Tax Guide for US Expats Living and Working in Boliva
Who Is Liable For Income Taxes in Boliva
All individuals domiciled or resident for tax purposes in Bolivia are subject to personal income tax (Régimen Complementario al Impuesto al Valor Agregado, or RC-IVA) on their worldwide income. Nonresident individuals are taxed on Bolivian-source income only.
A work permit (visa) or similar documentation does not change resident status in Bolivia. A foreigner may obtain this permit if he or she satisfies certain requirements, most importantly, the obtaining of a resident visa.
Domicile is defined as residence in a particular place with the intention of staying there. The intention is proved through facts and circumstances, including employment in Bolivia or moving one’s family into the country.
Income subject to tax
Employment income. In general, taxable income includes all wages, salaries, premiums, prizes, bonuses, gratuities, compensations and allowances in cash or in kind. It also includes fees for directors and trustees and salaries for owners and partners.
The following items are not included in taxable income:
- Salaries, fees or allowances received by diplomatic personnel, official personnel of diplomatic missions accredited in Bolivia and foreign employees employed by international organizations, foreign governments or foreign international organizations, as a direct reason of his or her position
- Christmas bonus
- Social benefits resulting from indemnities and evictions, in accordance with existing legal rules
- Pre-family, wedding, birth, lactation, family and burial allowances received according to the Social Security Code
- Retirement and pension income, sick allowances, and professional risk allowances
- Life pensions given to persons who were members of the army in any war or life pensions given to members of the army who were injured in peace time
- Per diem and representation payments, evidenced by local or foreign invoices if they are company-related expenses
Investment income. Dividends paid to Bolivian residents are not subject to personal income tax. Residents are taxed on interest and royalties received.
Nonresidents are subject to a 12.5% withholding tax on dividends, interest and royalties.
Self-employment and business income. Self-employed persons are subject to the following taxes:
- Value-added tax at a rate of 13%. This tax is paid on a monthly basis.
- Transactions tax at a rate of 3% on each service rendered. This tax is paid on a monthly basis.
- Corporate income tax at a rate of 25% (tax is calculated according to special rules). Up to 50% of the income tax can be offset by a tax credit equal to 13% of the purchase invoices obtained during the tax year. This tax is paid on an annual basis.
Directors’ fees. Directors’ fees not supported by a local fiscal invoice are taxed in the same manner as other personal income.
Taxation of employer-provided stock options. The Bolivian tax law does not specifically address the taxation of employer-provided stock options. Based on the nature of the Bolivian personal income tax, employees are taxed on stock options when the option is paid.
Capital gains and losses. Capital gains derived by individuals are subject to personal income tax. Capital losses can offset capital gains. Gains derived from financial transactions conducted through the Bolivian stock exchange are not taxed.
Deductions and tax credits. For personal income tax on employees, the following tax deductions may be claimed with respect to taxable income.
- Employee contributions to social security institutions.
- The nontaxable minimum amount, which equals two minimum national salaries per month. The current minimum salary is Bs 815 (US$117).
In addition, the following credits may be claimed with respect to the tax on the taxable income of employees:
- 13% of two minimum national salaries
- The value-added tax (VAT) credit remaining after offset against VAT
B. Social security
Contributions. Employers and employees are required to make social security contributions on total monthly remuneration.
Contributions of foreigners. Under Law No. 65 of December 2010, Bolivia ratified the Iberoamerican Social Security Treaty. With the signing of independent implementation agreements, the signatories to the treaty apply the general rules of the treaty. As a result, for nationals seconded to the member countries, it is possible to obtain a certificate of coverage to confirm that social security in the home country remains payable. If the certificate is obtained, such nationals are exempt from social security in the host country.
After all of the documentation described above is received, the local AFP determines that the contributions are not required for a foreign employee. The exemption enters into effect beginning in the month in which the certificate of exemption is issued.
To learn more about the history, culture, economy and other information about Bolivia
We have been preparing US income tax returns for US Citizens and permanent residents living in Boliva for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Bolivia and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the Boliva tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Boliva Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed while working in Boliva, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Boliva.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a request a consultation by phone, skype or email