One of the most common questions we are asked by those interested in Paraguay’s residency program is how to obtain a Tax ID. This can be crucial, for example, to shift your tax residency from your home country to Paraguay.
However, it’s important to understand that in Paraguay there isn’t an exact equivalent of the Tax ID, and especially not to confuse the RUC as the equivalent tax identification number. In this guide, we will shed light on the taxpayer identification systems in Paraguay and the cases where an RUC is not necessary. If you have any doubts, feel free to contact our office: we are here to assist you.
How to obtain tax residency in Paraguay?
In Paraguay, there isn’t a clear distinction between when an individual becomes a resident and when they become a tax resident. Paraguayan law is straightforward in this regard: when a foreign individual becomes a temporary or permanent resident, they must pay taxes on income generated in Paraguay. This income can come from:
- Employment as a worker
- Establishing a business
- Self-employment
- Income from assets held in Paraguay
If an individual doesn’t generate income in any of these four ways, they are not subject to either filing tax returns or any type of taxes in Paraguay. This is not dependent on how long one spends in the country or whether they have an RUC. The only thing that matters is whether an individual has a source of income generated in the country. This rule applies to all residents, from the moment they become residents, not after obtaining a specific tax identification number.
Instead, it’s important to know how to cancel tax residency in one’s home country if one wants to be subject to the Paraguayan tax regime and exit from where taxes are currently being paid. This process varies from country to country: by reaching out to us, you can receive personalized advice based on your specific situation. We have already assisted hundreds of clients in canceling their tax residency in their home country and shifting it to Paraguay in full compliance with each nation’s laws.
Is the RUC the same as the Tax ID?
We often encounter clients who confuse the RUC with a Tax ID, and it’s easy to mix up these two. It’s crucial to understand that the RUC is not a form of Tax ID and has nothing to do with tax residency in Paraguay.
As we’ve explained, there are four possible sources of income in Paraguay: employment, entrepreneurship, self-employment, or income from assets held in the country. Let’s see exactly how each of these income sources is associated with the RUC:
- Employees do not have an RUC;
- In the case of establishing a business, it will be considered a legal entity separate from its shareholders. The company will have an RUC, but not its owners;
- Self-employed individuals are the only ones with an RUC associated with their name and surname since in this case, there’s no separation between the business and its owner;
- Those earning income from stocks, real estate, or other assets do not have an RUC.
There are millions of workers in Paraguay who, being employed by a company or business owners, do not have an RUC associated with their name. Therefore, it’s incorrect to think that the Paraguayan RUC is equivalent to the Tax ID or social security number assigned to each resident in other countries.
The RUC is a number exclusively associated with economic activities that issue invoices to their customers, are subject to VAT payments, and may hire other individuals. This makes it very different from a number that identifies any taxpayer in a nation. You should only open an RUC in your name as an individual if you intend to operate as a self-employed worker in Paraguay.
To know more about being a self-employed worker in our country, you can read our freelancer blueprint for Paraguay.
Is there an equivalent of the Tax ID in Paraguay?
The closest thing to a Tax ID in Paraguay is the number on the ID card (cedula). This is the number used, for example, when we go to the pharmacy or to another business that needs to issue us a receipt or invoice. All citizens and residents have a unique number on their identity card, which is also used as an identification system by the national health system.
Even in the case of self-employed workers, their RUC number is the same as the number on the identity card with the addition of a single digit at the end. And even in their case, the RUC number is used exclusively on invoices they issue or receive only if they are related to their business. In case of personal expenses, for example, the RUC will not be provided but the number on the identity card will be used – even if they are self-employed workers with an active RUC.
It’s often a mistake to think that if one’s home country has a certain bureaucratic framework, it will be the same in Paraguay. In reality, each country has a unique way of managing documentation, and being accustomed to working with people from all over the world, we know well how even a birth certificate, a background check, or an apostille can be completely different from one country to another. In the case of Paraguay, the very concept of a tax identification number assigned to each citizen or resident regardless of their work activity is not present in the legal system.
Need help with tax residency in Paraguay?
If you’re considering the process of temporary or permanent residency in Paraguay, and need to understand how to shift your tax residency to our country, our team can help you resolve your doubts. You can contact us for free, and we’ll be happy to assess the situation with you. In most cases, the issue is not how to be recognized as taxpayers by Paraguay, but how to cancel your tax residency in your home country. Having worked with individuals who had their previous tax residency in the United States, Canada, EU countries, Australia, and Latin American countries, we can help you optimize your situation both in Paraguay and in the country where you are currently resident.