Switzerland - Paraguay Tax Treaty: what its absence means for you

Do you live in Switzerland and are you drawn to Paraguay? You've probably looked for a tax treaty between Switzerland and Paraguay. Direct answer: it doesn't exist. Switzerland has signed over a hundred treaties to avoid double taxation, but Paraguay is not one of them. Should you be worried? Not really, and for some profiles it's even an excellent setup. Here's what this absence concretely changes.

Why the absence of a treaty is not a problem

A tax treaty serves to allocate the right to tax and to avoid double taxation. Without a treaty, each country applies its domestic law. However, Paraguayan domestic law is based on territoriality: foreign-sourced income of tax residents is not taxed in Paraguay (Law 6380/2019). So, there is almost nothing to arbitrate: Paraguay claims nothing on your non-Paraguayan income. Double taxation, in this sense, simply does not exist.

Effect 1: everything hinges on your departure from Switzerland

The real question is not the treaty, it's the end of your unlimited tax liability in Switzerland. As long as your tax domicile remains Swiss, the Confederation, your canton, and your municipality tax your worldwide income. A clean departure involves announcing your departure, the real transfer of your center of life, and a solid and documented Paraguayan tax resident status, supported by your cédula and RUC. This is precisely what our Paraguayan tax residency support covers.

Effect 2: what remains in Switzerland remains taxed in Switzerland, without treaty reimbursement

Here, the absence of a treaty has a real consequence that you need to be aware of: the 35% withholding tax levied on dividends and interest from Swiss sources is only recoverable for a non-resident via a treaty. Without a treaty, it becomes definitive. The same applies to real estate in Switzerland, which remains taxed locally. The strategy of our Swiss clients is therefore simple: before or after departure, move most assets to non-Swiss sources (foreign brokers, structures outside Switzerland), which then become foreign income not taxed in Paraguay.

Effect 3: the 2nd pillar, the major issue for departure outside Europe

This is often the decisive argument. By permanently leaving Switzerland for a non-EU/EFTA country like Paraguay, you can withdraw your entire 2nd pillar in capital. This withdrawal is subject to a cantonal withholding tax, generally moderate. And then? With a treaty, the country of residence may have a say. Without a treaty, and with a country of residence that does not tax foreign income, the story ends with the Swiss withholding tax: Paraguay adds nothing. For many future expatriates, this point alone largely finances their relocation.

Proving your status to the Swiss administration

Should the Swiss tax administration question the reality of your departure, your best asset is the Paraguayan tax residency certificate, issued by the DNIT once your residency, cédula, and RUC are in order. This document formalizes your tax affiliation with Paraguay.

In practice: 2 days in Asunción are enough

Obtaining Paraguayan residency is much simpler than moving to most destinations: a 2-working-day visit with our packages starting from €1,400, and we handle the entire process with you. For an overview, consult our guide to expatriation in Paraguay from A to Z, then contact us on WhatsApp at +595 971 362 302 to discuss your situation. Over 200 cases supported, 100% acceptance.