Anyone who looks into moving abroad with taxes in mind sooner or later comes across two names: Paraguay and Serbia. Paraguay is the classic choice because of its territorial tax system, while Serbia is seen as the European alternative with low tax rates and a short journey from Germany. Online forums like to present both countries as an easy solution. They are not. This article compares the two destinations soberly on the points that decide matters in practice: the route to residency, taxation, the relationship with Germany, banking and everyday life. We explain the basic concept of flag theory in a separate article, Flag Theory auf Deutsch (in German); here we focus purely on the direct comparison between the two countries.
The comparison at a glance
| Criterion | Serbia | Paraguay |
|---|---|---|
| Visa-free entry for German citizens | Up to 90 days within 180 days | Visa-free for tourist stays |
| First residence permit | Temporary residence (privremeni boravak), for example based on employment, a company or property | Temporary residence permit (residencia temporal) for up to two years, renewable once |
| Permanent residence | After three years of uninterrupted temporary residence | After the temporary residence permit |
| Tax principle for individuals | Worldwide income once resident | Territorial principle: in general only income from Paraguayan sources |
| Typical tax rates | 10 % on employment income, 15 % on investment income | IRP 8 to 10 %, corporate income tax IRE 10 % |
| Double taxation treaty with Germany | Yes, comprehensive treaty | No, only an agreement on air transport |
| Flight time from Germany | Around two hours, direct flights | No direct flight, connections via Europe or South America |
| Time difference from Germany | None | Four hours in winter, five in summer |
| EU outlook | EU candidate country since 2012 | Mercosur member |
Residency: two different routes
Serbia
German citizens may stay in Serbia without a visa for up to 90 days within any 180-day period. Anyone who wants to stay longer applies for temporary residence. Typical grounds are employment, your own company, property ownership or family reunification. After three years of uninterrupted temporary residence you can apply for permanent residence (stalno nastanjenje). According to the official portal of the Serbian government, several absences totalling up to ten months, or a single absence of up to six months, do not interrupt this period. Our article Residence Permit in Serbia: Step by Step walks you through the procedure.
Paraguay
Paraguay reorganised its migration law with Law No. 6984/2022. Since then, the route leads through a temporary residence permit (residencia temporal), which according to the state news agency IP is valid for up to two years and can be extended for the same period. It is a prerequisite for permanent residence. Applicants must provide, among other things, an identity document, a birth certificate, proof of marital status, police clearance certificates from their country of origin and from Paraguay, and proof of entry, each with an apostille. There is also a separate procedure for investors; you should check the current conditions with the Paraguayan migration authority or a local lawyer, because older guides often still describe the law as it stood before 2022.
The practical difference: Both countries now require a genuine intermediate step before permanent residence. The widespread impression that you can obtain an unlimited residence permit in Paraguay straight after a short trip no longer reflects the legal situation.
Taxes: territorial principle versus worldwide income
Paraguay
Since the reform introduced by Law No. 6380/2019, Paraguay's tax system has been built on several types of tax. According to EY's overview, personal income tax (IRP) is 8 percent on investment income and 8 to 10 percent on income from personal services, while corporate income tax (IRE) is 10 percent. IRP is levied on persons resident in Paraguay, and in principle only on income from Paraguayan sources. The law defines, for example, income from capital invested and loans granted "in the country" as domestic. Foreign income therefore remains untaxed in many cases. According to the common interpretation, you are considered tax resident if you spend more than 120 days a year in Paraguay; the centre of your vital interests can also be decisive. Whether specific foreign income is nevertheless caught in your particular case, especially if you operate through a Paraguayan company, should be confirmed by a tax adviser in Paraguay.
Serbia
Serbia taxes resident individuals on their worldwide income. You are resident if you have your residence or the centre of your business and personal interests in Serbia, or if you spend at least 183 days there within a twelve-month period. The rates are flat: 10 percent on employment income and 15 percent on investment income such as dividends and interest. On top of this comes an annual additional tax on high incomes above three times the average annual salary. For self-employed people, the lump-sum taxation regime offers a very simple model. What tax residency in Serbia actually requires, and why a residence permit alone is not enough, is explained in our article Steuerliche Ansässigkeit in Serbien: Warum Aufenthaltstitel oder Firma allein nicht reichen (in German).
What this means
For someone who mainly earns foreign income, for example from an online business with customers outside the country or from capital investments, Paraguay is the cheaper country on paper. For someone who works locally or runs a company with real local substance, the differences are smaller, because Serbia also taxes employment income and profits at a low rate of 10 percent.
The side that is often forgotten: Germany
The biggest difference does not lie in the destination country's tax rate but in its relationship with Germany.
Double taxation treaty. Germany and Serbia have a comprehensive agreement for the avoidance of double taxation. It determines which state may tax which income and contains rules for dual residence. With Paraguay, Germany only has an agreement from 1983 on income from international air transport. For rental income from Germany, pensions or shareholdings, there is therefore no treaty-based allocation of taxing rights in relation to Paraguay.
Exit tax and extended tax liability. Anyone leaving Germany must clarify, regardless of the destination, whether the exit tax (Wegzugsbesteuerung) applies to shares in corporations and whether extended limited tax liability (erweiterte beschränkte Steuerpflicht) under Section 2 of the German Foreign Tax Act (§ 2 Außensteuergesetz) may come into play. The latter is linked, among other things, to low taxation in the new country of residence. With a country that applies the territorial principle, this check is particularly relevant, but it should also be carried out for Serbia. You can read more in our article Wegzugsbesteuerung vermeiden (in German).
Residence in Germany. Neither country helps if you keep a home in Germany that is available to you at any time. In that case you remain subject to unlimited tax liability in Germany, no matter where you spend most of your time. Giving up your German residence is therefore the real first step in both cases.
Banking and money
In Serbia, foreigners can open an account with a passport, and it is considerably easier with a residence permit than without one. Alongside the dinar account, foreign currency accounts in euros are common, and transfers to Germany are routine for the banks. You will find the details in our article Opening a Bank Account in Serbia as a Foreigner. In Paraguay, opening an account as a foreigner is in practice usually tied to the Paraguayan identity card (cédula), which you only receive once you hold a residence permit. You should ask the individual banks directly which documents they require. In both countries, banks check the source of funds, and an account alone establishes neither a right of residence nor tax residence.
Daily life: distance, climate, language
Accessibility. From many German airports you can reach Belgrade in about two hours, or by car in one to two days. Visiting family, attending a doctor's appointment or dealing with an emergency in Germany can be arranged at short notice. Paraguay can only be reached with a connecting flight, and the journey takes a whole day. In 2024 Paraguay permanently switched to the UTC-3 time zone; the time difference from Germany is therefore four hours in winter and five in summer. If you work for German clients, you will notice this every day.
Climate. Belgrade has a continental climate with hot summers and cold winters. Asunción is subtropical with very hot summers from December to February.
Language. In Serbia, many younger people speak English, and with a basic knowledge of Serbian you can get by well in everyday life. In Paraguay, Spanish and Guaraní are the official languages and English is less widespread; there are German-speaking communities in some regions.
Legal outlook. Serbia is an EU candidate country and is gradually adopting EU law, for example in data protection and financial supervision. This often makes procedures feel more familiar to Germans. Paraguay is part of Mercosur and has a different legal tradition.
Which country suits whom?
Paraguay is the better fit if your income comes almost exclusively from abroad, you have no close ties to Germany, you accept the long distance and the time difference, and you are willing to learn Spanish.
Serbia is the better fit if you want to stay in Europe, travel to Germany regularly, work with German clients in the same time zone, value a double taxation treaty for legal certainty or want to build a company with real substance on the ground. Our article Moving to Serbia: What You Need to Know gives an overview of life in Serbia.
In both cases, the tax saving does not come from a residence permit but from a genuine centre of life in the new country and a clean break from Germany.
How Exgentum helps
Exgentum supports people relocating from German-speaking countries to Serbia, with an English- or German-speaking contact: residence permits, finding a flat, address registration, bank accounts and company formation. For tax planning, we work with specialists. We do not advise on Paraguay; however, if you are seriously comparing both countries, we help you fill in the Serbian side with reliable facts.
Frequently asked questions
Is Paraguay tax-free?
No. Paraguay levies income tax, corporate income tax and value added tax. Because of the territorial principle, however, foreign income is in principle not covered. How this applies to your specific income should be clarified by a tax adviser in Paraguay.
Do I have to pay tax on my worldwide income in Serbia?
Yes, as soon as you are tax resident in Serbia. The double taxation treaty with Germany then determines how income from Germany is treated.
Can I hold a residence permit in both countries?
Legally, yes. However, you are tax resident wherever the respective criteria are met, and both countries check actual periods of stay. Two residence permits are no substitute for a genuine centre of life.
Is a residence permit enough to end my tax liability in Germany?
No. What matters is that you no longer have a residence (Wohnsitz) or habitual abode (gewöhnlicher Aufenthalt) in Germany. In addition, exit tax and extended limited tax liability may apply.
Which country is cheaper to live in?
That depends heavily on the city and your lifestyle. Housing costs in central areas of Belgrade have risen considerably. Compare actual rents and living costs for the city you intend to move to rather than national averages.
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