1. The Territorial Taxation Principle: Ley N° 6380/19
The Republic of Paraguay operates a strict territorial tax system codified under Ley Nº 6380/19 de Modernización y Simplificación del Sistema Tributario Nacional, administered by the Dirección Nacional de Ingresos Tributarios (DNIT).
Under this principle, tax residents in Paraguay are taxed exclusively on Paraguayan-source income (income generated from activities, capital, or services rendered within the physical territory of Paraguay). Income generated from activities outside of Paraguay is exempt from local personal income tax (Impuesto a la Renta Personal - IRP).
2. Synergy: Non-ETBUS U.S. LLC + Paraguay Tax Residency
The Legal Dual-Jurisdiction Architecture:
In the United States:
The non-ETBUS single-member LLC pays 0% federal income tax on foreign-source income because all services are performed outside the U.S.
In Paraguay:
The tax resident receiving dividends or consulting revenues from foreign clients pays 0% local IRP because the income is of foreign source under Ley 6380/19.
3. Legal Requirements for Establishing Residency
- Apostilled international birth certificate and clean police record.
- Interpol certificate issued in Asunción.
- Temporary residency filing under Ley de Migraciones Nº 6984/2022.
- Cédula de Identidad Paraguaya issuance.
- Tax ID registration (RUC) with the DNIT.
Optimize Your International Tax Posture Legally
Combine a U.S. pass-through LLC with legitimate Paraguay legal tax residency to achieve complete international regulatory compliance and 0% territorial taxation on foreign income.