Bolivia's Tax System: Understanding The Basics

Bolivia is a democratic country in South America with a territorial tax regime. Its tax system is made up of national, departmental, and municipal taxes. National taxes are collected by the National Tax Service (SIN), departmental taxes are collected by the governors of each department, and municipal taxes are collected by the mayors of each municipality. All residents of Bolivia are taxed at a standard rate of 13% on their Bolivian income, regardless of residency. There are no local income taxes in Bolivia. The country also imposes gift and inheritance tax, with rates varying depending on the relationship of the recipient to the deceased or donor.

Corporate Income Tax

Bolivia has a territorial tax regime, meaning income tax is only levied on income generated within the country. Income from foreign sources is not subject to tax.

The standard corporate income tax (CIT) rate in Bolivia is 15%. However, mining companies and other businesses involved in the extraction of non-renewable energy resources are taxed at a higher rate of 25%. Additionally, companies in the financial and insurance sectors may be subject to additional income tax rates.

The tax rate for corporations is applied to any income generated within Bolivia. This includes inventory valuation, capital gains, dividend income, interest, and rent/royalty income. It is important to note that businesses operating in gambling, lottery, or raffle-based promotions may be subject to special taxes. Gambling and lottery businesses are taxed at 30% of gross income, while business operations using raffle systems for promotions are taxed at 10%.

Bolivia's tax system also includes various indirect and direct taxes. Indirect taxes, such as value-added tax (VAT), are levied on the sale of goods and services, while direct taxes are imposed on the income of resident companies. Resident companies are required to pay taxes such as the transactions tax (IT), which is 3% of gross income, and the complementary regime to VAT, which is 13% on income received.

Personal Income Tax

Bolivia has a territorial tax regime, meaning income tax is levied on income sourced in Bolivia only. Income from foreign sources, including investment income earned abroad, is not subject to tax.

All residents of Bolivia are taxed at the same rate on their income from Bolivia, regardless of their residency status. Taxes are taken at the federal level; there are no local income taxes in Bolivia. The tax rate is a standard 13% across all income, including employment income, capital gains, and investment income.

There are two deductions available for individuals: a standard deduction and an employment deduction. The standard deduction is worth approximately $1,200 USD and applies only to individuals. The employment deduction covers any social security taxes paid.

Bolivia imposes a wealth tax on fortunes greater than 30,000,000 Bolivian pesos (Bs) (or its equivalent in foreign currency), at rates between 1.4% and 2.4%, including foreign assets. This is known as the IGF – Impuesto a las Grandes Fortunas (Tax on Great Fortunes).

Value-Added Tax

Bolivia has a value-added tax (VAT) system, which is a common form of consumption tax. The value-added portion is the difference between a business's sales and the cost of purchasing services or goods from another company. The VAT rate in Bolivia is 13% on the net sale price, but the effective tax rate is 14.94% on each transaction as the tax is added to each purchase.

VAT is applied to a range of goods and services, including cigarettes, alcohol, energy drinks, and hydrocarbons and their derivatives. For example, the IEHD (Special Tax on Hydrocarbons and Their Derivatives) is a specific fee per litre for sales of hydrocarbons and their derivatives of national origin in the domestic market, as well as the import of these products. The IDH (Direct Tax on Hydrocarbons) is a 32% tax on the total volume of hydrocarbons measured at the inspection point (wellhead).

In addition to VAT, there are other taxes related to transactions and consumption in Bolivia. The IT (Transactions Tax) is 3% of gross income earned from activities such as rental income, contracting of works, provision of services, and free transfer of private property. The ICE (Specific Consumption Tax) varies depending on the good, with percentage rates on the net sales price or specific rates on sales volumes.

It is important to note that Bolivia's tax system also includes other national, departmental, and municipal taxes. These taxes are collected by different entities, such as the National Tax Service (SIN), governors of each department, and mayors of each municipality.

Withholding Tax

Bolivia's tax system is made up of national, departmental, and municipal taxes. National taxes are collected by the National Tax Service (SIN), departmental taxes by the governors of each department, and municipal taxes by the mayors of each municipality.

Dividend payments, distributions of profits to head offices by Bolivian branches, interest payments, royalty payments, and fees for services made to non-residents are subject to a WHT of 12.5%. Activities considered partially performed within Bolivia by non-residents (e.g. telecommunication services, insurance, transportation) are taxed at a reduced rate of 2.5%. Payments to non-domiciled individuals for activities performed within Bolivia are taxed at a rate of 16%, including a transaction tax of 3% and a personal income tax of 13%.

Bolivia has double tax treaties (DTTs) in force with several countries, including Spain and Sweden, which provide beneficial WHT rates on dividend distributions.

Capital Gains Tax

Bolivia has a territorial tax regime, meaning income tax is only levied on income sourced from within Bolivia. Income from foreign sources, including investment income earned abroad, is not taxed.

In Bolivia, capital gains are taxed at the corporate rate, which is a standard rate of 25%. However, capital gains are not taxed at the individual rate. That is, residents of Bolivia are taxed on their local source income at 13%, but capital gains are exempt from this.

Additionally, income obtained by individuals as a result of the investment of their capital, work carried out, or a combination of both, is taxed with RC-IVA. This does not apply to dividends paid to individuals by domestic corporations, which are taxed as ordinary income with RC-IVA. Investment income obtained abroad by individuals is not taxed in Bolivia. Interest, dividends, etc., earned in Bolivia by non-residents are subject to a withholding tax (WHT) of 12.5% when such income is remitted or credited to a personal account.

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