Paraguay offers great opportunities for those who are tired of paying so many taxes and want to live a freer life. Paraguay offers territorial taxation, which allows you to only pay taxes on income earned in the country, i.e. in Paraguay you do not pay taxes on foreign income. This is particularly interesting for any entrepreneur or investor who does not have their business or investments in Paraguay, as is the case for many of our clients who operate a USA LLC or other similar structures.
While CRS is implemented in many countries around the world, there are still countries such as Paraguay and the Philippines that, although having joined the CRS agreement, still do not participate in the exchange of information.
After 2023, Paraguay still offers a smooth and fast immigration process (here you can read about how the process was before). What is particularly interesting is that it is also possible to obtain a tax residency certificate without living in the country. Many of those who already have their cedula are often unaware of this detail.
In addition, the cost of obtaining a residence permit is significantly lower than in other destinations such as the United States, Thailand or Panama.
A great advantage is that there is no minimum length of stay in Paraguay after obtaining a temporary residence permit, which translates into greater ease of travel, and it is not even necessary to own property in the country.
Added to this is a favourable tax environment with 0% tax on income earned abroad and a stable economy with low debt. We can assume that individuals will continue to be able to benefit from this territorial taxation.
All these characteristics make Paraguay an increasingly attractive option for those seeking new opportunities and quality of life.
This wide range of attractions has even caught the attention of European immigrants who have emigrated in large numbers to create European communities in the country, as a BBC report from May 2022 shows. Due to the persistent popularity of Paraguay as a destination, Denationalize.me now also offers its own service for those who want to obtain their residency in Paraguay. Unlike the usual immigration assistance services, we add to the offer our vast experience in the tax optimisation field, which ensures that we can take care of a multitude of essential issues when establishing a legally compliance residency. In this article, we would like to introduce you in detail to the process of obtaining a residence permit and nationality, as well as a tax identification number and tax certificate, and give you a brief initial overview of taxation in Paraguay.
Taxation in Paraguay
One of Paraguay’s great advantages is that its tax conditions are very clearly defined: Income tax on domestic income is a flat 10%, although there are additional tax levies that can modify the overall burden.
Owners of local companies are subject to a 15% withholding tax on dividend distributions, and the legal entity itself is subject to a 5% withholding tax when distributing dividends to shareholders. If we add to this the 10% corporate tax on worldwide income (since 2018, territorial taxation only applies at the individual level, companies are also taxed on foreign income), the result is an effective tax burden of more than 20% for anyone residing in Paraguay and maintaining their company there. These figures tend to push entrepreneurs to prefer to set up their company outside Paraguay, unless, of course, they really intend to operate in Paraguay.
A remarkable feature of the Paraguayan tax system is the uniformity of tax rates: Both income tax and VAT are 10% on consumer goods. VAT paid can be deducted from income tax at the end of the month, resulting in a harmonious combination of direct and indirect taxes. The total tax burden is therefore 10%.
Here are some key facts about the Paraguayan tax framework:
- Domestic income tax: 10% (from a minimum annual income of about USD 13,000).
- Tax on foreign income: 0%.
- Corporate income tax: 10%.
- Dividends (withholding taxes):
- to non-resident shareholders: 15%.
- to local legal entities: Possibly exempt, subject to a 5% withholding tax on distribution.
- Interest/royalties: 30% if paid to non-residents, effective taxation between 15% and 50% of the sum.
- CFC Rules: Non-existent.
- Tax year: Normally coincides with the calendar year.
- Tax residency: Officially after 120 days of residence during the calendar year. However, you are considered resident as soon as you have your cedula, with no obligation to make declarations.
- Capital gains: Domestic capital income is subject to ordinary income tax. Foreign investment income is considered tax-free. For business income, we recommend having a foreign legal entity.
If you want to ensure that you legally keep your taxes at zero or at least keep them as low as possible as a tax resident in Paraguay, you may want to book a consultation with us.
The first step to get Paraguayan residency: Temporary residency in Paraguay
Now that we have seen how taxation works in Paraguay, we are going to explain how you can obtain a residence permit. The first step is to obtain a temporary residence permit through a relatively simple process that takes between 2 weeks and 3 months.
Your journey to Paraguay and your process of becoming a legal resident begins with this temporary residence permit.
The temporary residence permit is valid for 2 years, making it an excellent option for those who want to try out the country before committing to life in Paraguay for good. After 2 years, you can either become a permanent resident or simply let your permit expire.
The time it takes to obtain a temporary residence permit can vary. On average, the process is completed after 3 months.
It is worth noting that there is an accelerated process: Upon payment of an additional fee of USD 300, you can obtain your temporary residence after only 15 days. This is particularly useful for those who are in a hurry to establish a “plan B” for residency.
Having clarified the initial information, there are still a few points to keep in mind:
Firstly, the process to obtain a temporary residency in Paraguay is very simple, to the extent that you will only need the following documents:
- A birth or marriage certificate apostilled for Paraguay; and
- a criminal record certificate (which must not be older than 90 days at the time of application) apostilled for Paraguay.
Once you have these documents in your possession, we can start the process physically in Paraguay. To organise the documents, we will need at least one week between the application and your visit.
As of September 2023, some countries require travellers to pay a tourist visa fee to apply for residence permits. This is done remotely and is included in our fee.
The application for a temporary residence permit only requires a 1-3 day visit to Asunción (in Paraguay, of course), where you will receive full assistance from us.
Do not forget to be vaccinated against yellow fever (or have the International Vaccination Certificate) if you are arriving from risk areas such as Brazil, Venezuela, Bolivia, or Peru. Vaccination is compulsory to fly to Paraguay, unless you are flying from Europe (Madrid) or via the USA.
What does our residency service include?
- Temporary residency and cedula for one person, including all entry formalities.
- Life and residence: certificate of residence with your name and address issued by the National Police of Paraguay.
- Remote assistance with information on all the necessary documents.
- The services of a professional who will pick you up at the bus station or at the airport in Asunción.
- The services of a professional who will personally accompany you to the immigration office to apply for residency and subsequently collect your passport.
- Processing time of 3 working days for face-to-face procedures, and 3 months until everything is completed.
What our assistance service does not include:
- All expenses related to the trip to Paraguay.
- All expenses related to accommodation in Asuncion.
The costs of the residency process and the identity card (more details in the next section) are as follows:
- The total cost of the temporary residence permit and identity card (cedula) is USD 2699.
- For each additional dependent family member, you will receive a USD 200 discount on the price.
- For dependants under 14 years of age, the Interpol document is not required, which makes the process even cheaper. For dependants under 14 years of age, the total discount is USD 350.
Additional optional services are:
- Acceleration of the process from 3 months to 15 days: USD 300 per person.
Paraguayan cedula: Paraguay’s identity document
After obtaining your temporary residence permit, the next step is to obtain the Paraguayan identity card, or cedula. This document is absolutely crucial for your new life in the country.
The cedula can be applied for once you have obtained your temporary residence permit, and will open the doors to a multitude of activities, such as opening bank accounts, for example.
With the temporary residence permit in hand, you will need to return to Asunción to apply for the cedula. Do not worry: Our team will assist you every step of the way. The process of applying for the cedula takes between 1 and 3 working days and the issuance of the document takes another 3 months.
However, it is also possible to speed up this process. If you pay an additional USD 300, the processing time for the cedula will be reduced to 30 to 45 days. With the cedula, you will be one step closer to your tax residency in Paraguay.
The cedula allows you to open bank accounts and is necessary to obtain a Paraguayan driving licence and RUC (tax identification number).
Some points to keep in mind:
- Presence in Paraguay: You will have to travel to Asunción to apply for the cedula. If you speed up the issuing of your temporary residence permit, you can complete both procedures in a single stay of 16 to 18 days. If you wish to apply for other documents, such as the RUC, you may have to make additional visits. Therefore, it would be possible to apply for the temporary residence permit on an accelerated basis, travel around South America for 2 weeks and re-enter Paraguay for a few days to apply for the cedula.
- Time and deadlines: 1 to 3 days for the application, and after that another 3 months for the standard procedure of issuing the cedula, or 30 to 45 days for the accelerated procedure.
- Acceleration of the process: It is possible to accelerate the process of obtaining the temporary residence permit and the cedula by paying an additional USD 300 per document per person. This way, you can obtain each document within 15 days.
- Residency obligations: Even with the cedula, it is not obligatory to reside in Paraguay. However, you will need to visit the country to renew your documents and to convert your temporary residence permit into a permanent one (if you wish to do so, of course). For new immigrants, it is necessary to renew the cedula after 3 years. Those who acquired their cedula under the old conditions (before 2021) usually do not need to reissue it for 10 years.
- Next steps: With the cedula already issued, you can apply for a Paraguayan driving licence and a RUC (Registro Único de Contribuyente) number. This last document is necessary to get the Paraguayan tax residency certificate.
Registro Único de Contribuyentes or RUC: The Paraguayan tax identification number
The Registro Único de Contribuyentes (RUC) is a fairly easy-to-obtain Paraguayan tax document that can be requested within 5 working days of receipt of the cedula. It is equivalent to the tax identification number, which is increasingly requested by institutions all over the world.
The RUC application requires physical presence in Paraguay, and will take one day. Once approved, the document is issued within a maximum of 10 days. If you want to work or do business in Paraguay, the RUC is essential. It works in a similar way to a tax identification number and you will need it for opening a business, working as a freelancer, and even paying taxes in the country.
If you want to apply for a tax certificate, you will need to keep your RUC active, but be aware that with an active RUC, you will be obliged to file a monthly VAT return – which will cost USD 50 per month if you do it through our accountants.
If you do not wish to keep your RUC active, you can “deactivate” it: This way you will keep your tax identification number, but you will not be able to apply for a tax certificate unless you stay in Paraguay for at least 120 days a year.
The deactivated RUC exempts you from monthly VAT obligations, but also restricts other tax activities.
Important aspects to consider when obtaining the RUC:
- Physical presence: The RUC application must be made physically in Paraguay, but it will only take you one day.
- Paraguayan income tax declaration: If you have no Paraguayan income, you are not obliged to file an income tax declaration in Paraguay. There is a local income tax exemption of up to PYG 80,000,000 (about USD 11,000) per year. You will have to pay local income tax on any income above this amount.
- Active RUC: Once you receive the RUC, you must file a monthly VAT return. This costs as little as USD 50 per month thanks to our local accountants – that is USD 600 per year. It is mandatory to have an active RUC to obtain a tax residence certificate without a residence in Paraguay.
- Freeze the RUC: You can freeze the RUC if you do not wish to file returns. The cost of freezing the RUC is USD 200 per year.
- Providing services remotely: If you work remotely for foreign companies, you are not obliged to pay VAT and income tax in Paraguay. However, with the RUC active, you will have to fill in the VAT form. Think of it as a zero-sum tax return at a cost of USD 600 per year. It is still the easiest tax certificate in the world to obtain.
The Paraguayan Tax Residence Certificate
After the RUC, there is another document that can be applied for through this process: the Tax Residence Certificate. This document certifies that you have been a tax resident in Paraguay from the date indicated on the document until a year after that date.
Basically, it is a certificate of residence that you can use in an international context. It is worth mentioning that, as Paraguay has hardly any double taxation agreement, this tax certificate will be less useful than those of other countries. However, Paraguay has signed a tax agreement with Spain that will come into force in January 2024.
The recognition of this certificate varies from country to country, but according to national legislation, it is a tax residence certificate with full international validity that could protect you from certain problems or issues.
You can apply for a Tax Residence Certificate if you decide to keep your RUC active. The issuing process takes approximately 15 working days.
This document can be useful for financial institutions that require proof of tax residency, as well as to complete the deregistration process for certain countries, such as Spain or Portugal, which often prefer this type of document.
It is important to note that you will need to have an active RUC to maintain this certificate, which means that you will need to file monthly VAT returns or hire an accountant to take care of this for you.
On the other hand, it is possible to obtain a Tax Residence Certificate with a frozen RUC, although you need to stay a minimum of 120 days per year in Paraguay. In most cases, however, it is desirable to keep the RUC, especially for digital nomads who only want to enter Paraguay from time to time or who do not plan to set foot in the country at all. Thus, in Paraguay it is possible to obtain a Tax Residence Certificate without a minimum stay, which is something that almost no other country allows.
In any case, if you want to start a business or invest in Paraguay, you will need to keep your RUC active in some way. In addition to financial institutions, some large companies or commercial transactions may also require you to present this certificate.
Don’t forget that Paraguay applies a territorial taxation system. Therefore, income earned outside Paraguay is not taxed: The fact that you are a tax resident with a Residency Certificate does not imply that you must pay taxes, which makes this country a very attractive destination for digital nomads and entrepreneurs.
Permanent residence permit in Paraguay
After two years of temporary residence, you can apply for a permanent residence permit. The application can be submitted once there are three months left before the end of the temporary stay and must be made before the temporary stay expires.
This means that, with the temporary residence permit, you must return to the country after 1 year and 9 months, while with the permanent residence permit you only have to visit the country once every 3 years to maintain your residence.
The permanent residence permit is valid for 10 years and must be renewed shortly before it expires.
The issuing time for permanent residence is the same as for temporary residence: 3 months for the normal procedure and 15 days for the accelerated procedure.
A positive aspect of the permanent residence permit is that it brings you one step closer to Paraguayan citizenship, which is often the ultimate goal of many immigrants. To apply for nationality, 3 years of permanent residence are required.
To obtain permanent residence, in addition to Paraguayan documents, you will need to prove your “economic capacity”. Unlike the conditions that applied before 2021, it is no longer necessary to make an actual capital deposit at the Central Bank of Paraguay.
You can simply use documents proving that you have income, such as the following:
- a monthly VAT return;
- a salary; or
- bank statements showing at least USD 5,000 in savings;
The cost of a permanent residence permit is the same as for a temporary residence permit:
- The total cost of the temporary residence permit and cedula is USD 2,699.
- For each additional dependent family member, you will receive a discount of USD 200 per applicant.
- Acceleration of the process from 3 months to 15 days: USD 300 per person.
If you wish, you can skip the temporary residency step and apply directly to permanent residency through the SUACE Residence Permit for Investors.
This permit requires an investment of USD 70,000 in Paraguay within 2 years and the creation of at least 5 jobs in the country during this period. We can take care of your SUACE residency process for USD 3,499 but, to be completely honest, we do not think this procedure makes any sense, as the temporary residency permit has almost no disadvantages compared to the permanent one.
What does it mean in practice to have a residence permit in Paraguay?
Many people mistakenly think that it is compulsory to move to Paraguay after obtaining the temporary residence permit. The reality is that it is not necessary to reside in Paraguay for the duration of the temporary permit. Only in case you decide to change the temporary residence permit for a permanent one, you will have to return to Paraguay. You can make this leap after 1 year and 9 months – that is, 3 months before the two-year temporary residence permit expires. After obtaining the temporary residence permit, you will only be obliged to return for a short visit every 3 years, accompanied by a renewal every 10 years.
Even if you remain in your country of origin, you can benefit from the privileges of a Paraguayan residence permit:
- Start the deadline for obtaining permanent residence and possible naturalisation.
- With the cedula, you can open accounts in national banks and cooperatives.
- Facilities for investment, education, and business activities in Paraguay.
- Possibility of obtaining a Paraguayan Taxpayers Registry Number (RUC), which allows you to open accounts in national and international stock exchanges.
After three years of permanent residence, you can apply for Paraguayan citizenship, which would give you access to a Paraguayan passport. This passport has its own benefits, such as freedom of immigration throughout Mercosur. However, these benefits are only available to naturalised persons after 5 years. The Paraguayan passport can be an entry ticket to other South American countries with stricter requirements.
In the following, we explain the steps for acquiring Paraguayan citizenship in an abbreviated form:
- First steps towards second citizenship: In Paraguay, the path to second citizenship starts with the temporary residence permit and the cedula.
- Transition to permanent residence permit: After almost two years with the temporary residence permit, the next step is to convert it into permanent residence. This process must be initiated at least 3 months before the end of the 2 years of temporary residence and must be done physically in Asunción.
- Citizenship and passport: Once you have held your permanent residence permit for 3 years, you will be able to apply for Paraguayan citizenship and the corresponding passport.
The cost of the whole naturalisation process is about USD 10,000.
Since the application must be submitted to Paraguay’s Supreme Court, the process is somewhat slow: You should expect a processing time of 2-3 years after submitting your citizenship application. Certain connections with Paraguay are very advantageous, and we recommend investing in the local real estate or agricultural sector for your application to be successful. Regular visits are not necessary, but it certainly will not hurt to travel to the country from time to time.
On paper, Paraguay does not recognise a second nationality, so you will have to renounce your current citizenship. The only exceptions are bilateral agreements with Italy and Spain. In practice, however, this is not a strictly enforced rule. As a rule, naturalised Paraguayans must surrender their old passport. This, of course, does not invalidate their citizenship: You would simply have to obtain a new passport. As long as you do not make the mistake of entering the country on the wrong passport, dual citizenship will not be much of a problem.
However, if you are in a hurry or want to get more reliable results, you might want to look at the typical Caribbean passports, which offer similar freedom of movement to Paraguay. Currently, the Paraguayan passport allows visa-free entry into 144 countries, including the Schengen area and Russia.
We have already explained the main documents to obtain in Paraguay, but we can also help you apply for other documents:
- Driving licence: Apply for this at an additional cost of USD 250 once you have received the cedula. The application does not require physical presence. This permit is potentially recognised worldwide, but has a short period of validity.
- Visa and residence: A proof of residence with your name and address issued by the Paraguayan National Police. You will receive the first copy during the procedure of obtaining the temporary residence permit. If you need a second copy or a new proof, the additional fee is USD 100. This is not a tax residence certificate, but can replace it for certain purposes.
- Rental contract: We can provide you with a rental contract for USD 250. This document can partially replace the need for a utility bill. It is certainly not expensive to rent a flat in Paraguay on a pro-forma basis if you really want a consumption bill.
Costs and terms of residence in Paraguay
The costs of the main services are as follows:
- Temporary residence permit + cedula: USD 2,599
- Temporary residence permit + cedula for each additional dependent family member: USD 2,399
- Expedited issuance of both documents: USD 600
- RUC (tax identification number): USD 300
- Tax certificate: USD 300 in person or USD 400 online
- Maintain active RUC*: USD 600
- Permanent residence permit**: Same cost as temporary residence permit – i.e. USD 2,699 + USD 2,299 per dependant.
*The person who has an active RUC must file monthly VAT returns. If the person in question has no income in Paraguay, our accountant can make blank declarations for USD 50 per month – one-off payment for 12 months.
**You can apply after 1 year and 9 months of temporary residence.
Below you can find the issuing deadlines for the main documents for which we offer our services:
- Temporary residence permit
- In-person application in 1 to 3 days.
- Issuance in 3 months with the normal procedure or 15 days with the accelerated procedure.
- In-person application within 1 to 3 days after receipt of the residence permit.
- Issuance within 3 months under the normal procedure or 30 to 45 days under the accelerated procedure.
- In-person application in 1 day. You must wait at least 5 days after receiving the cedula to apply for the RUC.
- Issuance in 10 days.
- Tax Residence Certificate
- In-person or online application in 1 day (remote application has a surcharge of USD 100).
- Issuance within 15 working days after receiving the RUC.
Total time: about 2 months to issue the Tax Residence Certificate with the accelerated procedures. In the meantime, you will be able to enter and leave the country as you wish, so it is best to combine this process with a longer stay in South America.
Below are two examples of costs and deadlines for obtaining residency in Paraguay, with which we hope to illustrate the process in a simpler way.
Example A: a digital nomad
Andy is a German digital nomad working remotely for Europe. He wants to have a residence in Paraguay only for compliance reasons and for opening international accounts.
He does not need a tax Residence Certificate, as Germany does not require one to register in the country. However, he wants to have a RUC that allows him to include a tax identification number for his international broker accounts.
As he does not intend to do business or invest in Paraguay, Andy freezes his RUC to save costs.
Since he also wants to travel elsewhere, he intends to visit Paraguay as little as possible. He therefore pays the accelerated procedure fee so that he can complete all his paperwork in one trip.
After two years, he applies for permanent residence, but he is not interested in Paraguayan citizenship – otherwise he would lose his German citizenship.
The costs for Andy’s case are as follows:
- Temporary residence + cedula: USD 2,599.
- Acceleration of the issuance of the temporary residence + cedula: USD 600
- RUC: USD 300
- Maintain frozen RUC: USD 200 per year
- Permanent residence after 2 years: USD 2,499
- First year: USD 3,699
- Second year: USD 2,699
- Third year and beyond: USD 200
Total time until RUC:
- Temporary residency: 15 days to receive it
- Cedula: 30 days to receive it -applied for after receiving residency-
- Tax Identification Number (RUC): 10 days to receive it -applied for 5 days after receiving the identity card-
- Total stay in Paraguay: 35 days
Example B: a couple moves to Paraguay
Bernard and Karina are an Austrian couple who moved to Spain. They now want to move to Paraguay because of the low cost of living and the tax advantages the country offers.
To be exempt from the Spanish tax authorities, they must present a tax residence certificate. As they also want to obtain the attractive Paraguayan credit cards with up to 30% cashback, they also opt for the accelerated procedure.
As they are going to live in Paraguay for more than 120 days a year, they can apply for the Tax Residence Certificate without having the RUC.
After 2 years, they will apply for the permanent residence permit.
The costs in the case of Bernard and Karina are as follows:
- Temporary residence + cedula: USD 2,599 + USD 2,399
- Acceleration of the issuance of the temporary residence + cedula: USD 600 + USD 600
- Tax certificate: USD 300 + USD 300
- Permanent residence after 2 years in Paraguay: USD 2,499 + USD 2,299
- First year: USD 6,798
- Second year: USD 4,798
Total time to obtain the tax certificate:
- Temporary residence: 15 days to receive it
- Cedula: 30 days to receive – applied for after receiving temporary residency
- Tax certificate: 15 days to receive – applied for after 120 days in the country
Residence in Paraguay as plan B
Regardless of your plans – whether you really want to move to Paraguay or are simply looking for a second residence – Paraguay offers a fast, cheap and flexible option available to everyone.
Advantages of residency in Paraguay
- It allows you to obtain verifiable proof of all kinds (compliance residency).
- It allows access to temporary registration for future Paraguayan citizenship.
- It can act as a refuge from international crises, such as pandemics or wars.
- It allows very easily to open accounts and let you access investment opportunities in the country.
- It offers greater financial privacy, as Paraguay does not participate in the CRS.
- Income from abroad is tax-free, even if you are a Paraguayan tax resident.
- It offers low costs compared to jurisdictions such as the United Arab Emirates.
So, if you want to expand your options, have a plan B, and invest in a country with strong growth, residency in Paraguay is an excellent option.
Not only will we take care of all the bureaucratic procedures for your residency, but we also offer you personalised advice to adapt this plan to your needs.
If you would like us to help you assess whether Paraguay is the best option for you or to explain in more detail how it would work in your specific case, you can hire our consultancy service.
On the other hand, if you are sure that you want to take up residency in Paraguay, you can access all the information about our residency service in Paraguay at the following link.
Because your life is yours!