Paraguay

Paraguay is the quiet one in South America. Landlocked between Brazil, Argentina and Bolivia, it rarely makes the news – but it keeps showing up in conversations about Plan B residencies and territorial tax systems. The reasons are simple: tax rates of 10% or less, no tax on foreign-source income as a rule, and a residence permit that is affordable and doesn’t require a fortune.

The fine print matters just as much. A Paraguayan residence card does not, on its own, end your tax residency in Germany, Austria or anywhere else. Some banks treat Paraguay-only setups with suspicion. And the residence rules were rewritten in 2022, with further changes since.

Here is how it works as of 2026.

How the Paraguayan tax system works

Paraguay reformed its tax system in 2019 (Law 6380) and has kept the rates low since. The system is territorial: as a rule, taxes apply to income from Paraguayan sources.

Territorial taxation

For individuals, the personal income tax applies to Paraguayan-source income. Dividends from a foreign company, foreign interest or foreign capital gains are, as a rule, outside the Paraguayan tax net.

That doesn’t mean everything with an international flavour is untaxed. Services provided to Paraguayan clients or entities can count as Paraguayan-source even if performed abroad, and income from Paraguayan assets is always local. The reverse is also true: if you work from Asunción for foreign clients, look closely at how your income is classified before assuming it’s foreign.

Personal income tax (IRP)

The IRP runs from 8% to 10% on net income from personal services and capital income. Individuals with gross income below PYG 80 million a year are not required to file. For most people who move to Paraguay with foreign income, the domestic IRP bill is small or zero.

Corporate tax and dividends

Paraguayan companies pay 10% business income tax (IRE) on their profits. When profits are distributed, the IDU applies: 8% for resident shareholders and 15% for non-resident shareholders. So a fully distributed profit to a non-resident ends up at roughly 23.5% combined (10% at company level, 15% on the remaining 90%).

Small businesses can use simplified regimes (IRE Simple and RESIMPLE) with lighter bookkeeping, subject to turnover limits.

Tax residency

According to PwC’s summary of Paraguayan law, you are tax resident if you spend more than 120 days in a calendar year in the country. Many people who hold Paraguayan residence permits spend far less time there – which is fine for immigration purposes, but means they aren’t Paraguayan tax residents either. A tax residency certificate from the tax authority (DNIT) requires meeting the conditions, not just holding a cédula.

Residency options

The 2022 migration law

Paraguay’s migration law was replaced by Law 6984/2022. The key change: most foreigners now start with temporary residence and can move to permanent residence afterwards. Direct permanent residence is mainly reserved for foreign investors under the SUACE route.

Temporary residence

• Validity. Up to two years, renewable for the same period.
• Application. In person at the Dirección Nacional de Migraciones in Asunción. The process is personal; follow-up can be handled by a legal representative.
• Documents. Passport, birth certificate, civil status certificate, criminal record certificates (home country and Paraguay) and an Interpol check. Foreign documents must be apostilled and translated into Spanish.
• Fees. The official government fee is a few million guaraníes (a few hundred euros), plus translations, apostilles and any legal fees.

While the application is pending, you receive a provisional status that lets you leave and re-enter the country. Once approved, you can apply for a Paraguayan identity card (cédula) valid for the same period as your residence.

Permanent residence

You apply to change from temporary to permanent residence within the three months before your temporary card expires. Permanent residence comes with a longer-lasting cédula and removes the need for renewals.

Direct permanent residence via SUACE

Investors who can document an investment in Paraguay can skip the temporary stage. The investment is certified through SUACE, the government’s one-stop shop for company formation, which issues an investor certificate. Since 2026, the minimum investment for this route starts at USD 70,000, with additional conditions depending on the type of investment. The rules around this route have changed several times recently, so check the current requirements before committing money.

Citizenship

Paraguay allows naturalization after several years of permanent residence, subject to conditions. It is a long route and not a product – treat any “fast Paraguayan passport” offer with deep suspicion.

Setting up a company in Paraguay

Common vehicles are the SA (sociedad anónima), the SRL (limited liability company) and the EAS (empresa por acciones simplificada), introduced in 2020 to make company formation faster and cheaper. The EAS can be registered through SUACE and is often the simplest option for small foreign-owned businesses.

What to expect:

• Timeline. A few days to a few weeks, depending on the vehicle and how quickly apostilled documents arrive.
• Tax ID (RUC). Every company and self-employed person needs a RUC from the DNIT.
• Accounting. Monthly VAT filings and annual IRE returns; a local accountant is practically a must.
• Costs. Setup through a local provider typically ranges from several hundred to a few thousand US dollars, plus modest monthly accounting fees.

A Paraguayan company is useful if you actually do business in Paraguay or want to document an investment for residency. As a vehicle for global online business run from somewhere else, it is rarely the best choice – management and control rules in your country of residence still apply.

Banking

Opening a Paraguayan bank account as a new resident is possible, but not always fast. Expect to show your cédula or residence documents, proof of address and a clear explanation of your source of funds. Banks are regulated and increasingly strict on anti-money-laundering checks.

Abroad, a Paraguay-only profile can raise eyebrows. Some European banks and payment providers ask more questions when your only residence is Paraguay, especially if you don’t live there most of the year. A tax residency certificate and evidence of real ties help.

Living in Paraguay: the honest version

The good

• Cost of living. Among the lowest in South America for rent, food and services.
• Low taxes. Even if you have local income, rates of 10% or less are hard to beat.
• Relaxed pace. Asunción is green, calm and friendly.
• Location. Close to Brazil and Argentina, with São Paulo and Buenos Aires a short flight away.
• Straightforward residency. Compared with many countries, the path is clear and affordable.

The less good

• Heat. Summers are long and hot. Air conditioning is standard, not a luxury.
• Language. Spanish and Guaraní are the official languages. Administration happens in Spanish.
• Distance from Europe. Few direct long-haul connections.
• Infrastructure. Roads, public transport and healthcare outside the cities are limited. Private health insurance is recommended.
• Reputation. Paraguay is working on transparency, but international institutions still look closely at the region. For the bigger picture on lists and labels, see blacklists and grey lists.

Key considerations

• Residence card ≠ tax residency. A cédula is a legal right to live in Paraguay. Your old country looks at where you actually live, where your family is and where your economic interests are.
• Exit taxes and extended liability. Some countries, including Germany, tax unrealized gains on company shares when you leave, and may keep taxing certain income for years after a move to a low-tax country. Check this before you go.
• Few tax treaties. Paraguay has only a small number of double tax treaties, which limits relief on foreign withholding taxes.
• Changing rules. Migration rules were rewritten in 2022, and the investor route has been adjusted since. The information here is as of 2026.

Who Paraguay suits – and who it doesn’t

Paraguay works well for

• People who want a Plan B residency in the Americas at a reasonable price.
• Investors with foreign-source income who actually move to Paraguay and want territorial taxation.
• Entrepreneurs doing business in Paraguay or the wider Mercosur region.
• Perpetual travellers who need a residence address – as part of a broader strategy, not as a magic shield. See how perpetual travel works.

Paraguay is probably not for you if

• You expect the card alone to end your taxes at home. It won’t.
• You need an EU presence. Look at Bulgaria or Cyprus instead.
• You want English-language administration. Spanish is essential.
• You need a bank-friendly profile for high-volume payments. A Paraguay-only structure can be a hard sell.

Compare the options in the country comparison or try the jurisdiction finder.

Rates and rules in this guide were checked in September 2026. This is general information, not tax or legal advice – get your specific situation reviewed by a qualified advisor before you act.

Sources

• Dirección Nacional de Ingresos Tributarios (DNIT)
• Dirección Nacional de Migraciones – temporary residence (Law 6984/2022)
• Dirección Nacional de Migraciones – permanent residence for SUACE investors
• SUACE – Sistema Unificado de Apertura y Cierre de Empresas
• PwC Worldwide Tax Summaries – Paraguay