Taxes include fees, special contributions and municipal license deducted at various rates according to the individual’s or company’s financial and economic activity.
Corporate tax or company tax is a direct tax by the government on a firm’s profit. The money is collected for the nation’s sources of income. The tax rate generates a legal obligation for the company or corporation on those domestic grounds of the region owes the government.
Taxes vary around the world and are approved by the country’s government to be ratified. This allows state resources to develop welfare programs to improve the quality of life for citizens and support the growth of the economy. We look at Bolivian corporate tax requirements for companies to be aware of when expanding into the country.
Who pays tax?
All taxpayers in Bolivia have a tax identification number and issue the corresponding invoices. Taxes are applied to individuals that operate in liberal professions or trades, or manage savings and other accounts. Proprietorships are included as well – they are when a person has legal use of the assets and their operations and legal entities: They are companies identified by a social reason and societies formed according to the code of Commerce or according to the Civil Code.
All natural or legal persons who have earned an income and gained finances through business activity are subject to tax payments. These activities include: commercial and industrial professions, ex officio members of a committee, rental of goods, works and services, transfer of movable and immovable property and rights.
Those who do not pay are government nationals, departmental and municipal self-government; public universities; associations, foundation, and non-profit institutions legally authorized and new industries established in the city of El Alto. The forms that could be used for this tax rate is:
- 500 for businesses required to keep accounting records
- 605 for the presentation of financial statements or annual report
- 520 for companies not required to keep accounting records
- 560 for businesses of El Alto – economic promotion
- 501 for carriers; payslip 1000
- Form 570 withholding. This can be paid annually up to 120 days after the end of the fiscal management year.
Exemptions to taxable income
Those people or instances that are not subject to taxable incomes in Bolivia are:
- Personal work in the dependency ratio
- Performance of public office
- Exports, the plurinational state
- Departmental autonomous governments and municipal services;
- Interests of deposits in savings, fixed-term and current account;
- Teaching with official plan private educational establishments;
- Sale of books, newspapers, informational publications, newspapers and magazines;
- Referred to in the law on the securities market, as well as contributions of capital;
- Services provided by diplomatic representations; purchase/sale of minerals, metals, oil and natural gas in the domestic market, provided that it is intended for export, transfer of portfolio;
- Cultural activities of national artists in State or municipal settings;
- The transfer of property or assets subject to securitization.
Corporate tax in Bolivia
Corporate taxation operates on the taxable income of a business. Businesses have to comply with the corporate income tax that is extracted from the business activities carried out in Bolivian territory. Taxable income comprises gross business income fewer deductible expenses (i.e. expenses that are necessary for the carrying on of the business). Certain income, such as foreign-source income and dividends, is exempt.
Personal value-added tax (VAT) in Bolivia stands at a low fraction of 13%. The VAT is additionally value-added on to goods and services as part of the transformation production process.
Businesses needing to pay their VAT should use Form. 200 v3; Form. 210, for exporters who apply for tax refund and 1000 payslip. This is paid monthly according to maturity, according to the last digit on the business’ tax identity (known locally as the NIT). In December 1994, the rate stood at a whopping 25% transactional tax, and this has since been replaced by the 3% of the national income on corporation’s taxed net worth.
Company profit tax
Utilidades de las Empree (IUE) relates to business profit distributions. Public and private companies, including sales proprietorships, are subject to 25% net profit distribution back to employees.
Additionally, there can be benefits for local and foreign corporations. They can receive tax holidays, exemptions, and other benefits if they invest in new companies or the production of non-traditional exports. Non-resident parent companies are expected to pay a 12.5% tax rate on income and net dividends.
Other points to note
Some countries include the gas industry within the standard corporate income tax regime, although they may use a higher tax rate to capture more rent. For example, the hydrocarbons industry pays an extra 18%, which was a decrease from 50%, royalty and tax rate for new projects and a 60% royalty and tax rate on existing projects. This is stated under the Hydrocarbons Law under Article 9 of the World Trade Organisation (WTO).
Discover Bolivia’s hidden gems
Overshadowed by regional economic heavyweights such as Brazil, Mexico, Colombia and Argentina, Bolivia is no less intriguing in terms of its potential. Its economy grew 4.22% in 2018, meaning like its neighbors, it is experiencing rapid development.
In fact, with a less saturated market, more opportunities lay hidden in Bolivia’s commercial landscape. Investment potential in the country can be especially found in fintech, building and construction, health, and real estate.
Contact Biz Latin Hub
If you are interested in starting a business in Bolivia, consider partnering up with Biz Latin Hub as your starting point.
Our back-office and market-entry experts can help establish your brand and business in the Latin Americas hottest investors market.
Reach out to Biz Latin Hub through our email address, [email protected] for more information on a personal business strategy.