HOW TO START AN INVESTMENT IN BOLIVIA

• 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 Companies, Sociedad Colectiva, limited partnerships, partnerships limited by shares, corporations, unincorporated associations, Partially government-owned enterprises, and Partially enterprises.

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-five; 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 Registry Office” (SEPREC) to obtain legal status. Then, the new company or branch must complete the following steps:

1. Tax Registration: The new company or branch must register with the “National Tax Service Office” (SIN) to obtain the NIT (Número de Identificación Tributaria) or Tax Identification Number.
2. Municipal Operating License: The company or branch needs to obtain an operating license from the appropriate municipal government where it will operate.
3. Employer Registration: Finally, it must register as an employer with the Ministry of Labor. This is typically referred to as the “Mandatory Registration of Employers.”

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 of the category and economic activity of the company you wish to establish, we will absolve any questions about the special certifications and records required.

• What labor issues should be taken into account?

Companies and branches that have dependent workers must enroll all workers in long-term and short-term social security.  

Long-term Social Security is in charge of the “Public Manager of Social Security” (Gestora Pública), it is the one who collects the contributions for the workers’ old-age insurance. Long-term social security contributions must be paid by both employees and employers. 

Short-Term Social Security is in charge of the “Caja de Salud”. Caja de Salud collects contributions from employers to finance its healthcare services in cases of illness or accidents. 

All employees of the companies are subject to the General Labour Law, which provides that no worker may receive less than the national minimum wage currently. By 2024 it is set to Bs. 2,500.00 (Two thousand five hundred 00/100 bolivianos) equivalent to $ us. 359.20 (Three hundred fifty-nine 20/100 US dollars), approximately.

• Which taxes should I pay?

Businesses in Bolivia are subject to the following taxes:

• Value Added Tax (VAT): This is a tax on sales, services, and permanent imports. Unlike in other countries, in Bolivia, VAT is included in the price of goods or services and is set at 13%.
• Tax on Company Profits (IUE): This tax is based on the profits reported in financial statements and is equivalent to 25% of the net profits for each fiscal year, ending on December 31. For branches, it is assumed that all income will be sent to the headquarters abroad, so in addition to the IUE, branches must pay an additional 12.5% of the total amount remitted abroad. Therefore, opening a new company is recommended.
• Transaction Tax (IT): This is a direct tax of 3% on gross income earned during each month and is paid per fiscal period.
• Financial Transaction Tax: This tax applies to operations in foreign currency, ITF is set at 0.30% per transaction.
• Property and Vehicle Tax: Companies that own real estate and/or vehicles are subject to this tax. The tax base is assessed and collected by each municipality. This tax is paid annually and depends on factors such as property location, construction quality, vehicle model, engine type, etc.
• Municipal Transfer Tax on Real Estate and Vehicles: This tax applies to the transfer of properties and motor vehicles. The taxable income is 3% of the value of the transfer and applies only when a company sells a property or vehicle to a third party.

• Should I pay double taxation?

Bolivian tax provisions are applicable within the national territory. Bolivia has signed international agreements to avoid double taxation with the Republic of Argentina, the Federal Republic of Germany, the United Kingdom of Great Britain and Northern Ireland, the Kingdom of Spain, the Kingdom of Sweden, and the Republic of France.

Additionally, Bolivia is a member of the Andean Community of Nations, which adopted Decision 578 to avoid double taxation among member countries: the Republic of Colombia,and the Republic of Peru, the Republic of Ecuador.

These international agreements stipulate that regardless of the nationality or domicile of natural or legal persons, taxes should be paid only in the country where the taxable event occurs. They also state that when a company operates in two or more countries, each country may tax the generated income within its territory as if the company were a distinct, separate, and independent entity, to avoid double taxation.