Bolivia is a country located in the center of South America, which gives a privileged place within the region due to the direct connection with the majority of the countries in the continent. Also, it contains large quantities of raw material, territorial diversity and natural resources. This causes a big demand of good and services nowadays. Therefore, we can conclude that the Bolivian market is attractive to anyone willing to invest.
However, when a foreign investor thinks about investing in Bolivia, a lot of questions come out. For example: Which migratory status is needed to own or partner a company? ; In the business field, what rights and obligations does a foreigner have? ; Which is the treatment that banks in Bolivia gives to foreigners? ; Which kind of company is the one that fits better with my interests? ; Which taxes do I have to pay?. We will try to cover on the following essay these and some other frequent questions with details.
Before starting, is important to advise the reader that the information in this essay does not pretend to substitute the necessity of consulting a specialized attorney in the business field. On the contrary, it seeks to inform in a brief way, some basic aspects on how to invest in Bolivia so all the information can be verified by a professional who can analyze the particular case of the investor.
2.- BASIC MIGRATORY ASPECTS
• Which migratory status is needed to own or become a partner of a company?
To own or become a partner of a company in Bolivia you don’t need any special migratory status, foreigner carnet or visa. This means any foreigner can constitute a company or become a partner of a company in Bolivia in your foreigner quality.
Once the company is constituted, it is necessary that it has a legal representative. It is important to point out that in Bolivia it is necessary, to assume that place, getting a foreigner carnet, visa, temporal residence of one or two years, multiple visa or visa of undefined permanency.
• Which is the legal value of the documents given in foreign countries?
Bolivia doesn’t take part in the Apostilla de La Haya of October 5th, 1961. Therefore, any foreign legal person that wants to own or become a partner of a Bolivian company has to remit any power or scripture given in a foreign country and duly notarized and legalized in the country where they were granted. This means that the documents kept in a foreign country, if they are public and granted in the foreign country, will have the same value that the ones in Bolivia if they are duly legalized by the Bolivian Consulate in the country of origin.
• In the business field, what rights and obligations does a foreigner have?
The Bolivian State grants that every company constituted in Bolivia with private contributions have the same rights and obligations. This means that every company constituted in Bolivia, with foreign capital or foreign partners, will be submitted to the Bolivian legislation and under the same normative treatment that a company constituted with Bolivian capital and partners.
• Which is the treatment that banks in Bolivia gives to foreigners?
Foreigners need to have a foreigner carnet to open and manage bank accounts in Bolivia. We recommend that if they don’t possess any of these documents, then designate a Bolivian citizen as a legal representative with the faculties of opening and managing the company’s bank accounts.
In the case that money is send from headquarters or from foreign partners to the account of the company in Bolivia, the financial entities charge a commission for any transfer. The amount of this commission depends on the bank, which is why we offer your company to manage and negotiate these commissions so they can fit in the budget of your company.
3.- CORPORATE VEHICLES
• Which kind of company is the one that fits better with my interests?
According to the Bolivian legislation, they can be constituted with private contributions, sole proprietorships, Limited Liability Company, Sociedad Colectiva, limited partnership, partnership limited by shares, corporation, unincorporated association, Partially government-owned enterprise and Partially enterprise.
The companies that are generally constituted with private contributions and that suit the interests and needs of foreign investors are limited liability companies and corporations because of the following features:
• Limited Liability Company. – These companies cannot be less than two partners and more than twenty; each partner is responsible for its social obligations to the extent of their capital contributions. The capital is divided into equal contributions of Bolivian hundred or multiples of one hundred.
• Corporations.- These companies must have at least three shareholders, the capital of these companies is represented by shares and the liability of its members is limited to the number of shares that they hold.
• What procedures must be met so these companies can start working?
Companies and branches must be formed by public deed and registered in the Trade Register dealership (FUNDEMPRESA) to obtain the legal status. Once established the company or branch and obtained legal status, they must register for the National Register of Taxpayers National Tax Service (SIN) and get their NIT tax identification number in order to bill.
At the same time it must be processed to obtain the operating license to the appropriate municipal government where the company or branch will work, obtaining the Mandatory Registration of Employers with the Ministry of Labor and special certifications and records that may or may not be necessary depending on the category to which the undertaking is active. In that sense, once you inform us the category and economic activity of the company you are wishing to establish, we will absolve any questions about special certifications and records required by your company.
• What labor issues should be taken into account?
Companies and branches that have dependent workers must process obtaining their mandatory registration of employers to the Ministry of Labor and enroll all workers to the short term social insurance Health Fund, so that their workers have access to health services in cases of illness or accidents. Also these companies must register at the Log term social Insurance to the Pension Fund Administrators AFPs for these companies to manage resources for workers when they reach old age.
All employees of the companies subject to the General Labour Act, which provides that no worker may receive less than the national minimum wage currently set to Bs. 1,656, 00 (A 1656 Bolivian 00/100) equivalent to $ us. 237.93 (two hundred thirty seven, 93/100 US dollars), approximately.
• Which taxes should I pay?
Businesses in Bolivia are subject to the payment of the following taxes:
• Value added tax VAT. – This is a sales tax, service and permanent imports. Unlike other countries in Bolivia VAT it is included in the price of goods or services and their share is 13%.
• Tax on company profits IUE. – This tax profits resulting from the financial statements and is equivalent to 25% of the net profits of each annual management as of December 31 of each year. In the case of branches it is assumed that all income will be sent to its headquarters abroad, so in addition to the IUE branches must pay 12.5% of the total amount remitted abroad. That is why the opening of a new company is recommended.
• Transaction Tax IT. – This is a direct tax of 3% of gross income earned in each fiscal period and paid for each fiscal period.
• Financial Transaction Tax. – This taxes the operations in foreign and domestic currency with value maintenance, whose rate is US $ 1.5 per transaction of US $ 1,000 or its equivalent in national currency with value maintenance.
• Property and vehicle tax. – Companies that possess real estate and / or vehicles are subject to this tax, whose tax base is valued by each municipality and supervised by local governments and the National Tax Service. This tax is paid annually and depends on the location of the property, construction quality, vehicle model, engine, etc.
• Real estate and vehicles municipal tax. – Any transfers of property and motor vehicles. Your taxable income is 3% of the value of the transfer and applies only in the case of a company to sell a property or vehicle to a third party.
• Should I pay double taxation?
The tax provisions in Bolivia have their application within the territory. Also, Bolivia has signed international agreements to avoid double taxation with the Republic of Argentina, Federal Republic of Germany, United Kingdom of Great Britain and Northern Ireland, Kingdom of Spain, the Kingdom of Sweden and the Republic of France.
Likewise, Bolivia is part of the Andean Community of Nations, an international organization which adopted Decision 578 that avoids double taxation between member countries, which are part of the Republic of Colombia, Republic of Peru, the Republic of Ecuador and Bolivian Republic of Venezuela.
These international agreements provide that regardless of the nationality or domicile of natural or legal persons, the taxes these got shall be taxable only in the country where such taxes have their operative event.
It also states that when a company makes its operations in two or more countries each of them may tax the taxes generated in its territory as if it were a distinct, separate and independent company, in order to avoid double taxation.