Comparison of Uruguay and Paraguay as Countries for Personal Residence

If you want to move to Latin America, but do not know where to start, here is a comparison between two of your best options.

Today we compare two promising South American countries that are much more than a plan B to avoid the stifling tax burden of your home country. Both Uruguay and Paraguay offer a high quality of life, a considerable degree of freedom, tax advantages and much simpler immigration procedures than other countries.

Join us in our comparative analysis and find out which country best suits your life plan.

The two countries in a nutshell

Let us start with Paraguay. This country has established itself as a favourite destination for many Spaniards and Europeans in general, who have found their new home here. Even if you do not plan to stay for a long time, it might be a good idea to obtain permanent residency there, as the procedure is very simple, undemanding and relatively cheap.

So even if you are not moving there permanently, you should put Paraguay on your list of destinations to live more freely thanks to the flag theory.

As a perpetual traveller, it is important that you take care to obtain a bank compliance residence that will make your life easier in the medium and long term.

It started with the wave of excessive government control at the time of the pandemic, and continued with travel restrictions and quasi-mandatory vaccinations (which, while not strictly mandatory, in practice made life miserable for those who did not get vaccinated). The wave of migration has intensified with the conflict in Ukraine, as both Austrians and Russians have migrated to the region.

Unfortunately, it took the lockdowns for many to realise how crazy government can become and that the last thing it cares about is individuals and their freedom.

Due to Paraguay’s increasing popularity as a destination for expatriates, Denationalize.me offers its own services for acquiring residency in the country. Our approach differs from that of traditional immigration agents, as we also offer you our extensive experience in international taxation. Not only do we help you with the residency and citizenship application process, but we also assist you in applying for a tax identification certificate and can advise you on how to cease being a tax resident in your home country, as well as on the best business structures to save or avoid paying tax.

The case of Uruguay is also interesting. Uruguay is recognised as a peaceful nation: In all rankings Uruguay is listed as one of the most stable and secure, least corrupt and most developed countries in Latin America. The capital, Montevideo, was named the least stressful city in Latin America in 2021. Uruguay ranks 50th in the Global Peace Index —and first among South American countries.

According to an article of the Uruguayan Constitution, parents have the right to “choose” teachers and schools for their children’s education. Both primary and secondary education are compulsory, which means that unregulated homeschooling is not legal. However, it is permitted to enrol children in alternative schools.

In terms of security of supply, there are almost four cows per Uruguayan inhabitant, and the Guarani aquifer flowing under the country guarantees a secure supply of drinking water. In general, this area has little history of warfare, so we consider it unlikely that there will be a military conflict in this region —and even less likely that a potential third world war will come to Uruguay.

It is also interesting to know that owning real estate in Uruguay does not entail any tax liability.

In addition, foreign nationals wishing to settle in Uruguay can choose between two special regulations: either to enjoy an 11-year tax exemption on interest and dividends from abroad, or to be taxed permanently at a reduced rate of 7% on this income. The 11-year exemption or the reduced tax rate is granted by filing a form with the tax authorities as soon as the person meets the tax residency requirements. The process usually takes one and a half to two months.

Uruguay offers unconditional Jus soli and multiple citizenship, good freedom to travel, and is a country where you can generally live quite well.

In a nutshell:

Paraguay: quick, easy, and cheap immigration process, great for PT living or for legal and bank compliance residences, territorial taxation, favourable cost of living, lots of nature, and little luxury.

Uruguay: 11-year tax regime on dividends and interest (otherwise, 7% income tax rate) one of the most developed, stable, secure and free countries in Latin America (and with a European flavour); good starting point for entrepreneurs and investors active in the south of South America (“the Switzerland of South America”) flexible education and easy immigration with proof of income, otherwise requiring a longer stay for the first year.

Other aspects to be considered: comparison of 15 factors

1. Immigration procedure

In Paraguay, you can apply for a temporary residence permit one week in advance, and the issuance of the document will take one to three months —depending on whether you decide to speed up the procedure or not. A short visit of 1 to 3 days is enough to complete all the formalities. It is also not necessary to own property in the country to obtain residency, and documents can be sent to an address outside the country. The disadvantage of Paraguay is that the temporary residency is only valid for 2 years. After this period, you will have to repeat the process to convert it into a permanent residence permit. It is also possible to skip the temporary residence phase and obtain a permanent residence permit directly through the SUACE programme, which offers investors a faster path to permanent residence if they invest at least USD 70,000 in the country and 5 jobs are created.

In Uruguay the process is for some more complicated and for others simpler than in Paraguay: in principle, it is more complicated because it requires a vaccination certificate, which is not the case in Paraguay. You do not need to be vaccinated against COVID, but you do need to be vaccinated against tetanus, rubella, and measles. You will also need to provide a Uruguayan address to complete the process —although fortunately your lawyer’s or hotel address will do if you do not have a rented property in the country. The process is also more complicated because, unlike in Paraguay, there is a waiting list for an appointment with the immigration office —which usually takes 3-4 months. Once the appointment is made, you will have to spend 3 days in Uruguay to complete all the paperwork and, once completed, wait another 3 months for your documents to be ready.

On the other hand, the process can be much simpler if you are a Mercosur citizen, as you can directly obtain a permanent residence permit.

2. Minimum stay in the country

In Paraguay, temporary residents cannot leave the country for more than one year at a time, while for permanent residents this period is extended to three years. This means that, to keep your temporary resident status active, you must travel to Paraguay once a year —and, as a permanent resident, you must visit Paraguay once every three years in order not to lose your permanent residency. If you are unable to comply with this condition, there are solutions within your reach.

It is also important to consider the transition from temporary to permanent residence. You must visit the country within 3 months of the expiry of your two-year temporary residence if you want to convert it to permanent residence. Once permanent residence is granted, you only need to renew the document every ten years. This offers considerable flexibility for people who enjoy travelling the world and do not need a fixed abode or regular presence in the country.

Uruguay, on the other hand, requires a minimum stay of more than nine months in the first year of temporary residence. After obtaining permanent residence, you must visit the country at least once in 365 days to keep it active. Note that a longer absence or the expiry of your identity document may affect your residency status.

 3. Tax residence

There are two ways to be recognised as a tax resident in Paraguay:

• stay in the country for a minimum of 120 days per year (well below the world average of 183 days); or
• maintain an active RUC (Registro Único de Contribuyentes). With an active RUC, you must file monthly VAT returns. However, if you have no income or expenses in Paraguay, you can file these returns in blank. Our accountant can do this for you for USD 600 per year.

Therefore, if you do not want to spend 120 days a year in Paraguay, you can acquire tax resident status for only USD 600 per year in accounting fees.

In Uruguay, tax residency is based on a stay of more than 183 days per year. However, this time can be reduced from 60 days to 1 single day per year depending on the qualifying investments you are willing to make.

Uruguay also considers persons who have their centre of vital interests or economic interests in the country as tax residents. This applies, for example, if the spouse and dependent minor children live in Uruguay or if more income is earned in Uruguay than in any other country (except exclusively passive income).

It is also possible to become a tax resident through investments. If you invest in Uruguayan property or companies that meet certain criteria, you can be considered a tax resident —unless it can be proven that you are a tax resident in another country. These are some of the criteria your company must meet to be considered a tax resident:

• More than 15 million indexed units (about UYU 77 million or EUR 1.788 million) in real estate in Uruguay.
• More than 45 million indexed units (about UYU 231 million or EUR 5.364 million) in a company with projects directly or indirectly subsidised by the Investment Law.
• More than 3.5 million indexed units (about UYU 18 million or EUR 418,000) in real estate, provided that the investment was made after 1 July 2020 and the person spends at least 60 days a year in Uruguay.

In both countries it is possible to be a legal resident without being a tax resident.

4. Taxation

Both Paraguay and Uruguay have territorial taxation, although they apply different approaches.

Paraguay’s territorial tax system is a real paradise for those seeking tax exemption for income earned abroad: in Paraguay, only income earned in the country is taxed, which means that all foreign income is fully exempt from taxation. If you have no income in Paraguay, you are not obliged to file an income tax return, but if you have local income, it will be taxed at a maximum of 10%. If you live in Paraguay, you can deduct the VAT paid (also 10%) from this income tax.

In Uruguay, capital gains, rental income, and pensions from abroad are exempt from taxation, but income from movable capital (dividends and interest) is normally taxed at a rate of 12%. However, immigrants in Uruguay have a choice of several special tax regimes: one attractive option is the 11-year personal income tax exemption on dividends and interest from abroad, which allows newcomers to Uruguay to enjoy a significant tax “discount” for more than a decade. Another option is the permanently reduced 7% tax on foreign interest and dividends.

Both countries also offer tax advantages to exporting companies (maquilas). The situation is not very different in Uruguay. Small companies can be structured as SAS (Sociedades Anónimas Simplificadas), which pay between 3.3% and 12% tax on gross sales up to an annual limit of around USD 500,000. There is also the possibility of not paying tax on foreign business income and dividends by setting up a company in one of Uruguay’s free zones. The minimum requirements are to hire at least one employee and rent an office in one of the free zones.

5. Naturalisation

If you have had a permanent residence permit in Paraguay for 3 years, you are eligible to apply for Paraguayan nationality and passport. However, it is important to note that, with one important exception, Paraguay does not recognise dual nationality; so you will have to renounce your previous nationality when you obtain Paraguayan nationality. In practice, however, this usually amounts to renouncing only your passport, which can easily be re-applied for. The exception is that Paraguay does have a dual nationality agreement with Spain. There is no minimum stay for naturalisation, but admission is arbitrary. Some investment in the country is recommended to increase your chances of being granted naturalisation.

In Uruguay, however, dual citizenship is recognised and accepted, although the naturalisation process is stricter and requires permanent residence in the country for 5 years. This period can be reduced to 3 years if you are married or have children in the country (it is not necessary to be married to a Uruguayan citizen). In addition, you must prove strong ties to Uruguay to obtain citizenship —without a regular residency it is almost impossible to prove this.

6. Quality of life and cost of living

The time has come to decide: do you prefer the simple Paraguayan lifestyle, with considerably lower costs; or do you opt for the elegance of Uruguay, which will drain your pockets a little more?

In Paraguay you can enjoy a high quality of life on a low budget. The reasons for choosing Paraguay are different from those that would attract you to highly developed countries, with state-of-the-art infrastructure and numerous leisure options.

Uruguay, on the other hand, is considered one of the best countries in all Latin America in terms of quality of life. With a very good ranking in the Human Development Index, the country offers shiny, well-organised roads and an efficient public service. The catch: all this comes at a price.

According to Expatistan, life in Paraguay is 40% cheaper than in Uruguay. While in Paraguay a single person can get by on about USD 917 per month, in Uruguay you have to pay about USD 1,506. A note: the cost of living in Uruguay is higher than in 60% of the countries in the world, while Paraguay is one of the cheapest countries in the world.

When it comes to renting a property, Numbeo shows that a one-bedroom flat in the centre of the Paraguayan capital costs USD 325.60, compared to USD 574.12 in Montevideo.

When you move abroad, it is not only the taxes you save that matter, but also the cost of living in your destination country.

So, if you are looking for a more affordable life without the comforts of developed countries, Paraguay is our top recommendation. However, if you are looking for a standard of living reminiscent of Europe (with first-class infrastructure, historic architecture and pedestrianised cities) and are willing to pay a cost of living similar to some European countries, Uruguay might be the right choice for you.

7. Civil rights and freedoms

In Paraguay, a traditionally conservative attitude prevails in many aspects related to civil liberties, which contrasts sharply with Uruguay, which is considered one of the most liberal countries in South America.

Gambling is widespread and legal in both countries, and Paraguay even allows betting on blood sports. Another common feature of both countries is the relatively liberal attitude towards firearms possession and trade, as well as the availability of alternative education for children —although Uruguay has stricter rules than Paraguay in this regard.

Same-sex relationships are legal in both countries, but in Paraguay, although legalised in 1880, homosexual couples lack the same legal protections as heterosexual couples. In Uruguay, on the other hand, LGBT rights are more widely supported, including the legalisation of same-sex marriage and adoption rights.

Interestingly, prostitution is legalised in both countries. In Paraguay, abortion is only permitted if the woman’s life is in danger, while in Uruguay it is freely permitted within the first 17 weeks of pregnancy.

There is a notable difference when it comes to cannabis: Uruguay went a step further and legalised the recreational use of cannabis with requirements such as minimum age and registration for purchase. However, Paraguay follows a more restrictive policy and criminalises both the consumption and the trade and cultivation of cannabis —despite being one of the largest producers of marijuana in Latin America.

8. Climate

Uruguay attracts visitors with its mild, stable, and pleasant climate. The average temperature is around 16.7 degrees Celsius. January is very hot, while temperatures can drop below freezing in July. So, if you like cool weather and distinct seasons, Uruguay may be the destination for you.

In Paraguay it is a completely different story, and the climate varies from region to region: most areas are characterised by a hot and humid tropical climate, very similar to that of many regions of Brazil. Winters are mild, averaging between 10 and 15 degrees Celsius. In the summer months, however, temperatures can rise to an alarmingly hot 50 degrees Celsius. During the rest of the year, Paraguay maintains a pleasantly warm and bearable temperature.

9. Population

Uruguay and Paraguay stand out for their comparatively small populations, especially when compared to South America’s giant metropolises, such as Lima (with 10 million inhabitants) or São Paulo (with 12.3 million inhabitants). Each of these two cities is home to more people than either of the two countries we are analysing today.

Uruguay, with some 3.5 million inhabitants and a low population growth rate of only 0.3%, offers a rather intimate and quiet atmosphere. Paraguay, on the other hand, with some 7.5 million inhabitants and a growth rate of 1.2%, offers a more lively and culturally dynamic environment.

Uruguay’s population is slightly older, with an average age of 35 years compared to Paraguay’s average age of 28 years. In both countries, much of the population is concentrated in the capital cities: in Paraguay, about a third of the population lives in Asunción; while in Uruguay, up to half lives in Montevideo.

10. Culture

If you like European culture, Uruguay is the perfect destination for you: in the streets of its cities, you will experience a fascinating mix of Spanish and Portuguese ambience, a legacy of the historic territorial conflicts that gave the country its unique character. Here you will discover a vibrant café culture, and you will find that weekends are perfect for trips to parks, museums, operas, theatres, dance performances, and other cultural events.

Paraguay is very different: here Spanish influence and indigenous Guaraní traditions form the cultural basis. The country has two official languages: Spanish and Guarani —the latter is spoken by around 80% of the population, including those of non-indigenous descent. Although Paraguay does not offer many attractions, the warmth and hospitality of its people more than make up for it, especially their open and welcoming attitude towards immigrants.

While Uruguay has clear European features, Paraguay has a culture that is a little more reminiscent of America. The Paraguayan capital has a more generous urban planning than Uruguay, and is more focused on local commerce and business.

Another relevant cultural aspect is religion: Uruguay is considered the least religious country in Latin America —about 37% of the population is atheist or agnostic.  Paraguay, however, is a deeply religious country, with 89.6% of residents being Catholic.

What unites both countries is the gaucho culture, with its delicious meats, traditional barbecues and asados, and its famous mate. In addition, the influence of Brazil and Argentina can be felt in both countries: emigrant communities, products, food, and music from these neighbouring countries enrich daily life in both destinations.

11. Policy

Politically, Uruguay stands out for its high level of transparency and democracy, based on a moderate and stable politics that avoids extreme positions. Uruguay’s political centrism is peculiar, as evidenced by advances on issues typically associated with the left —such as drug legalisation— that coexist with traditionally conservative approaches —such as tax exemptions and gun ownership. Overall, Uruguay is one of the best structured and most law-abiding nations in Latin America.

Paraguay, on the other hand, is much more conservative, and also one of the Latin American countries with the highest corruption rates —second only to Venezuela. Despite its tendency towards unregulated structures, the country is experiencing strong growth and attracting foreign investment, not least thanks to its pro-immigration policies and market-oriented reforms.

12. Economy

Uruguay stands out as one of the economically strongest nations in South America, with an impressive average per capita income of USD 1,427 per month. Unlike Paraguay, the country is characterised by a stable economy, driven by a strong middle class that makes up a significant part of the population. The official currency, the Uruguayan peso, currently has an exchange rate of UYU 42.93 per euro —despite an inflation rate of close to 9.10%. The unemployment rate of 7.8% is only slightly higher than in Paraguay.

Paraguay, on the other hand, has a lower income —an average of USD 469 per capita per month— but compensates with a lower cost of living, which strengthens your purchasing power in the country. Despite its relatively small market and significant poverty problems, Paraguay is one of the least indebted countries in the Americas, and ranks 76th on the Index of Economic Freedom. The country keeps its unemployment rate below 7% and inflation at 9.77%. The local currency, the Guaraní, currently trades at PYG 8,012.45 per euro.

Paraguay’s economic outlook is promising, with a GDP growth forecast of 4.8% for 2023, and the expectation that this trend will continue in the coming years. Uruguay, on the other hand, is growing more slowly, with a growth forecast of less than 2% for this year and annual estimates of less than 4% for the following years.

Despite Uruguay’s higher average monthly income and more stable economy, Paraguay stands out in terms of economic growth momentum, which exceeds the world average of 2.8% per year.

13. Security

It may come as a surprise at first glance, but Uruguay and Paraguay are among the safest countries in South America: Compared to other countries in the region, they have low rates of violent crime —such as murder, theft, and robbery.

As the World Data Atlas shows, Uruguay has a homicide rate of 8.9 per 100,000 inhabitants, while the rate in Paraguay is 7.8 per 100,000 inhabitants. These figures are significantly lower than those of other South American countries, such as Colombia (with 27.5) or Brazil (with 22.4).

Of course, this does not mean you should not be vigilant: extreme caution is advised everywhere, especially when it comes to street crime such as jewellery theft or pickpocketing of purses and wallets.

However, if you respect basic security measures, you are unlikely to experience any problems in either country.

Another point we have already mentioned: both countries have fairly liberal arms policies. Uruguay is considered the most peaceful country in South America and has the highest gun density on the continent, with 34.7 guns per 100 inhabitants. Self-defence is a recognised reason for owning up to three firearms. In Paraguay, on the other hand, citizens with the proper documentation can acquire a variety of weapons, such as shotguns, rifles, semi-automatic pistols, and revolvers.

14. Education

Uruguay and Paraguay differ significantly in terms of education. Uruguay has a first-class education system, which is available free of charge to all residents from early childhood through university. The high quality of its education system attracts students from all over the world who seek a top-level education.

On the other hand, in Paraguay, although the level of education is not as high, many students opt for private universities, especially in the field of health sciences, where affordable tuition fees are a considerable attraction. An important advantage is the relatively easy recognition of Paraguayan degrees in neighbouring countries such as Brazil and Argentina.

Alternative educational pathways, such as homeschooling, are allowed in both countries, albeit with different regulations. Although homeschooling is allowed in Uruguay, it remains subject to certain restrictions: children must be enrolled in schools, which means that pure homeschooling —where parents are solely responsible for their children’s education— is not viable. However, alternative forms of education can still be practised.

In Paraguay, on the other hand, parents have more freedom to choose their children’s education. Homeschooling can be carried out following the State curriculum or outside of it. However, only by following the official curriculum can one receive a certificate from the Ministry of Education.

15. Health

Uruguay’s healthcare system offers both public and private options. The public system is renowned for its quality, efficiency, and focus on prevention; and is available to all residents —including immigrants.

Paraguay also has a mixed system, but overall access to healthcare is often difficult, especially in rural areas. For immigrants, private health care may be more attractive, as it tends to offer better quality at affordable prices (especially for medical consultations).

We believe that in both countries it makes sense to rely on day-to-day medical care. However, for more complex operations and treatment, it may be a better alternative to seek treatment in private hospitals in Brazil, which have better facilities.

Conclusion

Both countries offer a level of security and freedom that cannot be found in many other parts of South America. Today we have shown you how different life can be between neighbouring countries, each of which has its unique advantages and disadvantages. Ultimately, the choice between Uruguay and Paraguay depends on your individual priorities and life goals.

Whether you prefer the urban elegance and social openness of Uruguay or the vibrant and entrepreneurial atmosphere of Paraguay, both countries offer a rich palette of experiences and opportunities.

Now, if you have any questions or need more information, please do not hesitate to contact us or even book a consultation with us directly. We can help you with our immigration and incorporation services in multiple countries, including Paraguay and Uruguay.