Frequently Asked Questions

Paraguay Tax Residency FAQ

20 expert-verified answers to the most common questions about Paraguay tax residency. From RUC registration to digital nomad taxes, get clarity on what really matters.

Answers verified January 2026

Jump to a topic:

Basic Tax Residency 4 RUC & Filing 3 Digital Nomads 3 Tax Rates 3 Certificate 2 US Citizens 2 Maintaining Status 3

Quick Answer

Paraguay uses territorial taxation—foreign-sourced income is taxed at 0%. Tax residency requires: RUC registration with SET, ongoing tax compliance (filing returns), and proof of center of vital interests. The 120-day rule is a myth—it establishes domicile, not tax residency. You must file annual returns even with zero local income.

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Common Myths We'll Address

  • MYTH: "You need 120 days for tax residency" → False. 120 days is for domicile, not tax residency.
  • MYTH: "Remote work for foreign clients = 0% tax" → False. Work FROM Paraguay is taxable.
  • MYTH: "Getting a Cédula makes you tax resident" → False. You need RUC + compliance.
Getting Started

Basic Tax Residency Questions

Yes, Paraguay uses territorial taxation—only income from Paraguayan sources is taxed. Foreign-sourced income (dividends from abroad, foreign rental income, foreign business profits) is not taxed for residents. This is codified in Law 6380/2019.
Follow the 4-stage process: (1) Apply for temporary residency, (2) Obtain Cédula de Identidad, (3) Register for RUC with SET, (4) File tax returns. The RUC is essential—without it, Paraguay does not recognize you as tax resident.
There is NO minimum days requirement for tax residency. The 120-day rule is a MYTH—it relates to establishing domicile (Ley 125/1991 Art. 152), not tax residency. Tax residency requires: RUC registration, proof of center of vital interests, and compliance with SET filings.
Legal/migratory residency (from Migraciones) gives you permission to live in Paraguay. Tax/fiscal residency (from SET) makes you a taxpayer recognized by the tax authority. You need both: Cédula (legal) AND RUC + compliance (tax). Getting a Cédula alone does NOT make you tax resident.
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Tax Registration

RUC & Filing Requirements

RUC (Registro Único de Contribuyentes) is Paraguay's tax identification number. YES, you need one to be recognized as tax resident. Apply at SET after receiving your Cédula. Processing takes 2-3 business days and is essentially free.
YES. You must file monthly VAT declarations (Form 120) and annual IRP returns, even if you report zero income ('sin movimiento'). This proves your compliance to SET and maintains your active tax status. Failure to file can result in RUC suspension and loss of tax residency.
You can file yourself via the Marangatú online platform, but it's in Spanish. Many expats hire accountants for basic compliance. For simple situations (zero income filings), DIY is possible. For complex situations (business income, multiple streams), professional help is recommended.
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RUC Quick Reference

Processing Time

2-3 business days

Cost

Essentially Free

Where to Apply

SET offices or Marangatú

Remote Workers

Digital Nomads & Remote Work

NO—this is a common misconception. Services performed FROM Paraguay are considered Paraguayan-source income, even if your clients are abroad. You would pay IRE Simple (3%) or standard IRE (10%) on this income. The 0% only applies to genuinely foreign income (work performed abroad, foreign investments, foreign dividends).
The most common legal structure is: (1) Own a foreign LLC (e.g., US LLC), (2) The LLC receives client payments and performs the 'business activity,' (3) You receive dividends from the LLC as a Paraguay resident, (4) Foreign dividends are not taxed in Paraguay. This requires proper structure and documentation.
Yes, if properly structured. Paraguay views the US LLC as a foreign company. Dividends from foreign companies are exempt from Paraguayan tax. However: (1) The LLC must have substance and not be a mere shell, (2) 'Place of effective management' cannot be entirely in Paraguay, (3) Proper documentation is essential, (4) US citizens still owe IRS taxes on worldwide income.
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Critical for Digital Nomads

The source of income is determined by where the work is performed, not where your clients are located. If you're typing on your laptop in Asunción, that's Paraguayan-source income—regardless of whether your client is in New York or Tokyo. The only legal path to 0% tax is through proper structuring (like a US LLC paying you dividends).

Tax Comparison: Direct Work vs. US LLC

Scenario Structure Tax Rate
Freelancer billing foreign clients directly Personal / IRE Simple 3%
Employee of foreign company IRP Personal Income 8-10%
US LLC owner receiving dividends Foreign dividends 0%
Rates & Calculations

Tax Rates & Corporate Tax

IRE (Corporate): 10% on net profits. IRE Simple: 3% effective on gross revenue (for income under ~$270K). IRP (Personal): 8-10% on Paraguayan income. IDU (Dividends): 8% resident, 15% non-resident. VAT: 10% (5% reduced rate).
IRE Simple is a simplified tax regime for businesses with annual income under G. 2 billion (~$270,000). You can calculate tax on 30% of gross revenue at 10%, resulting in 3% effective rate. Owners using IRE Simple are also EXEMPT from IDU (dividend tax). Ideal for freelancers and small business owners.
NO. Dividends received from foreign companies are NOT taxed in Paraguay under the territorial system. You should declare them as exempt income for information purposes, but no tax is owed. Keep documentation: LLC operating agreement, distribution minutes, bank statements.
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Business Taxes

  • Standard IRE 10%
  • IRE Simple (effective) 3%
  • RESIMPLE 4-6%

Personal & Dividends

  • IRP (Personal) 8-10%
  • IDU (Resident) 8%
  • IDU (Non-resident) 15%
Official Proof

Tax Residency Certificate

You may need one for: (1) Breaking tax ties with your home country (proving new tax home), (2) Opening foreign bank accounts requiring tax residency proof, (3) Claiming treaty benefits, (4) Audit defense. Most digital nomads don't need one immediately—focus on RUC registration first.
Requirements under RG 65/2020: (1) Active RUC in good standing, (2) Up-to-date tax filings, (3) Certificado de Cumplimiento Tributario (free, online), (4) Constancia de Movimiento Migratorio (from Migraciones), (5) Application form from DNIT. Apply in person at SET/DNIT. Processing: 7-10 business days. Valid for 1 year.
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Certificate Application Process

1

Gather Documents

RUC, compliance certificate, migration records

2

Submit Application

In person at SET/DNIT offices

3

Wait for Processing

7-10 business days

✓

Receive Certificate

Valid for 1 year

Special Cases

US Citizens & Special Situations

Partially. Paraguay won't tax your foreign income, but the IRS taxes US citizens on worldwide income regardless of where you live. You may use FEIE (Foreign Earned Income Exclusion) or FTC (Foreign Tax Credits) to reduce US tax, but you cannot escape IRS obligations through Paraguay residency alone. There is no US-Paraguay tax treaty.
NO. Paraguay does not participate in the Common Reporting Standard (CRS). This means Paraguayan banks do not automatically share account information with foreign tax authorities. However, information can still be shared through specific requests or treaty provisions.
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Important for US Citizens

The United States taxes its citizens on worldwide income regardless of where they live. Paraguay's territorial system helps reduce your tax burden, but does not eliminate US tax obligations. Work with a US-qualified tax professional to properly use FEIE and Foreign Tax Credits. There is currently no US-Paraguay tax treaty.

About CRS (Common Reporting Standard)

Paraguay does NOT participate in CRS, meaning Paraguayan banks don't automatically report your account information to foreign tax authorities. However, this doesn't mean you can hide assets—information can still be shared through:

  • • Specific information exchange requests between governments
  • • FATCA (for US account holders)
  • • Anti-money laundering investigations
Staying Compliant

Maintaining Tax Residency

Temporary residents: Cannot have unjustified absence exceeding 12 consecutive months. Minimum: visit once per year. Permanent residents: Cannot have absence exceeding 36 consecutive months. Minimum: visit once every 3 years. Also maintain active RUC and file required returns.
Your RUC can be suspended, you may face fines and penalties, and your tax residency status can be questioned. Other countries could then claim you're still their tax resident since you're not compliant anywhere. Always file, even if reporting zero income.
It's the country where you have your strongest personal and economic ties. SET may require evidence: rental/property contracts, utility bills in your name, bank statements showing local activity, family presence, entry/exit stamps. Build substance over time—don't just be a 'paper resident.'
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Temporary Residents

12 months

Maximum consecutive absence before status at risk

Visit at least once per year to be safe

Permanent Residents

36 months

Maximum consecutive absence before status at risk

Visit at least once every 3 years to be safe

Annual Compliance Checklist

  • File monthly VAT declarations (Form 120) - even if "sin movimiento"
  • File annual IRP return before March 31
  • Ensure RUC status is "Activo" (not suspended)
  • Visit Paraguay at least once (for temporary residents)
  • Keep records: bank statements, utility bills, travel records

Detailed Guides

Related Pages

How to Become Tax Resident

Step-by-step guide to establishing tax residency

Read More

RUC Registration

Complete RUC registration process guide

Read More

Digital Nomad Tax Guide

Tax planning for remote workers

Read More

Tax Residency Certificate

How to obtain proof of tax residency

Read More

Common Tax Mistakes

Avoid the most costly errors

Read More

Dividends & IDU Tax

Understanding dividend taxation

Read More

Still Have Questions?

Tax residency involves complex legal and financial considerations. For personalized advice on your specific situation, consult with qualified professionals.

Schedule a Consultation Back to Tax Residency Guide


Start with the fundamentals: get your residency, register your RUC, and set up proper compliance from day one.