From our law firm in the Plurinational State of Bolivia, we analyze the constitutional, jurisprudential, and practical scope of this issue, which is essential for companies, entrepreneurs, and taxpayers.
What Is Tax Prescription and Why Does It Matter?
Evolution of the Statute of Limitations
Originally, the general limitation period was four years. It was later extended to eight years, and in certain cases, it could reach up to ten years, significantly increasing taxpayers’ exposure to fiscal risk.
This expansion generated controversy, particularly when the Administration attempted to apply the new time limits to prior fiscal years.
Constitutional Case Law on Tax Prescription
The Plurinational Constitutional Court, through Constitutional Judgment 1169/2016-S3 and later Judgment 0255/2019-S2, established key criteria:
- It differentiated between the authority to assess taxes (initiation of an audit), which is subject to prescription.
- A final and firm assessed tax debt may receive different treatment once the amount has been consolidated.
- It applied the principle of non-retroactivity of more burdensome laws, stating that the applicable limitation period is the one in force when the prescription period began to run, thereby reinforcing legal certainty.
These criteria align with the constitutional principles of legality and due process, as well as international standards on tax certainty.
Economic Impact of the Eight-Year Limitation Period
An eight-year limitation period produces significant effects:
- Exponential growth of interest and penalties.
- Accumulation of contingent liabilities.
- Disincentives to business formalization.
While neighboring countries generally apply limitation periods between three and five years, a longer exposure window increases fiscal risk perception. For domestic and foreign investors, this directly affects national competitiveness.
Moreover, in a context of widespread electronic invoicing and real-time data cross-checking, maintaining extended limitation periods may contradict the technological modernization of the Tax Administration.
Tax Relief and Transparency Bill
The bill proposes extraordinary measures that could significantly reshape the fiscal landscape.
Scope of Tax Debt Forgiveness up to 2017
The proposal establishes the forgiveness of:
- Omitted taxes.
- Value maintenance adjustments.
- Interest.
- Fines for tax and customs offenses and violations.
The forgiveness would even cover debts with final administrative or judicial resolutions, provided that assets have not yet been adjudicated or auctioned.
However, it would not apply to taxpayers whose accumulated omitted tax as of December 31, 2017, equals or exceeds Bs 10,000,000. This threshold raises relevant technical questions, such as whether the amount is calculated per fiscal period or cumulatively.
Regularization of Debts from 2018 Onward
Within 120 calendar days from the law’s entry into force, taxpayers may:
- Pay the updated omitted tax in full.
- Access payment facilities of up to 24 monthly installments.
In both cases, interest and fines related to tax evasion, non-payment, and formal duty breaches derived from the regularized tax would be forgiven.
Eligible taxpayers include those who:
- Have ongoing assessment procedures.
- Have pending tax returns.
- Failed to file returns.
- Filed incorrect returns.
- Defaulted on prior payment facilities.
- Are under audit without a formal charge notice.
- Are in tax enforcement proceedings before asset adjudication.
- Are involved in administrative or judicial appeals.
Regularization and proof of payment would terminate the corresponding proceeding.
Failure to comply with installment payments would result in the loss of benefits.
Legal Certainty as an Incentive for Formalization
Legal certainty directly encourages formalization. In an economy with high levels of informality, a system that allows review of eight previous years with cumulative penalties may discourage registration and tax compliance.
Reducing the limitation period to four years would require the Administration to strengthen tax intelligence, data analysis, and early-stage auditing efficiency, shifting from a sanction-based revenue model to one focused on expanding the tax base.
In conclusion, reducing the prescription period and implementing a tax relief regime are not merely technical adjustments, but a redefinition of the balance between fiscal authority and legal certainty. If enacted, such measures could provide economic relief for formal businesses, reduce litigation, and signal institutional modernization.
If you are facing a situation related to tax debts, enforcement proceedings, or need to apply for a regularization plan, please contact one of our specialized attorneys. We are at your service!
What does it mean for a tax debt to be time-barred?
It means that the Tax Administration has lost the authority to assess or collect the debt due to the expiration of the legal limitation period without action.
Does prescription automatically eliminate the debt?
It must be invoked and analyzed according to the applicable limitation period and the regulations in force at the beginning of the calculation.
Can I regularize a debt while a judicial process is ongoing?
Yes. The bill allows regularization even during appeal stages, concluding the process upon payment or approval of a payment plan.
What happens if I default on the installment plan?
The forgiveness benefits are lost, and the full debt becomes enforceable again.
Does the forgiveness apply to all debts prior to 2017?
No. Economic thresholds and specific conditions must be analyzed on a case-by-case basis.
The content of this article does not reflect the technical opinion of Rigoberto Paredes & Associates and should not be considered a substitute for legal advice. The information presented herein corresponds to the date of publication and may be outdated at the time of reading. Rigoberto Paredes & Associates assumes no responsibility for keeping the information in this article up to date, as legal regulations may change over time.
