During 2025, 38,236 residency applications were filed in Paraguay, mainly from Brazilian citizens. This represents a 31.3% increase compared to 2024 and consolidates a 203.5% cumulative increase over the last decade.
Why are so many foreigners seeking to relocate to Paraguay? This trend can be explained primarily by the convergence of three factors:
A simple and accessible immigration regime.
A favorable economic environment.
And, most decisively, a highly competitive tax regime.
Indeed, Paraguay’s tax system is the most competitive in the region, providing for a maximum tax rate of 10% on the income of resident individuals and adopting a territorial taxation principle, under which foreign-source income is not taxed in the country.
However, in practice, we have identified recurring misunderstandings regarding the true tax implications of transferring residency to Paraguay. Below, we briefly address the most common errors.
First mistake: confusing immigration residency with tax residency
Although closely related, immigration residency and tax residency are legally distinct concepts.
Immigration residency is the authorization granted by the National Directorate of Migration to reside in the country on an occasional (90 days), temporary (2 years), or permanent (indefinite) basis. Tax residency, on the other hand, is a purely tax-related concept, determining whether a person is subject to Paraguay’s taxing authority based on domicile or residence.
Immigration residency constitutes a necessary but not sufficient prerequisite for acquiring tax residency. Additionally, it is essential to obtain a Paraguayan identity card and, when applicable, proceed with registration in the Single Taxpayer Registry (Registro Único del Contribuyente – “RUC”).
It is also crucial to verify whether a Double Taxation Agreement (DTA) exists between Paraguay and the country of origin, an aspect addressed later.
Second mistake: believing that only permanent residents can be tax residents
Tax residency is regulated in Decree No. 3,181/19, which regulates the Non-Resident Income Tax (INR) within the framework of Law No. 6,380/19 (the “Tax Law”).
The confusion arises from the wording of Article 2 of the decree, which states that an individual is considered a tax resident if they hold a permanent residence permit under Law No. 978/96.
However, this interpretation is currently incorrect for the following reasons:
Law No. 978/96 was repealed by Law No. 6,984/22, which introduced the figure of the temporary resident, allowing access to a Paraguayan identity card and, consequently, to registration in the RUC, enabling taxation as a tax resident.
Consistent with this, the National Directorate of Tax Revenues (the “Tax Authority”) has established that foreigners with temporary residency are eligible to register in the RUC.
The Tax Authority has also determined that the Paraguayan identity card is the essential requirement for the issuance of a tax residency certificate.
Consequently, a foreigner holding a temporary residence permit, by being able to obtain a Paraguayan identity card and a RUC, may be considered a tax resident, regardless of the current wording of Decree No. 3,181/19.
Third mistake: believing that Paraguayan tax residency automatically eliminates tax residency in another country
Paraguay currently has Double Taxation Agreements (DTAs) in force with Chile, Uruguay, Taiwan, Qatar, the United Arab Emirates, and Spain.
A person may be considered a tax resident in two countries simultaneously. In such cases, DTAs establish so-called “tie-breaker rules”, which generally apply the following criteria:
The place where the person has a permanent home available, and failing that, the center of vital interests (family, business).
The place of habitual residence, and if dual residency persists, nationality.
As a last resort, the criterion determined by mutual agreement between the states.
For example, if a Spanish resident obtains tax residency in Paraguay, but maintains their home, family, and business in Spain, and spends most of their time in Spanish territory, they will continue to be considered a tax resident in Spain.
In such a case, obtaining immigration residency in Paraguay would be insufficient to access its tax advantages and could lead to challenges from the Spanish tax authorities.
In the absence of a DTA, the situation may be even more burdensome, since the taxpayer could be subject to international double taxation without tie-breaker mechanisms or effective tax relief. Therefore, in addition to obtaining tax residency in Paraguay, it is essential to analyze the conditions for terminating prior tax residency, whether based on the applicable DTA or the domestic legislation of the country of origin.
Fourth mistake: believing in the existence of a 120-day minimum stay rule
Current tax regulations do not require a minimum annual stay in the country in order to be considered a tax resident.
Formally, a person may obtain a tax residency certificate even if their physical presence in Paraguay has been limited, provided that they comply with the corresponding administrative and tax requirements.
The confusion regarding a supposed “120-day rule” stems from a misinterpretation of Articles 151 and 152 of Law No. 125/91 (the “Tax Code”).
These provisions refer exclusively to the tax domicile of the taxpayer, establishing that the declared domicile is valid for all legal purposes unless the Tax Authority requires the establishment of a new one when the declared domicile hinders assessment or audit activities.
In this context, if the taxpayer does not establish a new tax domicile, the Tax Authority is empowered to assign one ex officio, and one of the criteria for doing so is the place of residence, which is presumed when the person remains there for more than 120 days per year.
Therefore, the reference to 120 days does not regulate tax residency, but operates solely as a subsidiary criterion for determining tax domicile. It is not a general rule for acquiring tax residency, but rather a procedural provision designed to provide the Tax Authority with an operational tool in exercising its powers of assessment and audit.
Fifth mistake: believing that RUC registration and invoice issuance are requirements for tax residency
Obtaining tax residency does not, by itself, imply the obligation to register in the RUC or to issue legal invoices.
Under Law No. 1,352/88 and its regulatory decree, registration in the RUC is required only for individuals subject to tax obligations, either as direct taxpayers or as withholding, collection, or reporting agents.
Within this framework, individuals must register only when they generate taxable events under the Personal Income Tax (IRP) or the Value Added Tax (VAT), both of which operate under a territorial principle.
Consequently, a person who obtains tax residency in Paraguay but does not generate income or conduct taxable transactions in the country — for example, someone who receives exclusively foreign-source income — is not required to register in the RUC or issue invoices in order to obtain or maintain that status.
Conclusions
Transferring tax residency to Paraguay requires careful legal and tax analysis. In particular:
Immigration residency and tax residency are different concepts and should not be confused.
Temporary residency may be sufficient to access tax residency.
Obtaining tax residency in Paraguay does not automatically eliminate tax residency in another country, especially where DTAs and tie-breaker rules apply.
The reference to 120 days is not a rule for acquiring tax residency, but a subsidiary criterion for determining tax domicile.
Registration in the RUC and invoice issuance are required only when taxable territorial income or transactions exist in Paraguay.
Ultimately, changing tax residency is not merely an administrative procedure, but a strategic decision in international tax planning that requires rigorous professional analysis.
Federico Martínez Tebecheri
Senior Associate
federicomartinez@mersanlaw.com
Legal Disclaimer
The information contained in this article is provided for informational and educational purposes only and does not constitute legal advice or replace consultation with a professional. Each situation is unique and requires individualized analysis considering the specific circumstances of the case and the applicable legislation. To obtain professional advice regarding your specific situation, we recommend consulting lawyers specialized in the relevant area.