Doing Business in Bolivia

PRELIMINARY AIDE MEMOIR

SECTION A: GENERAL TAX FRAMEWORK
I. Bolivian companies and foreign companies (branches of foreign companies or locally established companies whose capital participations are held in more than 50% by foreign investors) enjoy an equality of taxation treatment. A complete tax reform as part of the new economic policies of the 80s and 90s, still in effect, was introduced by means of Law No. 843 of May 20, 1986 with some amendments to date.

II. The general taxation system currently comprises: (1) Added Value Tax (13%), on local sale of goods and services; (2) Additional Added Value Tax, on personal income of a Bolivian source (13% basis); (3) Tax on Company’s Profits (25% of net profits); remittance of income and of profits abroad are subject to a 12.5% tax; (4) Transactions Tax, as a special 3% tax on gross income which can be credited against the Company’s Profits’ Tax, where applicable; (5) Municipal taxes on the transfer of real estate property and vehicles; (6) Tax on specific consumption, applicable to a specific list of products; (7) Tax on ownership of real estate property and vehicles; (8)Tax on travel abroad for nationals and local residents; and (9) Inheritance tax and tax on free transfer of goods.

III. Bolivia has executed several double taxation treaties and bilateral investment protection treaties, based on which different investment vehicles and venues could be explored.

SECTION B: TAX INCENTIVES
I The main legal framework for the grant of tax incentives and other facilities for the establishment of industries in Bolivia, is as follows:

a. Law 2685 of May 13, 2004 “Economic Promotion of the city El Alto” that establishes a tax exemption on the Tax on Company’s Profits to any new industry that is established in the city of El Alto, for a period of 10 years from the date it starts production. Companies are also exempted from the Value Added Tax related to the import of machinery for its installation in industries in the city El Alto.

b. Law 876 of April 25, 1986 establishes that any new industrial or manufacturing industry that is established in the Department of Oruro, with a capital of at least U$S 250.000.- or equivalent in national currency, will remain exempted from the payment of national, departmental, municipal and university taxes with exception of the individual income tax, for a period of five years. This term will be calculated from the day in which the industry starts production. The period of organization of the factory should not exceed of two years. The following industries can’t receive the exemption: alcohols, beers, wines, whiskies and spirits liquors.

c. Law 877 of May 2, 1986 establishes that industries that are installed in the Department of Potosi will receive the same treatment as that conferred to depressed zones. Also investments done by companies in schools or institutes of education, as well as grants for local works will be deductible from the Tax on Company’s Profits with exception of mining royalties.

II Also a special regime of Duty-free zones (Zonas Francas) with customs and fiscal segregation is applied in areas of the Bolivian territory with infrastructure adapted for the accomplishment of commercial and industrial operations.

The operations in Duty-free zones are exempted from the payment of internal taxes and from customs duties.

a. The legal framework of duty-free zones is mainly contained in Law 1489 of April 16, 1993 (Law of Development and Treatment of Tax of Exports), Law 1990 (General Law of Customs) and Supreme Decree 27944 of December 20, 2004.

b. By means of Law of October 12, 1983 a special Commercial and Industrial Duty Free Zone is created for the City of Cobija, for the term of twenty years in order to stimulate the social and economic development of the Department of Pando. The term has been extended by means of Law 1850 of April 7, 1998 for twenty additional years.

Supreme Decree 25933 of October 10, 2000, among other aspects, establishes the tax regime applicable to the area named “ZOFRACOBIJA” that includes the urban radius of the city of Cobija of the department of Pando.

The entrance of goods to ZOFRACOBIJA is liberated of Value-added tax, Specific Consumptions Tax and Transactions Tax.

The import of goods from ZOFRACOBIJA to the national territory, will be subject to the payment of Value-added tax, Specific Consumptions Tax, Special Tax to the Hydrocarbons and Derivatives and Custom duties.

To the present the following duty-free zones (zonas francas) exist in Bolivia:

Zona Franca Comercial e Industrial de Cobija (Public Administration).
Dpto. de Pando frontera con Brasil, Km. 2 carretera Porvenir.

Zona Franca Cochabamba Comercial e Industrial S.A.
Ubicada en Km. Cuatro, - Albarrancho – Cochabamba

Zona Franca Desaguadero S.A.
Departamento La Paz frontera con la República del Perú.

Zona Franca La Paz Comercial (General Industrial & Trading S.A.)
Ubicada en el Km.17, carretera La Paz - Oruro.

Zona Franca Guayaramerín S.A.
Prov. Vaca Diez del Dpto. de Beni, a 3 Km. de la Frontera del Brasil.

Zona Franca de Oruro S.A.
Carretera Oruro - Machacamarca. Kilometro 10

Zona Franca Puerto Aguirre
Hidrovía Paraguay - Paraná, frontera de Bolivia con Brasil.

Zona Franca Puerto Suarez (Comercial, Industrial y Maquiladora S.A.)
Línea fronteriza Boliviano - Brasileña, a 9 Km. de Corumbá. Pto. Suarez.

Zona Franca Santa Cruz (General Industrial & Trading)
Provincia Warnes, a 23 Km de la ciudad de Santa. Cruz.

Zona Franca San Matías S.A.
San Matías Dpto. Santa Cruz, frontera con la ciudad de Cáceres (Brasil).

Zona Franca Yacuiba S.A.
Campo Grande Km. 5 carretera a Santa Cruz.

Zona Franca Villazón
Villazon.

Zona Franca Industrial (El Alto - GIT La Paz)
Km. 7 carretera a Viacha - La Paz.

Zona Franca Comercial e Industrial Winner S.A.
Parque Industrial – Santa Cruz.

III With respect to preferential treatments in the import of goods of neighboring countries, Bolivia has signed the following agreements:
a. The Agreement of Cartagena dated May 26, 1969 of Andean Community (Bolivia, Colombia, Ecuador, Peru and Venezuela), which was updated and extended successively.
b. Bolivia is also a member of the Latin-American Association of Integration ALADI, constituted on August 12, 1980 by means of the subscription of the Agreement of Montevideo.
ALADI - REGIONAL AGREEMENT OF OPENING MARKET In favour of BOLIVIA (AR. AM 1)
Bolivia receives liberation of 100 % of the import duties from countries of ALADI for previously negotiated products. These grants are of unilateral character: Bolivia does not grant any tariff reduction in exchange for the preferences that it receives.
c. Bolivia has also signed the following commercial agreements.
AGREEMENT OF ECONOMIC COMPLEMENTACIÓN N º 22, BOLIVIA - CHILE
In force from April 6, 1993, this establishes the commercial liberation for lists of products of interest of both countries.
AGREEMENT OF ECONOMIC COMPLEMENTACION N º 36 BOLIVIA - MERCOSUR
Between Bolivia and the States belonging to MERCOSUR (Argentina, Brazil, Uruguay and Paraguay), in force from February 28, 1997.
IV. Exporters, for their imports used in their exporting activities, are entitled to get back customs duties and a certain AVT paid on importation (draw back – neutrality system), by receiving tax credit titles that can be used to pay any other taxes. Apart from preferential customs duties arrangements as mentioned before, Customs Law recognizes zero customs duty for the importation of certain capital goods.

SECTION C: BOLIVIA LEGAL REGIME APPLICABLE TO FOOD PROCESSING INDUSTRIES
I. Several legal norms regulate food processing and importation in Bolivia. According to Law No. 2061 of March 16, 2000, regulated by Supreme Decree No. 25729 of April 7, 2000, SENASAG has the faculty, amongst others, to (i) prevent sanitary condition of the agro pecuary and forest productive patrimony, (ii) conduct sanitary improvement of animal production (iii) verify and guarantee the innocuousness of food in the productive sections and of agro pecuary processing.

II. Some of the most relevant norms regarding food processing and importation are:

  • Law No. 2061 - 3/16/2000: Creates SENASAG
  • SD No. 25359 - 4/22/1999: Arranges rigorous application of legal norms for the import, marketing and traffic of agro pecuary and agro industrial products in the country
  • SD No. 25393 - 5/24/1999: Modifies Supreme Decree No. 25359
  • SD No. 25686 - 02/25/2000: Modifies Supreme Decree No. 25359
  • SD No. 25729 - 4/07/2000: Establishes SENASAG organization and functioning
  • SD No. 26590 - 4/17/2002: Exigency of Sanitary Import Permits
  • AR 079/01 - 11/09/2001: Establishment of the rates for services from SENASAG, for Food Companies Registry, grant of Free Sale Certificates, Certification and elaboration of special programs
  • AR 087/01 - 12/11/2001: Sanitary requirements for animals transportation, infrastructure and classification of slaughterhouses; meat process, storage and transportation
  • AR 088/01 - 12/11/2001: “ante mortem and post mortem” inspection norm applicable to slaughterhouses
  • AR 089/01 - 12/11/2001: Sanitary Authorization for slaughterhouses construction, registration, renovation, modification, transfer and Cancellation of the Sanitary Registry
  • AR 011/02 - 01/25/2002: Approves the list of products that require a sanitary import permission, granted by SENASAG, for its entry to the country
  • AR 095/02 - 02/07/2002: Modifies Administrative Resolution No. 011/2002
  • AR 121/02 - 08/29/2002: Procedures to grant agro pecuary products and food permissions of import and exportation certificates
  • AR019/03 - 05/22/2003: Sanitary Requirements of production, storage, transport and division of food and beverages for human consumption
  • AR039/03 - 05/22/2003: Approves the inspection and control manual and the inspectors manual
  • AR - 05/22/2003: Approves the new regulation for Food Companies Sanitary Registry
  • AR012/04 - 01/21/2004: Establishes the regulation procedure of bovine slaughterhouses Sanitary Registry
  • AR013/04 - 01/21/2004: Establishes periodic inspections to bovine slaughterhouses that have Sanitary Registry
  • AR057/04 - 06/07/2004: Approves the SENASAG Manual of Sanitary Measures for importing
  • AR074/04 - 08/11/2004: Approves the conformation of the National Committee of Meat
  • AR008/05 - 01/17/2005: Approves meat innocuousness insurance programming
  • AR012/05 - 02/03/2005: Approves the Manual of Procedures for the Qualification in Origin of companies that produce or elaborate agro pecuary products and sub products for import to Bolivia.
  • AR068/05 - 06/28/2005: Approves the procedure for bovine meat carrier vehicles registry.
  • AR078/05 - 06/30/2005: Approves the closing procedure for slaughterhouses that don’t fulfill sanitary regulation
  • AR112/06 - 07/12/2006: Approves the procedure for the import of products of animal origin; in compliance to A.R. 121/2002 y 012/2005
  • AR180/06 - 10/25/2006: Establishes the Food Innocuousness National Program

SECTION D:
I. All industries are required to have an environmental license before starting any activity. The requirements and procedure depends on the type of activity and the probable environmental impacts.

Bufete Aguirre Soc. Civ.

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