There are many tax havens and shelters around the world as we all know, but is Bolivia one of them? The country has some crucial taxes you need to know about, and they will apply to almost anyone, in any kind of situation, without giving too many advantages to foreigners as you’ll see later in this guide.
In Bolivia both individuals and enterprises need to pay a VAT tax of 13% over the sales price every month, and also a Corporation tax of about 25% every year. This is the same for any foreign individuals and firms. In Bolivia, you won’t pay less than 20% in taxes on your revenue in almost any situation.
Here we’ll discuss whether Bolivia is or is not a tax haven or tax shelter. You’ll learn about the principal taxes that usually businesses and individuals need to pay every month or every year regarding their commercial activities, among other details and numbers.
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Is Bolivia near to becoming a tax haven?
From the details below you’ll see that Bolivia is very far from becoming a tax haven or a tax shelter. This is because almost always individuals and businesses need to pay taxes that are usually over 15% of their net income, cases up to 20% or 25%. They also need to pay VAT taxes in almost all cases of about 13% over the selling price.
1) Lower tax rates
People with low incomes in Bolivia are usually exempt from paying large taxes for their commercial activities, but we’re talking about individuals who earn about $1,000 or less per month. Individuals who earn more than this will usually pay:
- About 10% to %15 in taxes of their net income every year, if they’re professionals who have formal jobs.
- About 25% of their net income, if they run informal activities that are not related to their professions or that don’t require professional education, they will need to pay about.
These rules apply the same for people from overseas or foreigners, tourists, or residents of all kinds. The Bolivian law doesn’t give any advantage to individuals from other countries, they are treated the same as Bolivians.
On the other side, in regards to businesses, unless it’s really small, we mean it’s moving capital of about $3,000 to $5,000, or is getting a gross yearly income of about $15,000 to $20,000, it will not be exempt of paying the corporation tax that all firms usually need to pay in the country.
These tiny businesses also need to be very certain types of fields, like the food, craft, and small commerce fields.
Then, for example, if a business:
- Receives a gross income of only $10,000 through the year, from which $3,000 is its revenue, while being a business in the food space, in this case, it’ll only pay about $50 in income taxes.
- Receives a gross income of about $30,000 a year, from which $5,000 is its revenue, it will need to pay 25% of this revenue in corporation taxes, which for this case is $1,250.
- Receive a gross income of about $1 million the whole year and from this, $100,000 is its revenue, so it doesn’t matter which field this business is in, it will need to pay $25,000 in income taxes at the end of the year.
So, the only way to avoid paying business income taxes in Bolivia is to be very small and also operate in the food, crafts, or small commerce fields tax to only be charged a few 10s or 100s of dollars for any possible income from the business. Otherwise, it’ll need to pay 25% of its yearly net income in all cases, no matter if it’s a Bolivian or foreign company.
2) Privacy for the company owner
There is also another situation that we need to take into account regarding the privacy that a company can have in its finances.
In general, in Bolivia, it’s stated by law that any income that a bank could register that’s over $10,000 needs to have a sworn declaration attached to it. So if you have financial or business operations that are large within the country, the government and banks have the right to find out what’s really happening within your finances.
Although this investigation many times is not done by banking and financial institutions they certainly do it with some suspicious companies or companies they think are worth investigating.
3) Less paperwork
Here in Bolivia, you’ll find that it’s relatively easy to create a company once you become a resident of some kind (not just a tourist), but the process of paying taxes is usually painful, you need to do many manual activities in order to pay it. This process is not as easy as in developed countries.
4) More accessibility to deductions
As we just said before, in Bolivia both locals and foreigners are treated equally by law, the Bolivia’s Constitution states that foreigners and Bolivians are equal in the eyes of the law system and regulations. Once you get your foreigner’s ID card, you are subject to the same tax and law regulations that any other Bolivian may have within the country.
This means that you can’t enjoy any kind of tax advantage because of the only reason of being from another country. Also, if your company is founded here in Bolivia it’ll be treated as a Bolivian legal person with all the taxes attached to it. If your company is from overseas and is settled in Bolivia you’ll equally need to pay all the taxes mentioned before, there are no real tax advantages.
5) The tax rates and tax system
The income business tax and the bad tax in Bolivia are not the only taxes you’ll need to pay if you are operating within the country. There are other applicable taxes, we mentioned all of them in this list:
- The individual’s income tax (~5% to 20% of net income depending on the size of activities) or business income tax (always 25% of the net income, unless it’s a tiny business, which will pay a few hundred dollars).
- The equivalent of the VAT tax in Bolivia, which is 13% of the paid price of the good or service, and paid in all cases, except for education, craft, arts, small commerce, and some other fields.
- The transactions tax IT, which is paid on every transaction that is done within the country, it’s 3% of the total amount.
- The financial transactions tax ITF, which is paid over every financial transaction that is done within the banking system, it’s 0.005% of the total amount of the transaction.
- The rich people’s tax, any individual that has assets of $4.3 million or more needs to pay this additional yearly tax of 1.4% to 2.4% over the total assets. So if you own a company here or some kind of assets that together reach this level, you’ll need to pay it also.
- Additional contributions for employers, like medical care, retirement funds, dismissal settlements, and similar ones. In your day-to-day operations, you’ll also need to pay this to employees, and it normally reaches about 40% of the employee’s nominal salary.
So at the end of the day, as a company or individual that is large enough in Bolivia, you’ll need to pay, putting together all the taxes mentioned before (it’s a general estimation and may differ significantly), about 25% to 40% over your gross income.
Quote: This means that if, for example, you have received from your clients during a year $100,000 from the sales you did in that time, then you’ll need to pay about $15,000 to $30,000 just in taxes in Bolivia.
How does Bolivia deal with companies owned by foreigners?
Now let’s see some important nuances about how companies are treated by Bolivian laws and the Bolivian tax system. As we said before, both Bolivian and foreign companies or individuals doing operations in Bolivia are treated the same by the country’s law.
Source principle in Bolivia
In Bolivia the source principle is applied, this means that any kind of commercial activity that brings revenue to a company will be taxed according to where it has been made or conducted.
Any kind of industrial or commercial activity that has been done within the frontiers of Bolivia is subject to all the taxes that the Bolivian law dictates, as mentioned before.
On the other hand, if your business activities have been done outside the country’s territory, they are not subject to Bolivia’s taxes.
Double taxation in Bolivia
Bolivia also has some conventions with other countries, most of them in South America to seamlessly eliminate the double taxation that may exist between companies or individuals of these countries.
But also there is not any specific double taxation convention between Bolivia and the US or Canada. So, in order to avoid this possibility you’ll have to do more paperwork and more trouble when trying to avoid it.
In addition to this, many European countries have specific double taxation conventions with Bolivia already done.
Is Bolivia a country for better tax regulations?
Currently, we see that the tax system in Bolivia hasn’t changed almost at all. The same laws are applied from the case ago and this doesn’t change really fast.
So in the future, we feel that no matter which kind of government runs the country the tax system and its regulations for both Bolivians and foreigners are not going to change that much.
Also, you need to understand that the tax institutions and tax system of Bolivia are usually very bureaucratic and run over old systems that are difficult to handle for both individuals and corporations. It’s actually difficult to pay taxes within the country.
Offshore and shell companies in Bolivia
If you want to move your international and commercial activities to a Bolivian company, it’s legally possible to do so as opening a company as a tourist in Bolivia is not that difficult. But In most cases, it’s way better for you to be a resident of Bolivia rather than just a tourist to open a company here.
Once your company has been founded within the country, you’ll be subject to the same tax regulations as any other Bolivian company here, and you’ll need to pay the appropriate taxes for your activities.
Quote: We talk in detail about the process of opening a company in Bolivia as a foreigner, with all the requirements and steps in the following guide: How to open a company in Bolivia? all you need to know. Link
As for shell companies in Bolivia, creating a firm within the country is not very difficult, but when banks see that the owner is a foreigner they take more precautions when opening bank accounts for these companies. Also if you make transactions over $10,000, it’ll be suspicious to the banking system and they’ll in many cases investigate the finances and operations behind it.
In this note about whether Bolivia is or is not a tax haven, you’ve seen that the country is currently very far from falling into this category. With taxes that don’t discriminate between locals and foreigners that reach levels of 15% to 40% of the gross income in almost all cases, unless you are a tiny business, it’s difficult to call Bolivia a tax haven.
You’ve seen that in Bolivia you pay taxes by the source principle, well, it doesn’t matter whether you are either a Bolivian or foreign company or individual, your industrial or commercial activities have been created and run within the country you will need to pay several types of taxes.
These taxes are the VAT tax, 13% for the sales price, the business or individual income tax, from 15% to 25% of the year net income, the IT tax 3% of any transaction, ITF, 0.005% of any financial transaction, the rich people’s tax, for assets over 4.3 million dollars, and additional contributions for employees and firing fees.
We hope this information has helped you, and if you want to know all the taxes that are applied to Bolivian companies and commercial activities, with all their rates, regulations, ways to pay, etcetera, visit our educated guide: The business taxes in Bolivia, a complete walkthrough. Link
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