Paraguay temporary residence - 0% tax income from abroad or not?

[meze99]

Come across a guy on youtube who claims the easiest solution for Spanish/EU citizens for 0% tax on income from abroad with getting access to the first world banking is US LLC + Temporary residence in Paraguay that he helps to get from abroad (personal visit to submit a residence application is probably necessary by law, but we are talking Latin America, so I think it is possible to get it submitted remotely). I remember until a few months ago Paraguay gave away Permanent residence, now it's Temporary, but in terms of taxation he claims there is no difference between them. He even says you can leave Paraguay after 5 days instead of 120 days to keep the residence since nobody really cares (again Latin America).
So, does this setup really works? According to the guy since you submit your tax returns in Paraguay on US LLC income and pay 0% tax legally, you can show your tax returns papers to any bank in the world later and it will be bulletproof source of funds.
Does anybody know if this setup really works and what problems can come up later if this setup is legal right now?

 

[jafo]

Can you share the YT video?

 

[meze99]

youtube.com/watch?v=iW1NerO5j3M

 

[jafo]

youtube.com/watch?v=iW1NerO5j3M

Thank you! Interesting video. I wonder if anyone here has a PY residency

 

[backpacker]

youtube.com/watch?v=iW1NerO5j3M

This Pepe is selling hot air. Do not fall for it!
What he is doing: Mixing residency with tax residency. Just because you have a residence permit (in the case of PY not even a permanent one) doesn't mean that you can claim tax residency. If you do not stay 120 days in PY you are simply not a tax resident in that country.

 

[jafo]

This Pepe is selling hot air. Do not fall for it!
What he is doing: Mixing residency with tax residency. Just because you have a residence permit (in the case of PY not even a permanent one) doesn't mean that you can claim tax residency. If you do not stay 120 days in PY you are simply not a tax resident in that country.

Will a person lose the residence permit if gone for one year?

 

[meze99]

Legally speaking, I agree with backpacker, if you don't spend 120 days in Paraguay you are not a tax resident there according to law, but it seems that in practice the tax authorities don't enforce this rule (probably because the taxman there is lazy and thinks only in terms of money they can get, so tracking down the real peroid of staying of residents with 0% income tax on profits from abroad makes no sense for them even if they discover that a person didn't spend 120 days there, they can't charge this taxpayer any taxes, so they think, why bother?).
Let us suppose that a temporary resident really spends 120 days a year in Paraguay, can this EU citizen feel safe against potential claims from a taxman from his home country (EU citizenship)? I guess in my case this temporary residence should work, since I have never been a tax resident in my EU citizenship country, but I gather for people who lived in EU, especially in the country of their citizenship it won't be so easy to proof to a local taxman.

Jafo, the temporary residence begins with two years of temporary residency, you can become a permanent resident after two years. Also they removed a proof of solvency via a local bank deposit. So if you don't show up after two years, you loose your residence

 

[jafo]

I guess in my case this temporary residence should work, since I have never been a tax resident in my EU citizenship country,

I'll drink to that! We have something in common!

 

[meze99]

I have checked with a local lawyer- the temporary residence ID card is usually received 6 months after you have applied in person for this residence. The guy on Youtube says you contact me and you apply for residence in person and receive ID card personally in 5 days, I wonder if this super fast positive decision for residence can get you in trouble in Paraguay afterwards.

 

[backpacker]

Let us suppose that a temporary resident really spends 120 days a year in Paraguay, can this EU citizen feel safe against potential claims from a taxman from his home country (EU citizenship)?

If the person in question has no more ties to his/her country of citizenship + the country of citizenship has no specific clause to tax citizens even if not resident + he/she stays 120 days/annum in PY: There is no reason to assume that this person is not a tax resident of PY.

However, leaving the EU directly for a South American developing nation while still being counted as an active member of society (speak "taxcow") in a high tax Western country might require an emigrant to answer many questions.

 

[Soterus]

What I dislike in this video: He claims it is possible to use N26 or Revolut bank as a PY resident, and one does not need any PY bank. That is wrong. N26 closes your account as soon as they know you do not live anymore in EU. Equally do all EU brokers. It is, however, possible to use US banks, particularly via US-LLC. Additionally, most PY banks do not allow you to receive international wire transfers due to AML regulations. So there is a full dependence on the US banking system (or maybe Switzerland), if you want to work internationally. I have no info regarding China banking

 

[jafo]

most PY banks do not allow you to receive international wire transfers due to AML regulations.

What about those who retire there and need their EU pensions?

 

[Soterus]

There are some non-FINTECH banks in EU, (large system-relevant banks, too big to fail) such as Deutsche Bank, or DKB in Germany, or US-EMIs, where you can have an account with a card (and IBAN for pensions), but you pay fees for that obviously. These retired people certainly do not receive pensions via a PY bank account. From my past experience: most EU banks allow you to have an EU-account, but this account does not have a card associated to it, so no way to spend the money in PY.

 

[JustAnotherNomad]

Just because you have a residence permit (in the case of PY not even a permanent one) doesn't mean that you can claim tax residency. If you do not stay 120 days in PY you are simply not a tax resident in that country.

You obviously have no idea how tax residency works. Tax residency basically awards a country the right to tax you for more than local income.
Whether you are tax resident in PY or not is largely irrelevant - it's the difference between PY being allowed to tax you 0% or not.
The million dollar question is whether some other country has a claim on your income. If there isn't, it doesn't matter. If there is, then that country probably won't care if you are also tax resident in PY or not.

PY is convenient for digital nomads because you can get residency quite easily and in most cases (banks etc.), you only have to prove residency, not tax residency. And even if you falsely claimed to be PY tax resident, as long as you don't claim treaty benefits, I can't imagine anything bad would happen.

 

[Dasilva]

Anyone has some directions to a lawyer who can arrange this temporary residency remotely ?

 

[Paul Tudor Jones]

You obviously have no idea how tax residency works. Tax residency basically awards a country the right to tax you for more than local income.
Whether you are tax resident in PY or not is largely irrelevant - it's the difference between PY being allowed to tax you 0% or not.
The million dollar question is whether some other country has a claim on your income. If there isn't, it doesn't matter. If there is, then that country probably won't care if you are also tax resident in PY or not.

PY is convenient for digital nomads because you can get residency quite easily and in most cases (banks etc.), you only have to prove residency, not tax residency. And even if you falsely claimed to be PY tax resident, as long as you don't claim treaty benefits, I can't imagine anything bad would happen.

What you write is correct but it all depends on your HOME country. In case your home country suspects you're not paying tax they can just ask you to show WHERE you are paying taxes. And if you can't show that you are tax resident elsewhere (be in Paraguay, UAE, etc) then they will surmise that you are still a tax resident of your home country and will proceed to tax you. If you're coming from an aggressive-tax-office Western country, prepare for possible trouble.

Getting a PY residency is just a way to obfuscate CRS and cause banks to report you to PY instead of your home country. As long as the banks believe you and don't 'accidentally' report you also to your home country, this will work. But if you have indicia of your home country (mobile number, address, etc) the banks may choose to report you also to your home country. Note that almost any bank nowadays asks for TIN - tax number. If you don't have a PY tax number this may cause a problem.

 

[backpacker]

Tax residency basically awards a country the right to tax you for more than local income.
Whether you are tax resident in PY or not is largely irrelevant - it's the difference between PY being allowed to tax you 0% or not.

Are you Pepe?
Your post is as absurd as his video

I strongly suggest you start learning the basics before posting such unqualified stuff.
Start with the following -> Tax residence - Wikipedia
May it enlighten you!

Note: If a person stays his/her entire life in a single country, has no foreign sourced income and earns just a local salary for work as an ordinary employee, he/she is a tax resident of that country. Tax residency has nothing to do with a distinguishment between local and foreign sourced income.

What you write is correct

Nope, read from the start of the thread and what it's all about.
This is not about CRS, this is just about tax residency.
@JustAnotherNomad claims that ->

Tax residency basically awards a country the right to tax you for more than local income.

... which is nonsense!

Please: Let's not confuse unaware people who stumble across this thread.

 

[meze99]

There are English speaking lawyers in PY who can get all the documents translated before you go there (and perhaps picking up a residence permit afterwards with PoA), but application is always done in person (it includes fingerprinting and checking passport stamps). So at least one personal visit is required. The prices range from 1k to 3k (youtube guys are always the most expensive and non reliable).
As far as banking is concerned, you have to use and trust US banks and keep most of your money in a US LLC, and then hope that IRS don't report you to your home country (there are many stories with non resident accounts blocked and a US bank wouldn't even discuss the matter over the phone). The guy on youtube said that he wouldn't recommend this route to anyone who earns more than 250k a year, I guess there are many risks involved without spending 120 days in PY, that include blackmail by PY cops/tax office clerks who got wise to your real tax residence.

 

[JustAnotherNomad]

Note: If a person stays his/her entire life in a single country, has no foreign sourced income and earns just a local salary for work as an ordinary employee, he/she is a tax resident of that country. Tax residency has nothing to do with a distinguishment between local and foreign sourced income.

Lol. Suddenly you mention "has no foreign sourced income" as a prerequisite for being tax resident of a country?
Tax residency is all about a country having permission to tax non-local income (such as capital gains). Because even without tax residency, pretty much all countries tax local employment income anyway.
You can go to Thailand for 2 months and work as a barkeeper - you won't be tax resident there, but you'll still have to pay taxes on your employment income.
You could also go to Thailand for 2 months and live off dividend income - you won't be tax resident either, but you also won't have to pay taxes because (obviously) Thailand has no right to tax your capital gains just because you spend 2 months there.
Now you could live in Thailand for 2 years, you would be considered tax resident, but the same dividend income might still be tax free if you fulfill the Thai rules (no remittance to Thailand for the first year etc.).
Tax residency also gives you access to tax treaty benefits.
That's basically it.

 

[backpacker]

Lol. Suddenly you mention "has no foreign sourced income" as a prerequisite for being tax resident of a country?

You definitely have a reading deficiency. Try it again and use stronger glasses.

You can go to Thailand for 2 months and work as a barkeeper - you won't be tax resident there, but you'll still have to pay taxes on your employment income.
You could also go to Thailand for 2 months and live off dividend income - you won't be tax resident either, but you also won't have to pay taxes because (obviously) Thailand has no right to tax your capital gains just because you spend 2 months there.
Now you could live in Thailand for 2 years, you would be considered tax resident, but the same dividend income might still be tax free if you fulfill the Thai rules (no remittance to Thailand for the first year etc.).
Tax residency also gives you access to tax treaty benefits.
That's basically it.

This is common sense. However, it has absolutely nothing to do with what I mentioned in post #5 nor does it have any connection with the OP's thread and PY.

So, stick to the topic!
Stop destroying this thread and do not confuse unaware readers.