How to Get Tax Residency in Paraguay: A Step-by-Step Guide

Paraguay has become a popular destination for digital nomads, entrepreneurs, and expats seeking to optimize their tax situation due to its favorable territorial tax system. This system levies taxes only on income generated within Paraguay, leaving foreign-sourced income untaxed. Obtaining tax residency in Paraguay is a straightforward process, but it requires careful preparation and adherence to specific steps. Below is a comprehensive step-by-step guide to help you achieve tax residency in Paraguay in 2025.

Step 1: Gather Required Documents

Before applying for residency, you need to collect and prepare several key documents from your home country. These documents must be properly authenticated to meet Paraguayan legal standards.

• Valid Passport: Ensure your passport is valid for at least six months.
• Birth Certificate: Obtain an apostilled copy from your home country.
• Criminal Background Check: Get a clean criminal record certificate from your country of origin or residence for the past five years, also apostilled.
• Marriage/Divorce Certificate (if applicable): If you are married, divorced, or widowed, provide an apostilled copy of the relevant certificate.
• Proof of Income or Financial Solvency: While Paraguay does not require proof of a minimum income, showing financial solvency (e.g., a bank statement or a letter from a financial institution) can strengthen your application.

Important: All documents must be apostilled in the country of issuance to confirm their legality. Once in Paraguay, these documents need to be translated into Spanish by a certified translator.

Step 2: Apply for Temporary Residency

Temporary residency is the first step toward tax residency in Paraguay. This process requires a visit to Paraguay to submit your application in person.

• Travel to Paraguay: Visit the Immigration Office (Dirección Nacional de Migraciones) in Asunción to submit your application.
• Submit Documents: Present your apostilled and translated documents, including your passport, birth certificate, criminal background check, and any applicable marriage/divorce certificates.
• Complete Biometric Procedures: Undergo fingerprinting and have your biometrics taken at the Immigration Office.
• Pay the Application Fee: The government fee for temporary residency is approximately $400 USD.
• Obtain Interpol Certificate: In Paraguay, you’ll need to obtain a criminal background certificate from Interpol, processed locally.
• Processing Time: Temporary residency applications typically take 3–6 months to process. Once approved, you’ll receive a provisional residency card allowing legal stay in Paraguay.

Step 3: Obtain a Paraguayan Identity Card (Cédula)

After receiving your temporary residency, the next step is to obtain your Paraguayan Identity Card (Cédula de Identidad), which is essential for establishing tax residency and accessing services like banking.

• Return to Paraguay: A second visit is required to apply for the Cédula. This step cannot be delegated; you must be physically present.
• Submit Additional Documents: Provide your temporary residency card, passport, and a certificate of residence (obtainable locally).
• Processing Time: The Cédula is typically issued within 45 days to 3 months after application. Once received, it serves as your official identification in Paraguay.

Step 4: Apply for a Tax ID (RUC)

To formalize your tax residency, you need to obtain a Registro Único del Contribuyente (RUC), Paraguay’s tax identification number.

• Visit the SET (Subsecretaría de Estado de Tributación): With your Cédula, apply for an RUC through the Paraguayan tax authority.
• Provide Documentation: Submit your Cédula and a completed application form. If you have income from Paraguayan sources, you may need to provide evidence of economic activity.
• Processing Time: The RUC is usually issued within a few weeks, often in less than 2 weeks if all documents are in order.
• Optional Tax Residency Certificate: If you need to prove your tax residency to your home country (e.g., to cancel tax residency there), you can apply for a tax residency certificate through the SET. This requires an active RUC and evidence of tax compliance, such as a Certificado de Cumplimiento Tributario.

Step 5: Maintain Residency and Tax Status

To maintain your residency and tax status, you must comply with Paraguay’s minimal presence requirements.

• Visit Paraguay Periodically: Temporary residents must visit Paraguay at least once every 12 months, while permanent residents must visit once every 36 months to avoid losing their status.
• File Taxes (if applicable): If you have income from Paraguayan sources, you must file tax returns and pay a 10% personal income tax on that income. Foreign-sourced income is exempt from taxation.
• Renew Your Cédula: Ensure your Cédula is renewed when it expires (typically every 10 years for permanent residents).

Step 6: Optional - Transition to Permanent Residency

After holding temporary residency for two years, you can apply for permanent residency, which offers longer-term benefits and a path to citizenship.

• Eligibility: You must have held temporary residency for two years and maintained compliance with presence requirements.
• Required Documents: Submit your temporary residency card, Cédula, and either a valid RUC or a university degree diploma. As of late 2024, the $5,000 bank deposit requirement for permanent residency has been eliminated.
• Processing Time: Permanent residency is typically processed within 3 months. Once approved, you’ll need to update your Cédula to reflect your permanent status.

Step 7: Cancel Tax Residency in Your Home Country

To fully benefit from Paraguay’s tax system, you may need to cancel tax residency in your home country. This process varies by country but typically involves:

• Provide Proof of Paraguayan Residency: Submit your Paraguayan residency card, Cédula, and, if required, a tax residency certificate from Paraguay.
• Check Double Tax Treaties: Paraguay has double tax treaties with a few countries (e.g., Chile, Spain, Taiwan, UAE, Uruguay, Qatar), which can help avoid dual taxation. Consult with a tax professional to ensure compliance with your home country’s regulations.

Conclusion: Benefits of Tax Residency in Paraguay

Obtaining tax residency in Paraguay offers numerous advantages, making it an attractive option for digital nomads, entrepreneurs, and investors:

• 0% Tax on Foreign-Sourced Income: Paraguay’s territorial tax system exempts all income earned outside the country from taxation, providing significant savings for those with international income.
• Low Cost of Living: With living costs starting at approximately $443 per month (excluding rent), Paraguay is one of the most affordable countries in South America.
• Minimal Presence Requirements: You only need to visit Paraguay once every three years to maintain permanent residency, offering flexibility for global travelers.
• Banking Privacy: Paraguay is not fully integrated into the Common Reporting Standard (CRS), offering a degree of financial privacy not found in many Western countries.
• Access to MERCOSUR: As a Paraguayan resident, you can travel visa-free to other MERCOSUR countries (e.g., Brazil, Argentina, Uruguay), facilitating regional mobility.
• Path to Citizenship: After three years of permanent residency, you can apply for Paraguayan citizenship, which allows dual citizenship in many cases and provides access to a passport with visa-free travel to over 146 countries, including the EU and UK.
• Affordable and Streamlined Process: The elimination of the $5,000 bank deposit requirement in 2024 and low government fees (e.g., $400 for temporary residency) make Paraguay’s residency program one of the most cost-effective globally.
• Safe and Stable Environment: Paraguay offers a peaceful lifestyle, political neutrality, and a growing economy, making it an ideal base for those seeking stability and opportunity.

By following these steps and working with experienced professionals, you can establish tax residency in Paraguay and enjoy its unique combination of tax benefits, low costs, and lifestyle advantages. For personalized guidance, consider consulting with immigration and tax experts familiar with Paraguayan regulations.