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Bolivia Tax Overview
As US companies continue to expand their business into international territory, countries are working to increase their ability to host outsourced operations. Bolivia, a democratic country in South America, is one of these countries.
Bolivia is a wealthy producer of natural resources and currently sits as the continent’s fourth-largest natural gas producer. Foreign investments are largely in infrastructure and construction, including bridges, highways, and shopping malls.
If you are considering outsourcing to Bolivia, here is everything you need to know about the tax practices of the region.
Here’s everything you need to know about personal taxes in Bolivia:
All residents of Bolivia are taxed at the same rate on their Bolivian income, regardless of residency. 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. Income is defined as the sum of all employment income, capital gains, and investment income.
There are no taxes on international income generated, regardless of residency status. There are only taxes applied to income generated within Bolivia. This setup means that digital nomads and other transitory workers are attracted to the jurisdiction, as they can earn money from outside the country and avoid paying taxes on that income.
Note that employers are required to withhold and pay a complimentary tax in addition to the VAT on all employee wages paid. This tax rate is 13%, charged every month after a contribution to an employee pension fund.
Bolivia only allows two deductions for individuals: a standard deduction and an employment deduction. The employment deduction applies to any social security taxes paid. The standard deduction adds up to approximately $1,200 USD and applies only to individuals.
Here’s everything you need to know about corporate taxes in Bolivia:
All corporations are taxed on any income generated within Bolivia.
All companies are subject to a CIT tax rate of 15%. Mining and other business involving the extraction of non-renewable energy resources are subject to an additional 25% tax rate.
Income is defined as the sum of an inventory valuation, capital gains, dividend income, interest, and rent/royalty income. There is no foreign tax because Bolivia does not tax income originating outside of the region.
There are special taxes applied to any business that operates through gambling or raffle games. The tax applies to gambling and lottery businesses and any business operation that uses a raffle system as part of an advertising promotion. Lottery and gambling operations are taxed at 30%, while business operations are taxed at 10%.
The corporate tax deduction system in Bolivia is complex, but generally, business expenses can be exempt from taxes if there is proper documentation to prove it’s a necessary expense to generate income within the region.
Bolivia also offers tax incentives under a very specific business situation: new manufacturing businesses operating in Oruro and Potosi are entitled to various deductions within the first ten years of operation.
Value-added taxes, better known as VAT taxes, are a common form of consumption tax. The value-added portion is the difference between a business’ sales and its cost of purchasing services or goods from another business. Here’s what you need to know about VAT taxes in Bolivia:
Anyone buying the goods or services covered under VAT requirements is taxed. The list of items covered ranges from cigarettes to alcohol and energy drinks.
The tax rate is 13% on paper, but the effective tax rate is 14.94% on each transaction because the taxes are added to each purchase.
Note that hydrocarbons and products made from them are subject to a direct tax rate of 32%. This tax applies regardless of whether the producer produced the goods or services within Bolivia.
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