# How to get Paraguay Personal Tax Residency | 0% TAX SETUP

Channel: Hessel
Video: https://www.youtube.com/watch?v=oNYseHurM0g
Duration: 13 min
Language: English
Words: 2546
Transcript page: https://viewrankai.com/tools/youtube-transcript/oNYseHurM0g

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[0:00] What if I told you that you could legally pay 0% taxes on your business income while having complete freedom to live anywhere in the world? Well, that's exactly what I'm going to show you today with Paraguay's territorial tax system. Now, I've been researching tax optimization strategies for years, and Paraguay consistently comes up as one of the best options for online entrepreneurs and digital nomads. Unlike Dubai where you need to stay 90 days per year or Cyprus with its 60-day requirement, Paraguay is unique in having a zeroday minimum stay requirement. You literally never have to set foot in the country after your initial setup. So, here's what we're

[0:34] covering today. First, I'll break down exactly how Paraguay's territorial tax system works and why it's perfect for entrepreneurs making between 5 and $250,000 annually. Then, we will go through the three-step process to get this set up. First getting your personal residency, then tax residency, and then lastly your offshore business structure. I'll show you the real cost, the timeline, and most importantly, how to avoid the common mistakes that can mess up your entire setup. By the end of this video, you have a complete road map to legally reduce your tax burden to zero while maintaining full location

[1:06] independence. So, let's dive right in. All right, so first things first, let's understand why Paraguay is so attractive for tax optimization. [music] Paraguay operates under what's called a territorial tax system, which means you only pay taxes on income that's generated within the country's border. Any income you make from outside the country has a 0% tax rate. This is completely different from countries like [music] the US, UK, or most of Europe, where they tax you on your worldwide

[1:32] income regardless of where you earn it. So, if you're a freelancer working with [music] US clients, or you're running an e-commerce business selling to European customers, as long as you're structured correctly, Paraguay won't touch that income. And this will work best for specific type of people. So let's go to the requirements. First of all, you need to be a non- US citizen. So sorry Americans, you're taxed based on citizenship, not residency. Plus, you should be making anywhere between 5K and $250,000 annually because if you're making more than that, you probably want to look at more sophisticated setups elsewhere in [music] the world. And also, ideally, you're location

[2:06] independent, working online, consulting, or running a digital business without living in your home country. Now, for me, I am a Dutch citizen from the Netherlands. For this method to work, I [music] cannot live in my home country and need to resign. The key thing here to understand is that Paraguay doesn't care where you physically are most of the year. You could spend 4 months a year in Bali, 2 weeks in Europe or anywhere else, and Paraguay still

[2:30] considers you a tax [music] resident. The only rule is don't spend more than 6 months in any other single country because that country might try to claim you as a tax resident. Now, let's get into the actual process. [music] Step one is getting your personal residency in Paraguay, which gives you the legal right to live and work there. This is the foundation for everything else we're going to build. First, you need to prepare your documents. You'll need [music] your birth certificate from where you were born, and it needs to be apostile. You also need a criminal record certificate, again, apostile, from any country where you've lived in

[3:01] the last 5 years. And if you're married or divorced, bring those certificates, too, also apostile. [music] Now, if you don't know what an apostil is, it's an international authentication that basically makes sure that the documents you provide are certified. You can usually get this done online or you can get your local government office to do it [music] and in many countries it is free. Once you have these documents ready, here's how to get your personal residency. [music] The price will be around $2 to $3,000 and you only need one trip of four business days to Paraguay. So, here's how that process works. You fly into the capital of

[3:32] Paraguay [music] and go straight to the office. They scan your documents, take your photo, and that's it. It then takes two to three business days to process, after which you can go to the government office again to apply for your residency card and your sada. [music] A sadoula is basically your Paraguayan ID card. After this, your trip is done and you can go home. Then about 60 days later, DHL delivers your residency card and Sadulla to wherever you are in the world. So that's it. You're now a legal resident of Paraguay. And by the way, if you want professional help setting this up, I will leave a link down below to

[4:03] Nomad Tax, who are specialized in helping entrepreneurs move their setup to Paraguay and stay compliant. They handle the entire process for you and deliver the ID to your home. Okay, so having your personal residency is great, but it doesn't automatically make you a tax resident. [music] For that, you need to open what's called an RU. That's your Paraguayan tax ID number, and this is what officially makes you a taxpayer in the Paraguay system. Once you have your sedoula, you can get this activated. You need to register as self-employed in Paraguay. And here is the key part. You need to file monthly VIT declarations even if you have zero income. This shows

[4:38] the tax authorities that you have economic activity in Paraguay. Now, you could file zero income declarations and still maintain your tax residency, but if you want to have the strongest possible position, you should generate at least some income through your RU. The rough number is one minimum wage per month in Paraguay, which is about $300. If you invoice this amount monthly, and you pay [music] the 10% VAT on it, you'll get access to a tax residency certificate. And this is super important because if your home country ever questions about your tax residency or you need [music] to provide to banks where you're tax resident, having these

[5:14] documentation makes your position bulletproof. So, all in all, you're paying about $360 per year in taxes to save potentially tens of thousands in your home country. The easiest way to handle this is to invoice your own offshore company, which brings us to the next crucial step, setting up an offshore business structure. And here is where most people get confused, so pay attention. Having a Paraguay tax residency [music] is only half of the equation. You also need to make sure your income is considered foreign sourced by the Paraguay Tax Authority. This is both needed to stay compliant to not pay any tax and also because the direct business

[5:49] infrastructure in Paraguay is not at the levels of let's say most European countries. If you're physically working from Paraguay and invoicing clients directly through your ROC, that income is considered Paraguayan sourced and you need to pay tax on it. But if you have a company outside Paraguay and that company pays you dividends or distributions, then that is foreign income and it's tax-free. So to do this, the most popular option is setting up a US LLC, specifically in Wyoming. And here's why that's perfect. Wyoming has no state income taxes. It's anonymous, so your name doesn't appear on any of the public records. And for non- US citizens, LLC's are considered

[6:27] disregarded entities, which means they don't pay federal taxes either. So on one hand, your US LLC is considered pass through, so no state tax, no federal tax. And on the other hand, Paraguay considers this foreignowned income. So also not taxed from that side. Now to qualify for a non-resident LLC, you need to meet the four criteria. One, you're not a US person. Two, you don't have employees in the US. Three, you don't

[6:53] have any productive assets in the US. And four, you're not engaged in regular trade or business with the US. Now, as long as you're working remotely and your clients can be anywhere in the world, you'll still meet these requirements. As setting up the LLC is straightforward. I recommend using Northwest Registered Agent. You can get everything done online for under $300. You'll choose Wyoming as your state. Pick a company name ending an LLC. Provide your contact information and they'll handle all the paperwork. The whole process here takes about a [music] week. Once your LLC is formed, you need an EIN number from the IRS, which Northwest can also handle for

[7:27] you. It's like a social security number for your business, and you need it to open bank accounts. Now, there are alternatives to the US LLC route. You could set up an Estonian e company, which has a 20% tax rate only when you pay dividends, or a UK LLP if you want something closer to Europe. Some people even choose a newest LLC in the

[7:47] Caribbean for maximum [music] privacy. But for most people, the Wyoming LLC is the sweet spot of simplicity, cost, and effectiveness. If you don't want to hassle with setting up the LLC yourself, Nomad Tech can also do this as an extra service for the Paraguay tech setup, which makes it even easier. All right, so now you have your Paraguay residency and your US LLC. Next step is banking and the financial setup. And as I said before, Paraguay is not an amazing option for this infrastructure. [music] And this is then where having a US entity really pays off because you can get access to the entire American banking system. For your LLC, I

[8:22] recommend opening a Mercury bank account. They're designed specifically for [music] online businesses and they're much more friendly to international business owners than traditional banks. The application is entirely online. You'll need your EIN, your LLC formation documents, and some basic information about your business. They usually approve your account within one to two business days, and everything can be done remotely. Once you make more money through your LLC though, or you want a more robust setup, you can also open a bank at Chase, but this will

[8:48] require you to physically go to the US. So, I recommend doing this in a later stage once you already got everything set up and running. US bank accounts are solid, so you can receive payments from anywhere in the world, use services like Stripe and PayPal and manage both fiat and crypto payments easily. Now, you might be wondering about banking in Paraguay itself. Now, you could open an account there like Ital has a branch in Paraguay and they're used to working with foreigners, but honestly, the Paraguayan banking system isn't that great for international businesses. It's just useful to have a local account for any Paraguay related expenses and to

[9:21] strengthen your residency documentation when your own country requests it. The key here is diversification. [music] Don't put all your money in one country or one banking system. Having your main business account in the US, [music] a backup in Paraguay, and keeping some funds in international fintech platforms works [music] really well. Now that everything is set up, let's talk about the maintenance because this is where a lot of people mess up. Your part wine tax residency isn't a set it and forget it situation. You need to stay compliant with their requirements. First, you will need to file monthly VAT declarations through your RU. Even if you have zero

[9:56] income, you still need to file it. If you forget to file or file late, the RU gets marked as non-compliant and won't be able to get your tax residency certificates. There's usually a small fine, but once you catch up on your filings, you're back in good standing. Now, second, remember the physical presence rule. [music] You don't need to spend any minimum time in Paraguay, but you cannot spend more than 6 months in any other country. So, you could do 5 months in Thailand, 3 months in Mexico, 2 months in Europe, and 2 months anywhere else in the world. Just don't hit that 6-month threshold anywhere else. And third, keep good records. Save

[10:29] your invoices, bank statements, travel records, and tax filings. If anyone ever questions your setup, you want to be able to prove that you're genuinely a tax resident in Paraguay and that your income is legitimately foreign sourced. Now, for the ongoing costs, they're pretty minimal. You're looking at about $35 per month for accounting service to handle your monthly filings, maybe $400 per year for a doicile service if you want the Paraguay address for banking purposes, and around $500 per year in actual taxes if you're doing the minimum way invoice strategy like I mentioned earlier. Then for the total cost, let's talk pricing numbers because I know

[11:05] that's what you really want to know. Here's a complete cost breakdown for getting this entire setup running. First, for the onetime setup cost, Paraguay residency is roughly $2,500. The US LLC setup is around $300 through Northwest, and the banking setup is free with Mercury. So, you're looking at roughly $3,000 to get everything established. And this might sound like a lot, but think about it this way. If you're currently paying $30,000 per year in taxes in your home country, this pays for itself in less than a month. Annual maintenance costs are much lower. Your LLC will be around $200 [music] per year to maintain in Wyoming. Accounting

[11:39] services for your Paraguin filings are $35 per month, so around $400 per year. And if you want a doicile service, that's another $400 per year. And if you're doing a minimum wage invoicing strategy, you pay around $500 per year in actual taxes in Paraguay. So, for a total annual maintenance, it's roughly $1,500 to $1,800 per year. Compare that to what you're paying now in income taxes, and the savings are massive. But here's the real kicker. It's not just about the money you save on taxes. It's about removing the mental limitation of I can't make more money because I'll pay more taxes. When you know that every

[12:12] extra dollar you earn stays in your pocket, it completely changes how you think about growing your business. Now, the key benefits are obvious. 0% tax rate, complete location independence, access to US banking, and the mental freedom to grow your business without [music] tax limitations. And if you're ready to take action, I put the links below for the exact partners I trust for the Paraguay residency and [music] LLC setup. They'll take care of the entire process from start to finish so you can get started straight away. Advice and tax laws can change. You should definitely consult with professionals who specialize in international tax planning. And if you're ready to take

[12:46] action on this, I'll put some links in the description to the services I mentioned. [music]

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