Last Updated April 30, 2021

Dateline: Ubud, Indonesia

A surprising land-locked country that few people have heard of, people usually look at Paraguay as a place to get “easy, cheap, and fast” residency and citizenship. 

One of the main things that foreign investors like about Paraguay is that one doesn’t have to physically live there — just one day every three years will suffice for you to maintain your residency. That, coupled with the relatively low investment requirement, puts Paraguay on many people’s radar.

With a Paraguayan passport, you can access the European Union (EU), Russia, the United Kingdom (UK), and Ireland — so it’s a pretty good deal and a decent passport too. It’s also a part of the Mercosur trading bloc in South America, so you can also go anywhere in South America without a visa; just an identification card will do.

Another commonly held belief is that Paraguay is one of the fastest ways to get citizenship. On paper, and in some instances, that may be true. Technically, you could become a naturalized citizen of Paraguay in just 3 years.

However, as with every residence and citizenship by investment program, there are challenges that we will spell out in this article. 

For one, you have to understand that in many countries what is written in the letter of the law may not always follow in due process. What is said to be possible is not necessarily how things pan out — especially with regard to citizenship.

The fact that the law states that in Paraguay you can apply for citizenship after three years doesn’t guarantee you anything. It means you can apply and that they must consider your application but beyond that, nothing is certain.

So, then why Paraguay? 

Why Should You Get Paraguay Residency and Citizenship

A small and obscure country, Paraguay sure has its fair share of problems.

A decade ago, it was in the top 10 of the most corrupt countries in the world according to Transparency International. Luckily, the situation has improved and Paraguay ranks 123rd in the world currently — still a long way to go to an honest and democratic government but an impressive improvement.

Approximately a quarter of Paraguay’s seven million citizens live below the poverty line.

Essentially, the government’s tax policies have meant that very little tax is collected, and no cash can be spent on social services and poverty-reducing initiatives.

It’s estimated that three-quarters of Paraguayan land is owned by 1% of the population — highly concentrated in the hands of the wealthy few. The government has pretty much-done nothing to implement any sort of land reform.

What’s more, the main industry of agriculture is mostly automated, which means fewer laborers are needed.

And when you combine all of those factors, you’ve got a political and economic situation that’s unstable and full of surprises.

But there are a few glimmers of hope for Paraguay.

Firstly, the median age in the country is just over 26 years. You’ve got a workforce that’s young, robust, and ready for employment opportunities.

Secondly, the tax policies of the country, some that have the unfortunate side-effect of imprisoning some people in poverty, are also highly attractive to foreign investors.

All foreign-sourced income is completely tax-exempt, and the government has been pretty set on this, with promises to never reverse that policy.

And finally, the investment required to become a resident of Paraguay is really low, which makes it an affordable option for many.

How to Get Paraguay Residence and Citizenship

As we’ve already mentioned, many people choose Paraguay because the process of getting residency takes very little time and almost zero effort, not to mention it’s very cheap.

It’s most suited for people who are: 

  • Looking for a permanent residence with a minimal physical presence requirement. Requires that you spend only one day every three years in-country. Another way to look at this is that Paraguay isn’t exactly known for its livability.
  • Unable to qualify for tax residence elsewhere because they travel too often. Similarly, if you need tax residence somewhere but you are constantly on the move, then Paraguay could be a good solution.
  • Looking for a low-cost residence, tax residence, and citizenship. You can’t beat Paraguay’s prices, but don’t forget to consider the drawbacks.

So, if the country appeals to you, you’ll need to make some decisions as to how you’d like to invest in order to get your residence.

First, you’re able to make a simple bank deposit of 35 minimum monthly wages, which is approximately $5,000. The only condition required to take advantage of this option is that you have visa-free (or visa on arrival) access to Paraguay.

The deposit can be made in any Paraguayan bank and will usually be non-interest bearing. As soon as you’re granted residence, you can withdraw the deposit in full.

Second, you can opt to set up a company and invest Paraguayan Guarani 50,000,000 (approximately $7,500). It’s also possible to purchase land for agricultural activities.

You will also need to submit a business plan and show that you’ll spend $70,000 minimum in 10 years.

Finally, you can get residence in Paraguay if you’d like to retire in the country. If your retirement income is at least $1,300 per month, you can go this route. There is no age limit.

Also note that as a retiree, you will benefit from import tariff exemptions on your personal effects, mostly your household items.

From start to finish, the process takes around 2-3 months and requires multiple week-long visits to the country.

You’ll be issued with a permanent residence card that is valid for 5 years.

However, within 6 months of receiving the card, you must fly back to Paraguay to apply for a local ID card. Thereafter, you can apply and go through all the motions to become a tax resident, all in one visit.

Here are the documents you’ll need to apply: 

  • Passport
  • Clean police record
  • Birth certificate
  • Certificate of marriage or divorce (if applicable)
  • Medical certificate (must be issued in Paraguay)
  • Affidavit (must be issued in Paraguay)
  • Document issued by the National Police, Identifications Department of Paraguay
  • Proof of residence in Paraguay (must be held throughout residency)

All of your documents from abroad must be officially translated to Spanish, apostilled, and notarized.

Paraguay Citizenship

It’s possible to obtain Paraguayan citizenship after 3 years of being a permanent resident.

As mentioned, the process for acquiring residency is relatively easy, inexpensive, and quick. The process for acquiring citizenship is far more involved.

You will need to spend at least 183 days of each of those three years in the country. Plus, you’ll need to pass a Spanish language exam, as well as know about the country’s geography, politics, and history. 

You’ll also need to show that you have genuine ties to the country, such as real estate, a local company, or at least continuous fiscal residence.

Those are the legalities of a Paraguayan passport, but consider the big picture for a minute.

And the bigger picture in Paraguay is one of the extended wait times as a result of poor legal representation and bureaucracy, coupled with the current climate of heightened security and tighter policies.

The actual process of getting Paraguayan citizenship can take several years longer than that attention-grabbing headline of 3 years.

Still, every country has a trade-off between the benefits of citizenship and the process by which it takes to achieve it. Paraguay has good things going for it (low taxes, a good passport, and its laissez-faire attitude) but it’s not the only (or cheapest, or fastest, or easiest) option to get a second citizenship.

And having a second passport as an insurance policy is definitely a good idea, but why not evaluate other options? Here’s how to choose the best second passport for you.

If you’re a Westerner looking for more globalized travel, then the only place that Paraguay affords you freer access to is Russia.

And if you’re using Paraguayan citizenship to benefit from lower taxes and to save money, then there are better places to spend your time (and it is your time) jumping through hoops to get your second passport.

Why would you want to be wasting that time jetting off to Paraguay, in the middle of nowhere, at a moment’s notice to clear yet more red tape when you don’t want to live there?

There are other countries that have lower or no tax, closer to where you want to be.

Plus, if you are looking to renounce your citizenship, there’s a world of options that may be even better suited to what you actually want and need, even if that “headline” cost is more expensive.

Taxation in Paraguay

Paraguay used to be a tax haven and, in many ways, it still is. If you want to take advantage of the tax optimization strategies that residency affords you, here’s how.

As soon as you obtain an ID proving your residency status, you will need to collect the documents proving that you’re a tax resident of Paraguay.

Then, you’ll need to navigate a bit more red tape, such as registering at the Treasury office and participating in the official course for self-employed people in order to receive your tax number Registro Único del Contribuyente (RUC).

These are both processes for which you must be physically present. Plus, they are both fully in Spanish, but you are allowed a translator to help you navigate through the paperwork.

As soon as you have your RUC, you will need to file for value-added tax (VAT) each month — we’d advise having a trusted accountant to help you with all that. Alternatively, you can do it yourself via an online tax system called Marangatu.

Even though you won’t be paying any tax on any money that you make abroad, you will be liable to pay tax on onshore income made in Paraguay.

However, exemptions do exist, i.e., the first $20,000 is tax-free during your first year in the country, $19,000 the next year, and so on.  

You will easily be able to show your tax resident status to any tax authorities “at home,” because by this point you should have these official ties to Paraguay: 

  • Life and Residence certificate (the official proof of address in Paraguay from the police)
  • Tax authority’s certificate (as monthly VAT filing is obligatory, you’ll have a new copy of this document every month)
  • Landlord’s statement
  • Mobile phone contract
  • Bank account statements showing your local address

Weigh Your Options Carefully

Too many people believe Paraguay is such an easy road to a second passport that it must be a scam — a way to get one over on the “system” — which is what makes it worth a gamble to them just “to see” if they can get one.

The challenges to getting Paraguayan citizenship and a second passport in 2021 are:

  • It’s taking a lot longer than ever before to get your application even looked at
  • More applications are getting denied
  • No reason (or limited information) are being given for rejected applications
  • Immigration lawyers aren’t providing much help
  • The mythical “fast, easy, and cheap” just isn’t true

If there’s one takeaway from this it’s that you need to be clear about your end goal; define it and work backward to achieve the best results.

If your goal is to renounce US citizenship to save $500,000 a year on taxes, then it’s likely that your time is far more valuable than any paltry savings that may or may not be made in seeking Paraguayan citizenship.

In fact, by the time you’ve made your sixth visit to the country, making at least two stops along the way and waiting in airports the size of your laundry room just to fill out another form before returning home, you’ll probably have wasted more money than you’ve saved.

We’d say the last time Paraguay was a sensible option for most foreign investors was back in 2015.

There are better options now that are a lot easier with far more guaranteed success and, compared to how much time you can spend with Paraguay, cheaper in the long run in terms of your time investment.

The bottom line? We think Paraguay is just not worth it at the moment.

Don’t get us wrong. Paraguay is an amazing country and still offers plenty of opportunities. If you are someone who is looking for a frontier market (and maybe speak Spanish), you might find it the perfect bolt-hole. In which case, go for residency.

If you’re looking for Paraguay as a second passport you’re probably looking in the wrong direction; instead, you should be looking for a solution to your unique pain points and go from there. 

Get in touch with the Nomad Capitalist team and we can help you figure it all out.

Andrew Henderson
Last updated: Aug 23, 2021 at 2:32PM