a taxpayer number, and receiving your tax residency certificate.
If you decide to handle everything on your own, be prepared for a long road — the process can drag on for up to 8 months due to bureaucratic delays and lack of coordination between government offices.
That’s why many choose to work with professionals. At TaxMove, we’ve streamlined the entire process so that your physical presence in Paraguay is reduced to just 3 days in the capital, Asunción. From there, we take care of everything behind the scenes. Around 3 months later, the full set of residency documents will be delivered to you, wherever you happen to be.
A quick note of caution: some intermediaries still promote the idea of “fast-tracking” the process through bribes or unofficial payments. While that might have been more common in the past, it’s now a serious legal risk — both for the person offering the bribe and for those accepting it. We never engage in or support those practices. Everything we do is 100% legal and compliant, so your residency is built on a solid foundation.
Our service includes all fees and government costs — no surprises, no hidden extras. Interested in doing this the right way? Reach out to us and we’ll be happy to explain the process clearly and answer any questions you have.
Maintaining Your Tax Residency in Paraguay
Maintaining Paraguayan tax residency is relatively flexible. Paraguay does not require you to spend a certain number of days in the country each year to keep your residency status.
- Temporary Residency Permit: You must visit Paraguay at least once every 12 months to keep your residency permit active.
- Permanent Residency Permit: You must visit Paraguay at least once every 3 years to keep your residency permit active.
- Tax Residency Certificate Requirements: To request a certificate, you must have an active RUC.
An active RUC requires monthly VAT returns (even if no business activities).
Permanent Residency and Citizenship
When your temporary residency expires, you can apply for permanent residency, which lasts for 10 years and requires a visit to Paraguay every three years. After three years of holding permanent residency, you can apply for citizenship.
Alternatively, you can obtain permanent residency by investing $70,000 and creating five jobs within two years.
Best Structure to Benefit from Paraguay Tax Residency
For digital entrepreneurs and online service providers, the most effective way to benefit from tax residency in Paraguay is usually to operate through an offshore company and invoice clients abroad. Under Paraguay’s territorial tax system, foreign-source income is generally not subject to local taxation, making this structure particularly attractive for international businesses.
In practice, many residents choose to use a U.S. LLC, as it is inexpensive to set up, easy to maintain, and widely accepted by international clients and payment platforms. When properly structured, income earned through a foreign company can fall outside the Paraguayan tax net.
However, an important nuance is often overlooked. Paraguay’s territorial tax regime is not as extensive as Panama’s. If you personally provide services from within Paraguay, you will be required to issue invoices using your local tax ID (RUC), which involves paying personal income tax at a 10% rate and charging 10% VAT, even when your clients are located abroad. This differs from Panama, where the territorial system is broader and foreign-source income typically remains non-taxable without the need for additional local invoicing or registration.
One important advantage to keep in mind is that Paraguay allows a broad range of personal expenses to be treated as deductible. As a result, although the personal income tax rate is set at 10%, the effective tax burden can be significantly reduced by properly offsetting taxable income with deductible expenses, making the overall tax outcome far more efficient in practice.
Banking in Paraguay
Paraguay’s tax residency is currently one of the most flexible and attractive programs on the market — simple, affordable, and highly effective. But here’s the truth: you don’t want to rely on local Paraguayan banks. Their high fees, outdated systems, and painfully slow transactions can turn an excellent residency strategy into a frustrating experience.
That’s why we recommend combining your Paraguayan residency with our offshore online banking solutions, giving you access to top-tier banks in Europe and the United States. This way, you secure the unbeatable tax advantages of Paraguay while enjoying fast, reliable, and globally recognized banking. It’s the perfect balance between a smart fiscal plan and world-class financial freedom.
How Can We Help You?
With hundreds of entrepreneurs and investors successfully relocated, Paraguay has become one of our top destinations due to its favorable tax rates and flexible residency requirements. Our extensive experience and dedication enable us to provide the most comprehensive residency service on the market in Paraguay, which includes:
Comprehensive residency package covering all procedures, fees, and documents required to establish tax residency, including:
- Temporary residency permit.
- Paraguayan ID card (Cédula de Identidad).
- RUC (Taxpayer Identification Number).
- Tax residency certificate.
- Document translation as needed for the residency process.
- Convenient transport: Taxi pickup from your accommodation for each appointment.
- Continuous support and follow-up: Assistance via email and WhatsApp to guide you through all steps and documentation.
International tax advisory service for individuals and businesses, including:
- Review of your current tax structure.
- Recommendations for the most legally efficient setup.
- Step-by-step guidance on severing tax ties with your previous country of residence.
Contact us to begin your Paraguay residency process
How can I become a tax resident in Paraguay?
Steps include:
- Secure a temporary residency permit (valid for 2 years).
- Apply for permanent residency after 2 years.
- Obtain a Paraguayan identity card (Cédula de Identidad).
- Apply for a tax ID (RUC).
What is the territorial tax system in Paraguay?
What is the taxation in Paraguay?
Paraguay follows a territorial taxation system, meaning only income generated within the country is taxed, making it an attractive option for international businesses and expats. The personal income tax rate is 10%, and corporate tax on profits from Paraguayan sources is also set at 10%.
What are the key tax rates in Paraguay?
- Corporate Income Tax (CIT): 10%.
- Personal Income Tax (PIT): 10%.
- VAT: 10% (standard), 5% (reduced for certain goods).
- No wealth, gift, or inheritance taxes.
What is the best structure to benefit from Paraguay tax residency?
For most digital entrepreneurs, the optimal structure is to operate through an offshore company, commonly a U.S. LLC, to invoice foreign clients, as Paraguay’s territorial tax system generally exempts foreign-source income. However, if services are personally rendered from within Paraguay, local registration and taxation may apply.
How is banking in Paraguay?
Banking in Paraguay is often hindered by slow transactions and high fees, making it difficult for clients to enjoy the country’s otherwise favorable tax advantages. Many experience delays and hidden charges, complicating financial management. Our offshore online banking solutions provide fast, efficient transactions and low fees, ensuring hassle-free banking. laudantium cum accusamus ullam voluptatibus commodi numquam, error, est. Ea, consequatur.
