In 2025, 38,236 residency applications were filed in Paraguay, mainly by Brazilian citizens. This represents a A 31.3% increase compared to 2024 and consolidates a 203.5% cumulative increase over the past decade.
Why are so many foreigners looking to move to Paraguay? This trend can be explained primarily by the convergence of three factors:
A simple and accessible immigration system.
A favorable economic environment.
And, most importantly, a highly competitive tax system.
In fact, 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 Income from foreign sources is not taxed in the country.
However, in practice, we have identified recurring misunderstandings regarding the actual 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 a concept related solely to taxes, determining whether a person is subject to Paraguay’s tax jurisdiction based on domicile or residence.
Immigration residency constitutes a a necessary but not sufficient prerequisite for obtaining tax residency. Additionally, it is essential to obtain a Paraguayan ID 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 issue discussed later.
Second mistake: believing that only permanent residents can be tax residents
Tax residency is governed by 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 stems 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Law No. 978/96 was repealed by Law No. 6,984/22, which introduced the figure of the temporary resident, allowing access to a Paraguayan identity card and, consequently, to registration in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, allowing them to be taxed as tax residents.
Consistent with this, the National Directorate of Tax Revenues (the “Tax Authority”) You have established that Foreigners with temporary residency are eligible to register with the RUC.
The Tax Authority has also determined that the A Paraguayan identity card is a prerequisite for the issuance of a tax residency certificate.
Consequently, a foreigner holding a temporary residence permit, by being able to obtain a Paraguayan ID 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 a person who is a tax resident of two countries at the same time. In such cases, DTAs establish what are known as “tie-breaker rules”, which generally apply the following criteria:
The place where the person has a Permanent housing available, and if that fails, the center of vital interests (family, business).
The place of habitual residence, and if dual residency continues, 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 retains 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 permanent residency in Paraguay would be insufficient to qualify for its tax benefits 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 double taxation agreement or the domestic laws of the country of origin.
Fourth mistake: believing that there is 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 relevant 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 The Tax Authority is authorized to appoint 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 a year.
Therefore, the reference to 120 days does not determine tax residency, but operates solely as a secondary 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 for exercising its powers of assessment and audit.
Fifth mistake: believing that RUC registration and the issuance of invoices are requirements for tax residency
Obtaining Tax residency does not, in and of itself, imply an obligation to register with the RUC or to issue legal invoices.
Under Law No. 1,352/88 and its implementing 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 give rise to 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 is a tax resident of Paraguay but does not generate income or engage in taxable transactions in the country — for example, someone who receives income derived exclusively from foreign sources — is not required to register with the RUC or issue invoices in order to obtain or maintain that status.
Conclusions
Transferring tax residency to Paraguay requires thorough legal and tax analysis. Specifically:
Immigration residency and tax residency are These are different concepts and should not be confused.
Temporary residency may be sufficient to qualify for tax residency.
Obtaining Tax Residency in Paraguay does not automatically result in the loss of 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 secondary criterion for determining tax domicile.
Registration with the RUC and the issuance of invoices are required only when there is taxable territorial income or transactions in Paraguay.
Ultimately, Changing tax residency is not merely an administrative procedure, but a 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 a tailored analysis that takes into account the specific circumstances of the case and the applicable laws. To obtain professional advice regarding your specific situation, we recommend consulting attorneys who specialize in the relevant area.
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