Understand the importance of an entity health check in Bolivia to secure your business and manage risk.
Bolivia is an attractive country for executives looking to expand in the Andean country. However, local and strict regulations may add a layer of complexity. As such, it is essential to understand the business conditions and corporate compliance requirements to properly develop your company in Bolivia. This includes conducting an entity health check in Bolivia.
How does an entity health check work?
An entity health check is an audit carried out by a third-party to verify its local corporate compliance. An entity health check in Bolivia involves the verification that company administrators and employees are fulfilling legal and fiscal obligations.
What kind of audits are involved in an entity health check in Bolivia?
Legal and fiscal obligations are the most important aspects to check in a company established in Bolivia. These provide essential information about a company’s status. Likewise, the audit will conclude if the business obligations are according to local laws. There are multiple kinds of audits involved in an entity health check in Bolivia, these include:
Legal auditing
The moment a company is constituted in Bolivia, it must fully comply with all legal obligations. Some of these obligations are:
- Registry of Commerce: Companies must have a trade registry number to operate with legal domicile in Bolivia.
- Company books: Once a company is constituted, company books must register all the important resolutions of shareholder meetings or Board of Directors meetings.
- License to operate: The municipality will grant the company a license according to the business activity registered at the Registry of Commerce. To maintain the license validity, the company must pay an annual payment.
- Bank accounts: The bank account registers the company’s money movements as proof of good administration. Bank accounts are vital in case of a tax audit.
- Trade registration update: Companies must update their trade registration with documentation that proves their existence and compliance with local corporate obligations. This documentation must be submitted every year.
- Labour obligations: If a company has employees, the entity health check in Bolivia verifies the company’s legal compliance with the Ministry of Labour, Health Insurance Office and Pension Fund Office.
Fiscal auditing
Once obtaining a trade registry number, the next step is to get a tax ID. The most important fiscal activities audited by an entity health check in Bolivia are:
- Tax ID: This document needs to register the main activities of the company. The date of registration will determine the company’s tax obligations.
- Monthly Tax returns: Tax returns are declared according to the tax calendar established by the tax office each year. The last digit of the tax ID is used to verify if tax returns are declared properly and before the due date.
- Financial statements and annual balance: Each year, the tax office establishes the deadline to file the financial statements and annual balances. These documents determine if a company needs to pay the Corporate Profit Tax. Paying taxes on time is crucial to avoid unnecessary expensive fines.
Companies can choose to conduct both kinds of audits (legal and fiscal) or to hire a third-party to determine if obligations in a specific field are fulfilled correctly.
Some benefits to hiring a third-party for an entity health check in Bolivia
In Bolivia, the legal report will inform if a company’s obligations have not been reached. If this is the case, companies can immediately comply with pending obligations to reduce or avoid penalties from local authorities. In the worst cases, corporate non-compliance can produce criminal responsibility for legal representatives, administrators or shareholders.
Given all of the above, it is strongly recommended to hire a third-party to conduct an entity health check in Bolivia at least once a year. This is the best way to know the company’s status and act as quickly as possible if administration modifications are needed to avoid financial and reputational risk. Hiring a third-party allows a company to better prepare for unwanted contingencies.
Conduct a local entity health check in Bolivia with the support of Biz Latin Hub
With offices all over Latin America, Biz Latin Hub has the expertise to offer due diligence services for investors and companies of all sizes. The legal and accounting team in Bolivia can serve your company at any time of the year to ensure your company is ahead of compliance deadlines. Get in touch now with our Bolivian team for further information about how an entity health check in Bolivia is conducted.
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