Is it really possible to pay 0% tax as an Expat in Paraguay because of the territorial tax system? (Assuming you have a remote job from Switzerland/USA/EU or have a foreign company and you don't perform any work activities in Paraguay)
So this means the company that employs you, your tax residency, and the place where you work are in 3 separate countries and you don't pay tax in any of them? Is this really possible?
Why chose Paraguay for tax residency?
This is one of my doubts about the plan... With territorial tax systems, you only pay tax on locally-sourced income and not on foreign-sourced income. For a remote job or business, this usually means you can't perform work activities in the country with the territorial tax system. However, in Paraguay, you don't need to actually live there (only to be there once every 3rd year), so you could be a tax resident there, but perform all of your work while traveling in other countries. You just need to stay less than 6 months in those other countries to avoid triggering tax residency in those countries. So theoretically it should be possible to choose 3 new countries for traveling and work each year and stay 4 months in each to avoid triggering tax residency while being a tax resident in Paraguay and paying 0% taxes (because it's a territorial-based tax system and I didn't perform my work there).
Disclaimer: I'm not a tax professional or lawyer and have not tried implementing this strategy. I'm actually only posting this so people can pinpoint why this plan won't work or the drawbacks of the plan.
So this means the company that employs you, your tax residency, and the place where you work are in 3 separate countries and you don't pay tax in any of them? Is this really possible?
- You are employed by a company from USA/Switzerland/EU or have a foreign company in another country, but you don't pay tax there, because you are a tax resident of Paraguay
- You are a tax resident of Paraguay, but you don't pay your tax there because it's a territorial tax country and you perform all your work activities in other countries.
- You perform all your work in other countries, but you don't pay your taxes in any of those countries because you are not in those countries long enough to trigger tax residency (don't spend 6 months a year in those countries), and because you are a tax resident of Paraguay.
Here is the ultimate plan for saving up as much money as possible while traveling the world:
- Get a remote job in a country with high salaries (For example Switzerland or USA) OR form a foreign company
- I assume you have to pay 0% tax in the country of the company you work remotely for if you are a tax resident in Paraguay. Likewise, I assume you pay 0% tax in the country of your foreign company if you are a tax resident in Paraguay.
- Become a tax resident in Paraguay
- You only need to be in Paraguay once every third year to remain a permanent resident there
- IMPORTANT: Cut your ties with your current tax residency country. (Different how you do that depending on your country)
- Travel in 3rd world countries while working
- If you perform your work activities inside Paraguay, then you have to pay your tax there because it's territorial taxation. So by performing them in other countries you pay 0% tax in Paraguay.
- Avoid working/traveling in other countries than Paraguay for more than 6 months each year per country, to avoid triggering tax residency in those countries. For example, 3 countries with 4 months in each is a way to travel for a year without triggering tax residencies in any of those countries (but you still need Paraguay as your tax residency, to say where you are paying your tax).
- Get travel insurance (You don't want to be surprised by a $100.000 medical bill or personal liability)
Why chose Paraguay for tax residency?
- Territorial tax system, so I only have to pay tax on money earned within the country (So I can get a remote job from USA/Switzerland or form a foreign company and do all my work activities while being outside Paraguay and thereby pay 0% tax in total because the work activities were performed outside the country. No tax anywhere.)
- Not blacklisted as a tax haven, so it should be possible to open up a bank account in another country with good banking. So I could for example open up a Revolut- or Wise bank account and use one of those to receive money from a remote job in Switzerland/USA or receive money from a foreign company.
- You only have to physically be there once every 3rd year, so it's easy to travel while remaining a permanent resident in Paraguay. However, I can't figure out if that means you are still a tax resident if you are only there once every 3rd year, but that's what I assume...For most other countries you HAVE to stay there 183 days a year to be a tax resident (Except UAE or those citizenship by investment programs, but it's expensive to become/remain a tax resident in those places...)
This is one of my doubts about the plan... With territorial tax systems, you only pay tax on locally-sourced income and not on foreign-sourced income. For a remote job or business, this usually means you can't perform work activities in the country with the territorial tax system. However, in Paraguay, you don't need to actually live there (only to be there once every 3rd year), so you could be a tax resident there, but perform all of your work while traveling in other countries. You just need to stay less than 6 months in those other countries to avoid triggering tax residency in those countries. So theoretically it should be possible to choose 3 new countries for traveling and work each year and stay 4 months in each to avoid triggering tax residency while being a tax resident in Paraguay and paying 0% taxes (because it's a territorial-based tax system and I didn't perform my work there).
Disclaimer: I'm not a tax professional or lawyer and have not tried implementing this strategy. I'm actually only posting this so people can pinpoint why this plan won't work or the drawbacks of the plan.