Leaving Canada or the UK for Paraguay: Tax Checklist

Paraguayan residency and a cédula (national ID card) establish your immigration status in Paraguay, but they do not by themselves end tax residency in Canada or the UK. Each country applies its own tests, so the exit has to be planned and documented on both sides.

A common mistake among Canadians and Britons is treating the move as one project. It is two: becoming resident in Paraguay, and ceasing to be resident at home. The first is largely an administrative process. The second turns on facts, timing and evidence that only your home tax authority can ultimately assess.

Why a Paraguayan cédula alone doesn't end home-country tax residency

Immigration residency vs. tax residency: two different questions

Law No. 6984/2022 on Migration replaced Law 978/1996. It sets a path from temporary residency (up to 2 years) to permanent residency, administered by the Dirección General de Migraciones (DGM). The cédula is then issued by the Identification Department of the National Police. These documents answer one question: are you lawfully resident in Paraguay?

Tax residency asks something else: which country has the right to tax you on your worldwide income? Canada and the UK each answer that with their own rules, applied to your real-life connections. A foreign ID card can be part of the picture, but it does not switch off your old residency.

Paraguay's territorial approach (Law 6380/2019) and its nuances

Law No. 6380/2019 has applied since 2020. As a general rule, it follows a territorial principle for income tax, so Paraguayan-source income is taxed. The main reference rates are:

• IRE (corporate income tax): 10%.
• VAT: 10% general, 5% for certain goods.
• IRP (personal income tax): progressive scale of up to 10%.
• IDU (dividends and profits): 8% for residents and 15% for non-residents.

The nuance matters: certain foreign-source capital income may receive specific treatment under the IRP. Do not read "territorial" as "zero tax on everything earned abroad." Paraguay's approach also does not change what Canada or the UK may claim. Tax administration sits with the DNIT, created by Law No. 7143/2023, which merged the former SET and the National Customs Directorate and runs the Marangatu system.

Leaving Canada: residential ties and departure concepts

Primary vs. secondary residential ties

The CRA looks at your residential ties to Canada. Primary ties are the strongest: a home you keep available, a spouse or common-law partner, and dependants. Secondary ties are lighter but still count together. They include other property, bank accounts and credit cards, provincial health coverage, a driver's licence, memberships and similar links.

The practical lesson: a Paraguayan cédula carries little weight if you still keep a Canadian home, an active provincial health card and a household there. Unwinding ties is a deliberate, documented process, and the right pace depends on your family and assets.

Deemed disposition ("departure tax"): who should look at it

When someone ceases Canadian residence, certain assets may be treated for tax purposes as if sold at market value. This is what people call departure tax. It is most relevant if you hold sizable investment portfolios, crypto or shares in a business. It can create a tax bill without any actual sale, so model it with a Canadian cross-border advisor before you leave, not after.

Ongoing Canadian-source income and reporting

Leaving does not necessarily cut every Canadian tax link. Canadian-source income, such as rental income, certain pensions or investment income, may remain taxable in Canada under non-resident rules. Follow your advisor's guidance on notifying the CRA and on filings for the year you leave. Staying fully compliant, including with international information-sharing, is part of the plan.

Leaving the UK: the Statutory Residence Test concept

How the SRT works in principle

HMRC uses the Statutory Residence Test (SRT) to decide UK residence for a tax year. It works in three layers:

• Automatic tests that can settle the question one way.
• Automatic tests that can settle it the other way.
• If neither is conclusive, a "sufficient ties" test.

The ties generally relate to family, accommodation, work and time spent in the UK in this and prior years. The more ties you keep, the less time you can spend in the UK before you remain resident.

A foreign residency card is not one of the tests. Your tax status follows your facts, so keeping a UK home available or family in the UK can count against you regardless of what Paraguay has issued.

Split-year treatment and the year of departure

The year you leave is often the trickiest. Split-year treatment can divide the tax year into a UK part and an overseas part when specific conditions are met. It is not automatic, and whether it applies depends on your circumstances and how you leave. A UK adviser should review your situation before you travel.

UK-source income, property and pensions

UK-source income, such as rent on a UK property or certain pension payments, can remain within the UK tax net after departure. Treat each income stream individually, because the answer for a state pension, a private pension and a rental flat may differ.

Tax treaties: check, don't assume

Treaties can resolve cases where two countries both claim you as resident, using tie-breaker rules. Do not assume a treaty exists with Paraguay, or that it would work the way you expect. Ask a qualified professional whether any treaty applies to your home country and, if so, how its tie-breakers would operate on your facts.

The logical order of steps: a checklist

Sequence matters because several steps depend on advice you should receive first. The table below is conceptual and contains no thresholds, fees or form numbers. Your advisors will supply those.

Setting up the Paraguayan side: residency, cédula, RUC and a documented address

The Paraguayan sequence is straightforward in principle:

1. Apply for temporary residency with the DGM.
2. Obtain the cédula.
3. Register for the RUC (Paraguay's taxpayer ID) with the DNIT, if your activity or plans require one.

For a deeper walk-through, see our complete guide to Paraguay residency under Law 6984/2022 and our guide to the RUC and the DNIT.

Why a real lease agreement in Asunción's Corporate Axis helps

Paraguayan procedures and financial institutions keep asking for an address. Banks and fintechs need it for KYC, and Paraguayan offices need it for residency and the RUC. Utility bills for rented apartments are usually in the owner's or property manager's name, so a lease agreement and an address certificate are commonly used instead. Each bank or entity decides whether to accept them.

Know the limits of a documented address. It is not accommodation. For CRA or HMRC purposes, what counts is where you actually live and spend your time, so keep separate records of your real living arrangements.

At paraguayaddress.com, operated by Eje Corporativo, we provide a legal and tax address in Asunción. It is backed by a 12-month lease agreement on a real apartment in the Eje Corporativo (Corporate Axis) of Asunción, plus a signed address certificate, issued remotely in about 48 hours. We assign the unit. The service does not include residential use, keys or utility bills in your name. See the plans. If you also need help with residency through collaborating professionals, you can request a quote via our custom services page.

Records to keep: building your evidence file

If a tax authority questions your residence, the person with the better file usually has the easier conversation. Keep these in one organized place:

• Travel history: passport stamps, tickets and a simple log of where you spent time.
• Where you actually live: rental contracts, long-stay invoices or other proof of your real accommodation abroad.
• Home-country housing: proof that your home-country residence was sold, terminated or rented out.
• Paraguayan status: DGM resolutions, the cédula, your DNIT/Marangatu registration, and your Asunción address documents.
• Closure of home ties: changes to health coverage, licence, accounts and address.
• Correspondence: advisor letters, bank messages and any exchange with the CRA or HMRC.

Common mistakes Canadians and Britons make

• Assuming the cédula ends home residency.
• Keeping a home, family base or active health coverage while claiming to have left.
• Treating a documented address as proof of where you actually live.
• Leaving the deemed disposition review until after departure (Canada).
• Planning travel days without checking how they interact with ties (UK).
• Treating "territorial taxation" as "no tax on any foreign income."
• Assuming a treaty exists and will resolve everything.
• Skipping professional advice in either country.
• For US citizens: different rules apply, because the US taxes on citizenship and moving does not end those obligations.

This content is informational and does not constitute legal or tax advice; consult licensed professionals in Paraguay and in Canada or the UK.