Short answer: for anyone tax resident in Spain, Paraguay solves what Portugal no longer solves, what Andorra charges for in investment and presence, and what Dubai charges for in distance and cost: a cheap residency in a country that taxes only what you earn inside it, with no wealth or inheritance tax, that is not on Spain’s tax-haven list and that since 14 October 2024 has a double tax treaty with Spain. The treaty is the change almost nobody has absorbed: it provides a referee (permanent home, centre of vital interests) to decide where you are resident, lowers withholding rates and sends pensions to the country of residence. But none of it works with a cédula in your pocket and a life in Valencia. This page is the exit manual: what the Spanish tax agency tests, what to do the year you leave, what you keep paying, where the exit tax bites and how Spanish citizens reach dual nationality without losing their passport.
Why Paraguay rather than Portugal, Andorra or Dubai
The people I see arrive in Paraguay from Spain fall into three groups: the freelancer or founder with clients abroad paying a 47% marginal rate plus social contributions and seeing no return; the retiree or rentier for whom the regional wealth and inheritance taxes weigh more than income tax; and the one who already left for somewhere else and it did not work. For all three, the comparison runs like this.
Portugal closed the NHR regime in 2024 and what remains (IFICI) is for narrow profiles; it still taxes worldwide income. Andorra requires an investment in the country, 90 or 183 days of presence depending on the permit, and a high cost of living; it works, but it is not cheap. Dubai has no income tax, but the visa is not tax residency, it is seven hours away, living costs double and it takes you far from everything Hispanic. Paraguay has a genuinely territorial system, residency costs about $3,000, Spanish is the language, there is a direct flight to Madrid and, since 2024, a treaty that orders the relationship with the Spanish tax agency. Its downsides are in living in Paraguay and they are not fiscal: heat, private healthcare, distance.
What the Spanish tax agency tests: article 9
Spain treats you as tax resident (article 9 of Law 35/2006 on personal income tax) if either of these holds:
- More than 183 days in Spanish territory in the calendar year. Sporadic absences count as days in Spain unless you prove tax residency in another country; hence the importance of the Paraguayan certificate.
- The core or base of your activities or economic interests is in Spain, directly or indirectly. And there is a presumption: if your non-separated spouse and dependent minor children habitually live in Spain, you are presumed to as well, unless proven otherwise.
Note there is no “and”. You can spend 100 days in Spain and remain resident if your company, home and family are there. And you can spend 200 days abroad across five countries and remain resident if you prove residency in none. That is why a move to Paraguay works when it is a move: home here, days here, activity from here, and family here or, if they do not come, the presumption rebutted with evidence.
The tax agency looks at what anyone would: where you sleep, where your home is, where your children go to school, where your doctor, gym, car and cards are, where you get paid. A change of residence is not declared: it is demonstrated.
The 2024 treaty: what changes
Until October 2024, if Spain and Paraguay both treated you as resident, there was no tie-breaker and the Spanish agency won by default. The Convention between the Kingdom of Spain and the Republic of Paraguay for the avoidance of double taxation, signed in Santo Domingo on 25 March 2023, published in the BOE on 29 July 2024 and in force since 14 October 2024, changes four things.
The tie-breaker (article 4). If you are resident under both countries’ law, it is decided in this order: where you have a permanent home at your disposal; if in both, where your centre of vital interests lies (closer personal and economic relations); if that cannot be determined, where you habitually live; then nationality; and finally mutual agreement between the administrations. The practical lesson: do not leave a home at your disposal in Spain (sell it, let it to third parties under a lease, or genuinely hand it over) and move your centre of interests to Paraguay. An empty flat in Madrid has sustained more Spanish residencies in audits than anything else.
Withholding rates (articles 10 to 12). Dividends at 10% (5% between companies holding at least 50%), interest at 5% and royalties at 5%. If you are a Paraguayan resident with a Spanish company paying dividends, withholding drops from the 19% domestic non-resident rate to the treaty’s 10%.
Pensions (article 17). Taxable only in the state of residence. With Paraguay’s territorial system, a private or social security pension of a Paraguayan resident is, in general, untaxed in both countries. Civil-service pensions are the exception (article 18): they stay in Spain.
The anti-abuse clause (article 26). A principal-purpose test: if one of the main purposes of an arrangement is to obtain the treaty benefit, it is denied. A reminder that the treaty protects the person who moves, not the one who pretends.
And an administrative consequence: the tax residency certificate you will need is the one the DNIT issues for treaty purposes, not a generic one.
The exit year, step by step
Spain does not split the year: you are resident or non-resident for the whole year under article 9. So the calendar matters.
- Pick the year and move before July. If in year X you spend more than 183 days in Spain, you are taxed for all of year X. A March move leaves margin; a September move condemns you to one more year.
- Obtain Paraguayan residency (temporary, or permanent by investment): requirements and timelines. Cédula, RUC where relevant, and the DNIT tax residency certificate for treaty purposes.
- Cut what sustains Spanish residency. Permanent home (sale, lease to third parties), deregistration from the municipal roll, registration as a resident at the Spanish consulate in Asunción, doctor, children’s school, gym, direct debits.
- Notify the tax agency. Form 030 to deregister as resident and record the new tax address abroad and, if you have Spanish income subject to withholding, form 247 so you are withheld as a non-resident. Appoint a representative if required.
- File the last resident return for the previous year and, where applicable, the last form 720 and the last wealth tax return under personal liability.
- Order the LLC and the banking so their operations sit outside Spain: contracts, invoicing, accounts. See US LLC taxes for non-residents.
- Keep evidence of everything: tickets, Paraguayan lease, utility bills, spending statements in Paraguay, consular registration, health insurance. The tax agency can ask four years later.
What you keep paying in Spain
Ceasing to be resident does not end your relationship with the Spanish tax agency. As a non-resident:
- Non-resident income tax (IRNR) on Spanish-source income: rents at 24% on gross with no deductible expenses as a non-EU resident; dividends from Spanish companies at the treaty’s 10%; real estate gains at 19% with the buyer’s 3% withholding.
- Wealth tax under real liability on assets located in Spain, above the regional threshold (and the large-fortunes tax where applicable).
- Property tax and local charges on whatever you keep there.
- Nothing on what you hold outside Spain: no form 720, no wealth tax under personal liability, no income tax on your LLC.
If you keep a Spanish company, it remains taxable there under corporate tax, and its effective management had better not travel with you, or it becomes Paraguayan resident.
Not sure how this applies to your case?
Eleven questions and we tell you whether the LLC fits, and if it does not, that too.
Exit tax and other departure traps
The exit tax (article 95 bis). If you have been resident in Spain for ten of the last fifteen years and hold shares worth more than €4 million, or a stake above 25% in an entity worth more than €1 million, you are taxed on the latent gain on leaving as if you had sold. It hits founders with a valuable company and investors with a large portfolio; not the freelancer with an LLC. Because Paraguay has a treaty with an exchange-of-information clause, a deferral can be requested if the move is temporary and you return within five years; if it is permanent, you pay. It is the trap to measure before applying for residency.
The quarantine that does not apply. Article 8.2 keeps people who move to a tax haven resident for five years. Paraguay is not on Order HFP/115/2023. No quarantine.
The split year that does not exist. Leave in October and you remain resident that year on days alone. If Paraguay issues a certificate for the same year, the treaty tie-breaker applies, resolved by home and centre of interests, not by dates.
The family that stays. The article 9 presumption can be rebutted with evidence, but it is a hard one. A spouse working in Spain and children in school there require a documented de facto separation or accepting that you remain resident.
The LLC run from Spain. If in the exit year you keep managing your LLC from Spain, the tax agency can treat it as Spanish resident through effective management. The exit is the person’s and the company’s.
Pensions and social security
For the Spanish retiree this is the most profitable chapter and the least known. The double tax treaty assigns private pensions and, as a general rule, social security pensions to the state of residence (article 17), and Paraguay does not tax an individual’s foreign-source income: the result is a pension received in full. Civil-service pensions are the exception and remain taxable in Spain. Confirm your specific case before deciding.
The Social Security Agreement between Spain and Paraguay (signed in 1998, in force since 1 March 2006, with an administrative arrangement from 2016) guarantees payment of the pension in Paraguay, aggregation of contribution periods in both countries and equal treatment. What it does not cover is healthcare: on ceasing to be resident in Spain you lose public cover unless you keep a special contribution agreement, and in Paraguay you need a prepaga from month one. A retiree moving should compare two figures: what is saved in income and wealth tax, and what private cover costs. It almost always pays; do the sum.
Dual nationality for Spanish citizens
The Paraguayan Constitution (article 148) allows naturalisation after three years of settled residence, adulthood, the exercise of a profession, trade, science, art or industry, and good conduct. The procedure is decided by the Supreme Court of Justice, requires proof of genuine ties (home, activity, presence) and includes a basic knowledge assessment; it is slow and discretionary, and in practice the three years count from permanent residency. Via the temporary route, five or six years from arrival; via investment, about four.
And the good news for Spanish citizens: the 1959 dual-nationality convention between Spain and Paraguay, article 11.3 of the Spanish Constitution and article 24 of the Civil Code mean that acquiring Paraguayan nationality does not cost the Spanish one. Paraguay in turn admits multiple nationality by treaty (article 149 of its Constitution, regulated by Law 7052/2023). The Paraguayan passport gives full mobility within Mercosur and visa-free entry to more than 140 destinations. It is not a replacement for an EU passport; it is a second citizenship in a country where you already live. Nationals of other countries should check their own rules on multiple nationality.
Three profiles leaving Spain
The agency with an LLC. Marta invoices €200,000 to European clients through a Wyoming LLC and paid Spanish tax on nearly all of it. She moves to Asunción in February, rents in Villa Morra, registers at the consulate, lets her flat to third parties and files form 030. She works from Paraguay for clients abroad: the DNIT treats a service rendered from Paraguay as Paraguayan-source, so her income falls under the IRP at 8–10% on what is attributed to her. From a 47% marginal rate to single digits, with a treaty and paperwork. The IRP detail is in tax residency in Paraguay.
The retiree with wealth. Luis, 66, a €2,800 pension and €1.8 million between flats and funds, pays income tax, regional wealth tax and plans for inheritance tax. He sells his main home, lets the other flats to third parties, settles in Encarnación and takes out a prepaga. Under article 17 the pension stops being taxed in Spain and is not taxed in Paraguay; wealth outside Spain falls out of scope; the Spanish flats remain under non-resident income tax and wealth tax under real liability. He swaps taxes for health cover and a direct flight twice a year.
The founder with a company. Andrés holds 60% of an SL valued at €3 million. First, the exit tax: above 25% and €1 million, resident for more than ten years, so he is taxed on the latent gain on leaving unless a deferral applies for a temporary move. He decides to sell first, or accept the cost, or not to go; all three are legitimate, and the worst is finding out in an audit. With the Investor Pass he also gets direct permanent residency and places $200,000 in financial instruments for two years.
How we do it at Cheq
We start with Spain, not Paraguay: we measure article 9, the exit tax and what sustains your current residency. Then we design the Paraguayan route with our of-counsel legal partners in Asunción, process the file and the treaty-purposes certificate, and order the LLC and the banking so they sit where you will. And we tell you when it does not pay, which also happens.
In short
- The Spanish tax agency decides under article 9: 183 days, centre of economic interests, family presumption. The cédula does not change that.
- Since 14 October 2024 there is a treaty: tie-breaker by permanent home and centre of vital interests, 5–10% withholding, pensions in the state of residence, anti-abuse clause.
- No quarantine (Paraguay is not a listed haven), but an exit tax if you hold shares above €4 million or more than 25% of a company worth over €1 million.
- The exit year: move before July, form 030, consular registration, Paraguayan certificate for treaty purposes, evidence of everything.
- Three years of permanent residency for citizenship; Spanish citizens keep their passport.
Explore the full guide
Frequently asked questions
Does the Paraguayan cédula end my Spanish income tax?
No. You stop paying IRPF when you cease to be tax resident in Spain under article 9 of the income tax law: fewer than 183 days, no core of economic interests in Spain, and no dependent spouse and minor children living there. And if Paraguay and Spain both claim you, article 4 of the treaty decides: permanent home and centre of vital interests. The cédula is one piece of evidence, not the evidence.
Do I need the Paraguayan tax residency certificate?
Yes, and since 2024 it must be a residence certificate "for treaty purposes", issued by the DNIT under General Resolution 65/2020 with a RUC and cédula. It is what the Spanish tax agency requires in order not to count sporadic absences as days in Spain and to apply the treaty. Without it, days abroad do not count in your favour.
Does the five-year tax quarantine apply?
No. The quarantine in article 8.2 of the income tax law only triggers on a move to a jurisdiction on the tax-haven list (Order HFP/115/2023). Paraguay is not on it and now has a treaty with Spain with an exchange-of-information clause. You remain taxable for the whole year of departure if you met article 9 that year, but not five years more.
Can I keep a flat in Spain and be resident in Paraguay?
You can keep a flat in Spain; what you cannot do is keep a permanent home at your disposal there and expect the treaty to place you in Paraguay. A flat let to third parties under a lease is an asset, not a home at your disposal. You will pay non-resident income tax on the rent (24% on gross, no deductions, as a non-EU resident) and wealth tax on Spanish assets above the regional threshold.
What happens to my pension if I retire to Paraguay?
Article 17 of the treaty assigns pensions to the state of residence, and Paraguay does not tax an individual's foreign-source income; for a private or social security pension the general result is no tax in either country. Civil-service pensions remain taxable in Spain (article 18). The 1998 social security agreement also lets you draw the pension in Paraguay and aggregate contribution periods in both countries.
Do Spanish citizens lose their nationality on naturalising in Paraguay?
No. Paraguay is an Ibero-American country with a 1959 dual-nationality convention; article 11.3 of the Spanish Constitution and article 24 of the Civil Code prevent the loss. With three years of permanent residency, an occupation and good conduct you can apply for naturalisation before the Supreme Court (article 148 of the Paraguayan Constitution), which is slow and discretionary but real.