Paraguay offers a tax residency certificate that can be requested from the tax authority, known today as DNIT (previously SET). This document is crucial for those residing or doing business in Paraguay, proving one’s status as a tax resident. The certificate is essential not only for legal and business dealings but also becomes a necessity during audits by tax authorities, banks, brokers, and cryptocurrency exchanges.

Remember that if you need help with tax filings and fiscal obligations in Paraguay, our team is ready to support you. Feel free to contact us at any time for a free consultation.

How to Request the Tax Residency Certificate in Paraguay

Applying for a tax residency certificate in Paraguay requires a few specific documents and steps. Here’s what you need to prepare:

1. Specific Application Form: You start the process by filling out a specific form provided by the DNIT.
2. Cédula (ID Card): This is your identification in Paraguay, showing your legal status and personal details.
3. Certificado de Cumplimiento Tributario: This tax compliance certificate is available online at no cost. By entering your RUC number and date of birth on the appropriate website, you can obtain this document, provided your tax filings are up to date and there are no outstanding issues.
4. Constancia de Movimiento Migratorio: This document, issued by the National Directorate of Immigration, can be requested online for a fee of approximately $40 (286.000 guaranìes).

Once you gather all documents, you submit them to DNIT. The processing time typically takes up to 10 business days, and the certificate must be collected in person or via a notarized power of attorney. It’s essential to ensure that the documents are in order, as these will be the first items checked during the application review. The certificate is valid for one year from the date of issue.

Criteria for Approval

For your application to be successful, there are specific criteria you must meet:

• Regular Tax Activity: Having an open RUC is not enough. You must demonstrate that you have been economically active in Paraguay and have paid local taxes. The tax authority requires evidence of invoicing or declarations of capital gains from Paraguayan sources.
• Mandatory Visits: Paraguay law stipulates that temporary residents must not have an unjustified absence from the country for 12 consecutive months and permanent residents for 36 consecutive months.

Failing to meet these criteria, especially not demonstrating tax activity through the RUC, typically results in the rejection of the tax residency certificate application.

For people who have tax residency in Paraguay but do not work in Paraguay, it can be challenging to demonstrate that they have local economic activity and have paid taxes. On one hand, it is definitely very advantageous to be able to take advantage of Paraguay’s territorial tax system, but on the other hand, it is always important to remember that having local economic activity and tax payments is fundamental for requesting the tax residency certificate and for having income tax returns in Paraguay. Without these documents, problems can arise in the event you receive an audit from your country of origin or from banks and other financial authorities.

Paraguay Pathways can help you determine the best strategy to maintain an active RUC with local declarations and tax payments, even if most of your economic activity takes place abroad. Feel free to get in touch with us, and we will be happy to assist you.

The Importance of the Tax Residency Certificate

While initially, it might seem just another piece of bureaucratic paperwork, the tax residency certificate is a powerful document in several situations:

• Audit Proof: During audits, this certificate is vital as it proves your tax residency status unequivocally.
• Financial Transactions: Banks, financial institutions, and authorities often require this certificate for various procedures and verifications.
• Legal Compliance: It helps in maintaining compliance with both Paraguayan and international tax laws.

Holding a tax residency certificate aligns your interests with Paraguay’s tax authorities, enhancing your credibility and establishing a robust economic relationship with the country. It acts like an insurance policy—perhaps not immediately necessary but essential when required.