Moving from France to Paraguay swaps a top combined burden of roughly 49% on income, 30% on portfolio gains and dividends (PFU plus CEHR), 1.5% IFI on French real estate above €1.3M, and up to 60% on inheritance for a 0% line on every cross-border flow under Paraguay’s pure territorial regime — for total residency cost under USD 4,000. The structural problem is not the destination side, which is mechanically the cheapest credible second residency in the world; it is that there is no bilateral double-tax treaty in force between France and Paraguay, so there is no article 4 OECD tie-breaker to retreat to, and France’s article 167 bis CGI exit tax falls into its harshest deferral configuration because Paraguay has no bilateral assistance-in-recovery agreement with France. Paraguay is not on France’s États et territoires non coopératifs (ETNC) list, so the punitive 75% rates that catch France-to-Panama movers do not apply — but the treaty void creates a different set of traps, principally around the foyer rule, the cash-up-front exit tax, and the absence of any tie-breaker if the DGFiP later argues you never validly ceased residency. This guide walks through the article 4 B residency tests, the 167 bis mechanics in their no-treaty configuration, the Independent Means Visa side, and the 6–12 month sequence that survives DGFiP audit.
The Tax Delta at a Glance
| France (current) | Paraguay (after move) | |
|---|---|---|
| Personal income tax | 0% to 45% progressive (barème IR) | 0% on foreign-source income; 8–10% on Paraguay-source only |
| Contribution exceptionnelle sur les hauts revenus (CEHR) | 3–4% above €250K / €500K of revenu fiscal de référence | 0% |
| Capital gains / dividends | 30% Prélèvement Forfaitaire Unique (12.8% IR + 17.2% CSG/CRDS) | 0% on foreign capital gains and dividends; 8–15% on Paraguay-source |
| Wealth tax (real estate — IFI) | 0.5%–1.5% above €1.3M of worldwide property | 0% (IFI continues on retained French real estate) |
| Inheritance / gift tax | 5%–60% (45% top direct line, 60% non-relatives) | 0% — Paraguay levies no inheritance, gift or wealth tax |
| Worldwide vs territorial | Worldwide for residents under article 4 A CGI | Strictly territorial — only Paraguay-source income taxed |
| Days/year required | None statutory; foyer + faisceau d’indices | None on the temporary card; one visit per 3 years on permanent residency |
| Effective rate (typical entrepreneur) | ~49% top marginal IR + CEHR; 30% on dividends/CGT | ~0% on foreign income |
The Paraguay column applies in full only after both legs are in place: cessation of French residence under article 4 B CGI and establishment of Paraguayan residency through the Independent Means Visa with issuance of the cédula and the RUC (taxpayer ID). Until cessation is documented, the Direction Générale des Finances Publiques (DGFiP) continues to tax you on worldwide income.
Step-by-Step Move
Step 1: Confirm you can legally cease French tax residency under article 4 B CGI
French tax residency is decided by article 4 B of the Code général des impôts. Meeting any one of four alternative tests makes you French resident on worldwide income:
- Foyer — your habitual place of dwelling and that of your family (spouse and minor children). The Conseil d’État has consistently held the foyer to follow the family: a spouse and children continuing in Paris keep France your foyer even with zero personal days in France.
- Lieu de séjour principal — the country where you spend the most days, applied when foyer is inconclusive. There is no statutory 183-day threshold; 4–6 months can be enough if no other country has more.
- Activité professionnelle principale — where your principal professional activity is carried out, judged by time and revenue.
- Centre des intérêts économiques — where your principal investments, business management, and source of income sit.
There is no quantified day-count formula equivalent to the UK Statutory Residence Test. The DGFiP applies a faisceau d’indices. The biggest practical break point on the France-to-Paraguay corridor is the foyer rule combined with the lack of a bilateral treaty: Paraguay imposes virtually no minimum stay to keep residency, so it is tempting to leave the family in France while the principal moves to Asunción for tax purposes. That arrangement fails article 4 B on day one — and because there is no France-Paraguay DTA, there is no treaty tie-breaker to argue your way out of the resulting dual-residency claim. France wins by default.
Mechanical sequence to establish a clean break: terminate the French principal lease (or sell the residence, or convert to an arm’s-length 12+ month tenancy to a non-family party), enrol the children in a Paraguayan or international school in Asunción, file the avis de départ with the Centre des Finances Publiques on form 2042 marked “départ à l’étranger” with a Paraguayan address, close the Plan d’Épargne en Actions (closed de jure on departure), and physically relocate. Without a clean foyer break, every article 167 bis manoeuvre below is moot.
Step 2: Plan around article 167 bis CGI in its no-treaty configuration
France’s exit tax under article 167 bis CGI is the dominant single cost for founders and investors leaving France. The trigger conditions are unchanged regardless of destination:
- French tax resident for at least 6 of the 10 years preceding departure, and
- On the date of departure, holdings of either shareholdings worth more than €800,000 in aggregate, or a 50%+ stake in the droits aux bénéfices sociaux of any single company.
If either threshold is met, the day French residency ceases the unrealised gains on those qualifying shareholdings are deemed realised. The deemed gain is taxed at the PFU rate of 30% (12.8% IR + 17.2% social charges — CSG, CRDS, prélèvement de solidarité), uplifted by CEHR 3–4% if total revenu fiscal de référence exceeds €250,000 (single) / €500,000 (couple). Top-bracket exiters typically face ~32–34% on the deemed gain.
The deferral architecture is where Paraguay differs sharply from a Cyprus or Portugal move:
- EU/EEA moves get automatic interest-free deferral with no security required.
- Non-EU/EEA moves to a state with which France has both a tax-information-exchange instrument and an administrative-recovery assistance treaty can defer subject to posting a sûreté (typically a bank guarantee or pledge of the shares).
- Moves to a state lacking those mechanisms — and France and Paraguay have no bilateral DTA in force, no bilateral exchange-of-information agreement, and no bilateral assistance-in-recovery instrument — fall outside the ordinary deferral track. Paraguay is a signatory to the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters (since 2018), which provides a multilateral basis for some cooperation, but the DGFiP’s deferral doctrine is built around bilateral assistance-in-recovery, which does not exist here. The exit tax is in principle payable up-front in cash on departure.
This is structurally the same outcome as the Panama corridor, but the legal route there is different: Panama is on the ETNC list, while Paraguay is not — Paraguay simply lacks the bilateral framework that ordinary deferral presumes.
Practical mitigation strategies that work specifically on the France-to-Paraguay corridor:
- Stay under the €800,000 / 50% thresholds. A founder under both can leave France with no exit-tax exposure on portfolio shareholdings at all. Pre-departure dilution, gifts to family ahead of departure (subject to the 6-year donation lookback under article 784 CGI), or partial sales can drop you under the thresholds.
- Sequence through an EU/EEA waystation. Many France-to-Paraguay movers physically relocate first to Portugal, Cyprus or Malta — securing automatic 167 bis deferral with no sûreté — and only later move on to Paraguay once the deferral is in place and the immediate French CGT exposure is neutralised. This requires careful structuring under the abuse-of-law doctrine (article L64 LPF); a genuine 12–24 month residency in the waystation, with substance, is the minimum.
- Crystallise gains pre-departure under PFU. If the deemed disposal will trigger anyway, accelerating actual sales while still French-resident can be neutral or slightly favourable, since the 30% PFU rate applies in both timings — but it converts the dry charge into cash that funds the move.
- The 15-year extinguishment under article 167 bis VII bis CGI still applies in principle — if you do not actually dispose of the deferred shares within 15 years of departure, the deferred exit tax extinguishes — but where deferral is unavailable on day one, the extinguishment never starts running.
Step 3: Establish Paraguayan tax residency
Paraguay is the cleanest residency regime in the Americas to establish, with the major caveat that an immigration card is not automatically a tax-residency document. The principal route for French nationals is the:
- Independent Means Visa (Visa de Permanencia — passive-income track). Approximately USD 1,300/month of demonstrable passive income (set in Paraguayan minimum-wage units / jornales and indexed annually), or alternatively a bank deposit of roughly USD 5,000 in a Paraguayan bank. Following the 2022 reform, applicants receive a temporary residency card valid 2 years, then convert to permanent residency after 21–24 months in good standing. Once permanent, you must visit Paraguay at least once every three years.
The full Paraguay-side mechanics, document apostille requirements, alternative Investor Visa, and Mercosur tracks are in Tax-Free Residency in Paraguay.
Critically, the cédula alone does not make you Paraguayan tax resident in the way the DGFiP will recognise. You also need:
- The RUC (Registro Único de Contribuyentes), the Paraguayan taxpayer identification number issued by the Subsecretaría de Estado de Tributación (SET). The RUC is the document that signals you are tax-registered in Paraguay and is what banks abroad will request on CRS self-certification. France treats registration as a taxpayer in another state plus genuine substance as the threshold for recognising Paraguayan residency — and in the absence of a treaty residency certificate (Paraguay does not issue tax-residency certificates in the OECD-standard form because there is no DTA to apply them under), the RUC plus substance file is what you have to work with.
Step 4: Document the break — without a treaty tie-breaker to fall back on
Because France and Paraguay have no bilateral double tax convention, there is no article 4 OECD tie-breaker (permanent home → centre of vital interests → habitual abode → nationality) to resolve a dual-residency dispute. The DGFiP applies article 4 B unilaterally; Paraguay applies its own residency rules unilaterally. If both countries claim you, the only resolution is that France enforces its claim under its own domestic law, and you owe French tax. There is no mutual agreement procedure available.
This makes the documentary file unusually important. Build it contemporaneously: avis de départ with the Asunción address, lease termination or sale contract for the French residence, EDF / Engie / Orange contract closures, résiliation of carte Vitale (Sécurité sociale) with attestation, school deregistrations, French bank accounts moved to non-resident profile, brokerage account closed off the PEA. On the Paraguay side: cédula, RUC certificate, registered tenancy or property title, Paraguayan utility bills, school enrolments, Paraguayan bank account statements, evidence of physical presence (boarding passes, immigration stamps).
In the absence of treaty cover, physical presence in Paraguay matters more here than in any other corridor. You cannot rely on a 60-day Cypriot non-dom rule or a UAE 90-day FTA certificate to neutralise foyer arguments — Paraguay has no equivalent. Plan to spend the majority of your days in Paraguay in the first two tax years post-departure, build a real home, and document it. The DGFiP routinely opens audits 2–3 years after departure of HNW exiters; the strength of this file decides the outcome.
Step 5: First-year compliance — what a no-treaty corridor costs in withholdings
In the year of departure you file a final déclaration des revenus (formulaire 2042 with annex 2042-NR) marked départ à l’étranger: worldwide income for the period of French residency (1 January to departure date), French-source income only thereafter. Article 167 bis is filed on formulaire 2074-ETD (and 2074-ETSL for any annual deferral monitoring), with the exit-tax payment evidenced or, where deferral is granted exceptionally, the sûreté arrangement documented.
After departure, four trailing nexus issues continue:
- IFI on French real estate. If you retain French real property and your French real-estate net worth exceeds €1.3M, the Impôt sur la Fortune Immobilière continues annually post-departure on French-situated real estate. A Paris pied-à-terre or a Provence house remains within scope regardless of new residency.
- Withholding on French-source dividends, interest and royalties. Standard French domestic withholding under article 119 bis CGI is 12.8% on dividends to non-residents. Without a France-Paraguay treaty, there is no treaty rate to step the withholding down further — the 12.8% domestic rate is what applies (which is, in fairness, lower than the 15%–25% you’d pay under many DTAs). Critically, because Paraguay is not on the ETNC list, the punitive 75% withholding under article 187 CGI does not apply.
- Article 244 bis B on substantial holdings. Capital gains realised by a non-resident on a substantial holding (25%+) in a French company are subject to French income tax at 12.8% (uplifted to 75% only if the seller is ETNC-resident — not applicable to Paraguay). For sub-substantial holdings, France-source gains are generally exempt for non-residents under article 244 bis A treatment, except for real-estate-rich entities.
- CSG/CRDS / prélèvement de solidarité. Unlike EEA-resident former French nationals, who can claim the reduced 7.5% prélèvement de solidarité on French rental income, Paraguay-resident former French nationals pay the full 17.2% social charges on residual French-source flows, because the EU/EEA carve-out under regulation 883/2004 does not extend to Paraguay.
Paraguayan compliance is light by comparison. There is no requirement to file a Paraguayan return for foreign-source income — under the territorial system, foreign income is simply outside the tax net. Paraguay-source income (a salary, rental income on Paraguayan property, profits of a local business) is taxed progressively at 8–10% on the Personal Income Tax (IRP), capped at 10%.
Cost & Timeline
| Phase | Cost (USD) | Time |
|---|---|---|
| French tax planning + article 167 bis modelling | $8,000–$25,000 | 2–6 months |
| Article 167 bis exit-tax assessment (founders only) | Up to ~32–34% × deemed gain | Filed with departure return |
| Final déclaration des revenus + 2074-ETD | $1,500–$5,000 | Filed by mid-May of following year |
| Paraguay Independent Means Visa fees + apostilles + counsel | $1,500–$4,000 | 4–8 months |
| Paraguay government fees + cédula | $300–$550 | At in-country filing |
| RUC issuance and tax registration | $200–$500 | Post-cédula |
| Move + setup (Asunción lease, banking) | $3,000–$8,000 | 1–2 months |
| IFI monitoring (if French real estate retained) | $2,000–$6,000 / year | Ongoing |
| Total year-1 effective cost (no 167 bis in scope) | USD 14,000–45,000 | 6–12 months |
The dominant cost line for taxpayers in scope of article 167 bis is almost always the deemed-disposal charge itself. For a founder with €5M of accrued gain on shareholdings worth €8M at departure, the deemed-disposal bill is roughly €5M × ~32% ≈ €1.6M, payable up-front in cash on the Paraguay corridor unless deferral is exceptionally granted. For movers below the 167 bis thresholds, Paraguay is by some distance the cheapest fully tax-free destination France can be exited to.
Treaty Considerations
There is no bilateral double-tax convention in force between France and Paraguay. The 2026 list of French DTAs published by the DGFiP includes Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Panama, Trinidad and Tobago, Uruguay and Venezuela in Latin America — Paraguay is conspicuously absent. There is also no bilateral tax-information-exchange agreement, and no bilateral assistance-in-recovery instrument.
What does exist: Paraguay is a signatory to the OECD/Council of Europe Multilateral Convention on Mutual Administrative Assistance in Tax Matters (in force for Paraguay since 2018), which provides a multilateral framework for limited information exchange and assistance-in-recovery between participating states. France is also a signatory. In principle, this multilateral instrument can be invoked to support a 167 bis deferral, but the DGFiP’s published doctrine (BOI-RPPM-PVBMI-50) is built around bilateral recognition, and the practical record on Paraguay-corridor deferrals is sparse. Most practitioners treat the corridor as cash-up-front by default and negotiate exceptions case by case.
The absence of a DTA has three structural consequences. First, no article 4 tie-breaker: dual-residency disputes resolve in France’s favour by domestic law alone. Second, no reduced treaty rates on French-source dividends, interest or royalties — but no ETNC uplift either, so the 12.8% domestic rate applies cleanly. Third, no mutual agreement procedure: if the DGFiP and the SET disagree on residency or source, there is no competent-authority forum to resolve the conflict.
Common Mistakes
- Leaving the family at the lycée international while you “live” in Asunción. Article 4 B foyer treats the family’s principal home as yours — minor children at school in Paris keep you French resident even with zero personal presence in France, and there is no treaty tie-breaker to argue your way out.
- Assuming the exit tax can be deferred on standard non-EEA terms. The absence of a France-Paraguay assistance-in-recovery instrument moves you out of the ordinary 167 bis deferral track. Cash-up-front is the default, the same as the Panama corridor but for different legal reasons.
- Treating the cédula as a tax-residency certificate. It isn’t. Without the RUC and a substance file, the DGFiP can argue you never validly became Paraguayan tax-resident — and the absence of a DTA leaves you no treaty cover.
- Underestimating the no-treaty exposure on French-source flows. While the 75% ETNC penalty doesn’t apply, the absence of treaty step-downs means 12.8% domestic withholding on dividends is the floor — there is no 5% participation rate or 0% exemption to argue for.
- Relying on the 15-year extinguishment without securing deferral. The clock under article 167 bis VII bis only starts when deferral is granted. If the exit tax was paid in cash, there is nothing to extinguish.
- Failing to close the PEA / PEA-PME affirmatively. Both close de jure on the day French residency ceases, with the 5-year tax preference lost retroactively if held under five years. Close them affirmatively pre-departure to avoid retrospective assessment.
FAQ
Will I still have to file a French tax return after moving to Paraguay?
For the year of departure — yes, a final déclaration des revenus (formulaire 2042 plus 2042-NR) covering worldwide income up to the departure date and French-source income thereafter, plus the 2074-ETD for any article 167 bis exit-tax election. After that, only if you retain French-source income (French real estate, French-source dividends, French director’s fees), filed on form 2042-NR.
How much is the article 167 bis exit tax in practice on a France-to-Paraguay move?
For taxpayers in scope (French resident 6 of last 10 years and either €800K+ portfolio holdings or 50%+ stake), the deemed gain is taxed at PFU 30% plus CEHR 3–4% — ~32–34% of unrealised gain at departure. On the Paraguay corridor, ordinary deferral is generally not available because France and Paraguay have no bilateral assistance-in-recovery framework, so cash payment on departure is the default expectation.
Why is Paraguay easier than Panama on the French exit if both are cash-up-front?
Panama is on France’s ETNC list, which triggers the 75% rate under article 244 bis B on substantial-holding gains, the 75% withholding under article 187 CGI on passive flows, and tighter scrutiny of all post-departure transactions. Paraguay is not on the ETNC list, so none of those punitive provisions apply. The cash-up-front 167 bis posture is the same, but the post-departure environment is materially cleaner on Paraguay.
Is there really no tax treaty between France and Paraguay?
Correct. As of 2026, there is no bilateral double-tax convention in force between France and Paraguay, no bilateral exchange-of-information agreement, and no bilateral assistance-in-recovery treaty. Both countries are signatories to the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which provides a limited multilateral framework for cooperation, but no article 4 tie-breaker exists.
Can I keep my French SAS shares, bank accounts, and Paris apartment?
French bank accounts can be retained under non-resident profile. PEA / PEA-PME wrappers must be closed. SAS / SARL shares above the article 167 bis thresholds trigger the exit tax at departure. A retained Paris apartment that remains “available” can re-establish foyer if the family uses it — convert to an arm’s-length 12+ month tenancy (not to family) before departure. IFI continues annually on French real estate above €1.3M.
How long does the full move take?
Realistic timeline 6–12 months from first planning meeting to issued cédula and RUC. The critical path is article 167 bis structuring (valuation report, sûreté if attempted) plus the in-person filing in Asunción for the Independent Means Visa, then the 21–24 month wait for conversion to permanent residency. The temporary card grants full tax-residency status from issuance — you do not need to wait for permanence.
What if my home country disputes the exit?
Without a DTA there is no mutual agreement procedure. If the DGFiP issues a proposition de rectification arguing you remained French-resident under article 4 B, the only forum is the French administrative courts (Tribunal administratif → Cour administrative d’appel → Conseil d’État). The contemporaneous documentation file built in Step 4 is what carries the case.
Next Step
For the full destination-side breakdown, see Tax-Free Residency in Paraguay. For the broader exit framework across all major origin countries, see How to Legally Exit a High-Tax Country. For the EU/EEA waystation alternative that secures automatic 167 bis deferral on day one, compare France to Portugal; for the other Latin American territorial-tax destination with a treaty in force, compare France to Panama (different in that Panama is ETNC-listed but a DTA exists).
Book a free consultation — we specialize in France-to-Paraguay relocations and 167 bis structuring on no-treaty corridors specifically.
Last updated: 2026-04-27
Sources:
– Bulletin Officiel des Finances Publiques — BOI-RPPM-PVBMI-50 (article 167 bis CGI) (https://bofip.impots.gouv.fr)
– Code général des impôts, articles 4 A, 4 B, 119 bis, 167 bis, 187, 244 bis B (https://www.legifrance.gouv.fr)
– DGFiP — Liste des conventions fiscales internationales (https://www.impots.gouv.fr/international-particulier/conventions-internationales)
– OECD — Multilateral Convention on Mutual Administrative Assistance in Tax Matters, Paraguay signatory status (https://www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm)
– Paraguay Subsecretaría de Estado de Tributación (SET) — IRP and territorial regime (https://www.set.gov.py)
– Paraguay Dirección General de Migraciones — Independent Means Visa (https://www.migraciones.gov.py)