A US LLC as a Paraguayan Tax Resident: What Applies and What Does Not

How the IRS sees a single-member LLC

The IRS states that an LLC with only one member is treated as an entity disregarded as separate from its owner for income tax purposes, unless the owner files Form 8832 to elect corporate treatment. For income tax, the LLC's receipts are the owner's receipts.

For a non-US owner, the question therefore becomes whether you have US-source income or income effectively connected with a US trade or business. The IRS sources income from personal services by where the services are performed. Services performed in Paraguay for clients anywhere are, for US purposes, foreign-source.

Effectively connected income arises only where a foreign person is engaged in a trade or business in the United States, and the IRS describes the activity required as considerable, continuous and regular. ECI is taxed at the graduated rates that apply to US citizens and residents.

Form 5472 and the pro forma Form 1120

Since tax years beginning on or after 1 January 2017, the IRS treats a foreign-owned US disregarded entity, meaning a domestic disregarded entity wholly owned by a foreign person, as a corporation for the limited purposes of section 6038A. The Form 5472 instructions set out what follows:

• The LLC files a pro forma Form 1120 with Form 5472 attached, by the due date of that Form 1120, including extensions. On the Form 1120 itself, only the entity's name and address and items B and E are completed.
• Reportable transactions with the owner include amounts paid or received in connection with the formation, dissolution, acquisition and disposition of the entity, including contributions to and distributions from it. A year with no clients is not automatically a year with nothing to report: you paid the formation fees, and you took money out.
• A foreign-owned US disregarded entity cannot file Form 5472 electronically. The instructions direct filing by fax or by post to the IRS in Ogden.
• The penalty for failing to file when due and in the manner prescribed, or for failing to maintain records, is USD 25,000, with a further USD 25,000 if the failure continues more than 90 days after IRS notice.

The LLC needs its own EIN for this; the Form SS-4 instructions provide a specific line 9a entry for a foreign-owned disregarded entity filing Form 5472.

State fees and reports

We cite only the states' own publications.

Beneficial ownership reporting: no longer for US-formed LLCs

FinCEN's interim final rule of March 2025 exempted every entity created in the United States, and its beneficial owners, from reporting beneficial ownership information under the Corporate Transparency Act. FinCEN made that exemption permanent in a final rule announced on 11 August 2026, which its BOI page gives as effective on 14 August 2026. A "reporting company" now means only an entity formed under foreign law and registered to do business in a US state or tribal jurisdiction.

A Wyoming, Delaware or New Mexico LLC is US-formed, so it files nothing with FinCEN. The bank still asks who owns it.

How Paraguay sees it

We have found nothing in Ley N° 6380/2019 corresponding to the US check-the-box election, and the statute says in terms that legal persons are subjects of law distinct from their members (Article 2, Ley N° 6380/2019). A US LLC is a foreign entity. It is not resident in Paraguay merely because its owner is: under Article 5, a foreign entity becomes resident when it establishes domicile in the country and registers in the Public Registry.

Where the work is done still matters

Article 48 taxes Paraguayan-source income under the IRP, defined as income from activities carried out in the Republic, from property situated there or from rights economically used there. Article 6 uses the same opening words for the IRE. Neither article says the activity must be performed for a Paraguayan client.

If you do the work here, the plain words point to Paraguayan-source income; invoicing through Wyoming does not relocate your desk. What the statute does not say is how the DNIT would classify that income when a foreign company receives it. We see three candidate readings:

• IRP on the individual, looking through the LLC to the person who performed the personal services.
• IRE on a permanent establishment. Article 2 numeral 7 lists branches, agencies or permanent establishments of foreign entities that carry out taxable activities in the country as IRE taxpayers, at 10%. Once you are in the IRE, Article 6 also reaches foreign interest, foreign dividends and exchange differences. See IRP vs IRE.
• INR on a non-resident. The non-residents' income tax (Articles 71 to 76) taxes non-resident entities on Paraguayan-source income at 15%, with personal services deemed 70% net. But under Article 74 the obligation arises on payment or remittance, which is built around a Paraguayan payer, not a foreign client paying a foreign company.

Cases that are clearer

• Paraguayan clients. Article 48 numeral 3 makes personal services performed outside Paraguay Paraguayan-source where they are rendered to IRE or IRP taxpayers. Invoicing a Paraguayan business through a US LLC keeps you inside the Paraguayan base, and a Paraguayan business paying a foreign entity is within the INR's scope.
• Passive foreign income. Where the LLC holds assets outside Paraguay and you perform no activity here, Article 57 anchors each category of IRP capital income to Paraguay, and distributions from a foreign entity are not on that list. See what the 0% actually covers.
• Unexplained wealth. Article 57 item 11 taxes an unjustified increase in net worth. Money that accumulates in a US LLC account and later appears in Paraguay needs a paper trail.

Your home country is not done with you

If a former country of residence still treats you as resident, it applies its own classification to the LLC, which need not match the IRS's. Some countries treat a US LLC as transparent; others treat it as a company, bringing controlled foreign company rules or tax on distribution. Several apply a central management and control test, so an LLC directed from your old home could be claimed as resident there. Paraguay's Article 5 makes no competing claim, and there is no US–Paraguay income tax treaty to settle anything.

We do not advise on foreign law. Read what Paraguayan residency does not solve, then take advice where you left.

Banking

FinCEN's customer due diligence rule requires US banks to identify and verify, when a legal entity opens an account, every individual who owns 25% or more of it and one individual who controls it. A 2026 FinCEN order lets banks do this once at the first account rather than every time. So the LLC's bank knows exactly who you are, whatever the position with FinCEN's registry.

Whether a US bank or payment provider accepts a Paraguay-resident owner is an institutional risk decision, not a right. Expect to provide formation documents, the EIN letter and your own identity and address evidence. For the Paraguayan side, see opening a bank account in Paraguay.

What we would actually do

1. Confirm you are not a US person before anything else. Citizenship, a green card or a substantial-presence year changes every answer on this page.
2. Diarise Form 5472. Pro forma Form 1120 by its due date, filed on paper or by fax, every year the LLC exists, including years in which only contributions and distributions moved. The USD 25,000 penalty is the single largest risk here.
3. Pay the state on its own calendar, checking the current amount on the state's site each year.
4. Keep US days and US functions at zero if your position depends on having no ECI. No US staff, office or dependent agent, and no services performed on US soil unless you have taken US advice.
5. Get a written Paraguayan opinion on how income from work done in Paraguay and received by the LLC will be treated. If it matters enough, file your own consulta vinculante. Do not add a Paraguayan company on top without reading the EAS guide.
6. Close the home-country file properly, including how it classifies the LLC.
7. Keep records that trace every transfer from the LLC to you, for Article 57 item 11 and for any bank asking where the money came from.