The short answer
Paraguay if you want the shortest and cheapest path to permanent status and a second passport, without locking up capital. Panama if you want to live in a dollar economy with a real airline hub, developed banks and the option of a private interest foundation to hold your assets. The rest is detail, unless you still have ties in the EU: in that case the blacklist line below outweighs everything else.
- ✓ Permanent residency is the status you apply for from day one
- ✓ No investment and no 200,000 USD deposit required
- ✓ Citizenship possible after 3 years of permanent residency
- ✓ Territorial: 0% on foreign income, around 10% on local income
- ✓ Not on the EU or the French non-cooperative lists
- ✓ Very low cost of living, cédula and RUC obtained in one trip
- ✗ 2026 reform (DNM resolution 407): a solvent file is required, the "zero RUC" route is over
- ✗ Guaraní currency, local banking, fewer options for large portfolios
- ✓ US dollar economy, no local currency risk
- ✓ Tocumen hub, direct connections to Europe and the region
- ✓ Developed banking sector, used to non-residents
- ✓ Private interest foundation available to hold your company
- ✓ Broad family coverage, and a tax treaty with France
- ✗ Economic tie required: real estate ~200,000 USD, deposit ~200,000 USD, or a Panamanian company
- ✗ Permanent after roughly 2 to 2.5 years, citizenship at 5 years
- ✗ On the EU blacklist (Annex I, February 2026 update)
- ✗ Cost of living well above Asunción
Line by line
| Paraguay | Panama | |
|---|---|---|
| Tax on foreign income | ✓ 0% | ✓ 0% |
| Local-source income | Around 10% | Panamanian brackets |
| Status applied for | ✓ Permanent residency | Provisional, then permanent |
| Time to permanent | ✓ It is the starting status | ✗ Roughly 2 to 2.5 years |
| Economic condition | ✓ Solvent file, no set amount | ✗ Property or deposit ~200,000 USD, or a Panamanian company |
| Government fees | Low | Around 1,000 USD, before legal fees |
| Citizenship | ✓ After 3 years of permanent status | After 5 years of permanent status |
| Presence required | At least one trip (biometrics, cédula) | Trips for the filing and the card |
| Currency | Guaraní | ✓ US dollar |
| Local banking | Workable with cédula and RUC, limited range | ✓ Established financial centre |
| EU non-cooperative list | ✓ Not listed | ✗ Annex I, still listed after February 2026 |
| French national list (238-0 A) | ✓ Not listed | ✗ Listed, order of April 15, 2026 |
| Private interest foundation | ✗ No | ✓ Yes, Law 25 of 1995 |
| Cost of living | ✓ Among the lowest in South America | High in Panama City |
| Tax residency | Real presence and centre of vital interests, in both cases. The card is not enough. | |
Panama sits on Annex I of the EU list of non-cooperative jurisdictions for tax purposes, and it survived the 17 February 2026 review that removed Fiji, Samoa and Trinidad and Tobago. It is also on France's own national list under article 238-0 A of the tax code, in the version set by the order of 15 April 2026. Paraguay is on neither list.
What this does not mean: that moving to Panama is illegal, shady or a bad idea. It is a country where thousands of Europeans live perfectly in order.
What it does mean in practice: flows between EU countries and Panama get harsher treatment (increased withholding, restricted deductibility, unfavourable presumptions), and a file that keeps one foot in Europe attracts more scrutiny by construction. If you leave cleanly and live on foreign-source income, the practical impact is small. If you keep European income, European companies or European property, this line deserves an arbitration with a tax adviser before you pick the country, not after.
The trap they share: the card is not tax residency
This is the mistake that costs the most, and it is identical in both countries. A Paraguayan cédula or a Panamanian residency card proves a right to stay. It does not prove where you live. Tax residency is demonstrated by real presence, housing, family, centre of vital interests, and by what the country you left has to say about it.
A tax authority challenging your departure does not look at your card: it looks at your bank statements, your flights, your housing, your household and where you actually work from. Buying a residency to file it in a drawer is the best way to pay for an application that protects nothing. This is developed in our guides on residency in Paraguay and residency in Panama.
The structure is the same on both sides
Many readers arrive looking for a tax arbitration when the structure does not change from one country to the other: a pass-through US LLC with no US trade or business is not taxed in the United States, and a territorial country of residence does not tax what comes from abroad. The outcome is identical in Paraguay and in Panama, and the three conditions to check are the same.
In other words: choose the country on the life you want to live there and on the passport you are aiming for, not on a percentage that is the same on both sides.
Pick Paraguay if…
- You want a second passport on the shortest path: three years of permanent residency against five in Panama.
- You do not want to lock up capital. No 200,000 USD deposit, no forced property purchase.
- You want a low cost of living and a calm South American base, on a monthly budget nothing like Panama City.
- You still have ties in the EU: Paraguay's absence from both blacklists avoids a hardening you do not need.
- You accept the 2026 reform: since DNM resolution 407, the file has to show real solvency or real activity. The "zero RUC" era is over.
Pick Panama if…
- You want to live and save in dollars, with no exposure to a local currency.
- You travel a lot. Tocumen is a genuine hub, with direct flights to Europe and across the region.
- Your wealth is already built and you want a financial centre whose banks are used to non-residents.
- You want a holding structure: the Panamanian private interest foundation (Law 25 of 1995) lets an orphan structure own your company, for asset protection and succession. That is the Protection tier of the Panama Pack.
- You accept the entry ticket: a real economic tie, two and a half years to permanent status, five years to the passport.
Which one, by profile
| Your situation | The right pick |
|---|---|
| Freelancer or solo founder, tight budget, passport goal | Paraguay |
| You want to leave your home country cleanly, with no grey zone | Paraguay |
| Nomad looking for a legal, low-cost base | Paraguay |
| Established wealth, need for banks and dollars | Panama |
| You want a foundation to own your company | Panama |
| Family to settle, international school, direct flights | Panama |
| You keep income or companies in the EU | Paraguay, and a tax adviser before you move |
| You want to compare with other countries first | See the residency hub |
Residency and LLC, handled end to end
The residency file, the US company and the banking setup, in the country you choose. The Paraguay Pack and the Panama Pack each come in two versions, with or without the Panamanian foundation that owns the company.
Frequently asked questions
Paraguay or Panama in 2026?
Both are at 0% on foreign income, so the decision is made elsewhere. Paraguay gives permanent status from day one, with no investment, and citizenship after three years: the cheapest route to a second passport. Panama asks for an economic tie and five years to the passport, but brings the dollar, an airline hub, established banks and the private interest foundation.
Is Panama on a tax blacklist?
Yes, on both the EU list (Annex I, still listed after the 17 February 2026 update) and France's national list under article 238-0 A (order of 15 April 2026). Paraguay is on neither. It forbids nothing, but it hardens the treatment of flows with the EU: if you keep European ties, arbitrate this before choosing.
How long to permanent residency?
In Paraguay, it is the status you apply for from the start, with at least one trip for biometrics and the cédula. In Panama, the provisional card can take up to six months, then permanent status follows roughly two to two and a half years later.
Do you really need 200,000 USD in Panama?
No. Three routes exist since the 2021 reform: real estate of about 200,000 USD, a term bank deposit of the same order, or an employment relationship with a Panamanian company, often incorporated for the purpose. That last route is the most used, and it does not require locking up 200,000 USD.
What about tax residency, in both cases?
It is proved by real presence and centre of vital interests, not by a card. Panama looks at 183 days or the centre of vital interests, and Paraguay reasons the same way.
Can I keep my US LLC in both cases?
Yes, and it is the standard setup on both sides. See running a US LLC from Paraguay for the Paraguayan case, and the three conditions for the general rule.