{"id":391,"date":"2024-07-11T01:46:27","date_gmt":"2024-07-11T01:46:27","guid":{"rendered":"https:\/\/paraguaypathways.com\/?p=391"},"modified":"2024-10-26T01:50:37","modified_gmt":"2024-10-26T01:50:37","slug":"paraguay-territorial-tax-system","status":"publish","type":"post","link":"https:\/\/paraguaypathways.com\/el\/paraguay-territorial-tax-system\/","title":{"rendered":"Paraguay’s Territorial Tax System: a Guide for Expats and Nomads"},"content":{"rendered":"\n

Paraguay is one of the countries that adopt a territorial tax system<\/strong>, which means only national income is taxed while income earned abroad is excluded from any form of taxation. This is one of the reasons why thousands of people every year, especially digital nomads and remote workers, move their tax residency<\/strong> to Paraguay.<\/p>\n\n\n\n

That said, it is important to know exactly which incomes are considered “earned abroad<\/strong>” and which are considered “national<\/strong>,” just as it is important to know which incomes should be reported in the tax return and which are excluded. Avoiding mistakes is crucial to prevent issues with Paraguayan tax authorities and those of your home country, something we pay great attention to: every year, we help hundreds of digital nomads and more to move their personal and tax residence to Paraguay.<\/p>\n\n\n\n

Introduction to Paraguay’s Territorial Tax System<\/h2>\n\n\n\n

A “territorial tax system” taxes only income generated within a country, while countries with a “global tax system<\/strong>” tax all resident income\u2014 or citizen income, as in the case of the United States\u2014 regardless of where it is generated. Paraguay is not the only country in the world to adopt a territorial tax system: Panama, Hong Kong, Costa Rica, Nicaragua, Seychelles, and a handful of other nations also do.<\/p>\n\n\n\n

The two major differences<\/strong> between Paraguay and other countries with a territorial tax system are:<\/p>\n\n\n\n

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  1. Obtaining residency in Paraguay is fast, requires few documents, and is inexpensive;<\/li>\n\n\n\n
  2. Maintaining residency in Paraguay does not require living 183 days or any specific period of time in the country each year, a great advantage especially for digital nomads interested in traveling most of the time.<\/li>\n<\/ol>\n\n\n\n

    Paraguay has always used a territorial tax system, but the rules have been updated and clarified by two important reforms<\/strong>. The first is Law 6380 of 2019, which simplified and modernized the country’s tax system; the second is General Resolution 73 of 2020, which specifically addresses digital services.<\/p>\n\n\n\n

    Which Incomes Are Considered Foreign Earned?<\/h3>\n\n\n\n

    Article 6 of Law 6380 states that all income related to services, rights, or goods<\/strong> located or used in the country are considered Paraguayan-sourced income. Additionally, some “borderline” cases are presented to consider. Specifically, it is important to remember that:<\/p>\n\n\n\n