The Bolivian Sales Tax (IVA)


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Whether or not you pay a Bolivian sales tax when you go shopping will depend on where you are shopping, what you are buying, and who you are buying it from. The Bolivian tax on transactions is called the IVA (Impuesto al Valor Agregado – or Value Added Tax, in English).

Basically, it all boils down to this: anyone who sells anything should pay taxes to the government on the income they earn from the sale. However, as you’ll soon learn, the IVA is a far more complex matter in Bolivia. I’ll try to explain in the most uncomplicated manner possible. For all practical purposes, what you need to know is that there are two types of commerce: what we typically call formal commerce and informal commerce.

Formal commerce includes all businesses that have registered with the government, have a Tax I.D. number and pay taxes on each sale made. In order to show how much they’ve earned, ideally they are supposed to issue an invoice (sales receipt) each time they make a sale. The Bolivian sales tax they charge you is then paid once a month to the government. Many of these businesses import the products they’re selling you – they pay import taxes on those products as well, prior to selling them to you and me.

Informal commerce includes all businesses that have not registered with the government, do not have a Tax I.D. number and do not pay taxes on each sale made. Technically this is not legal, right? Let me explain:

Many businesses “import” products without paying import taxes. This means they’ve found a way to obtain the product without taking it through customs. You would think these products (frequently called “black market” products) would be sold only in outdoor markets and in a clandestine manner, but you’d be surprised how many formal businesses actually acquire their products this way too (smuggling, basically). Stores or vendors who sell this type of product are part of the “informal” commerce that exists in Bolivia.

But, in addition to these, many stores, vendors, outdoor market vendors, and sidewalk vendors sell products that are not imported – they are manufactured in Bolivia. Nothing illegal about that. However, they have not registered with the government to sell anything (ideally everyone should) and therefore, do not pay taxes to the government.

The Bolivian government actually has a tax bracket for some small vendors and informal vendors. They register as small, informal vendors and therefore legally sell without paying taxes. This is supposed to be reserved for those who cannot afford to pay taxes. However, many midsized and large companies find ways to register under this tax bracket as well to avoid paying taxes.

Because both types of “informal” vendors have not paid taxes to the government (either in the form of an import tax or a sales tax) they cannot charge you a Bolivian sales tax either. And, because they are not registered with the government, they are unable to provide a formal tax invoice to their customers, although they may offer some type of non-tax receipt. Once in a while the government will send out inspectors to randomly close down informal businesses. But this happens infrequently.

Why has the government turned a blind eye to informal business for so long? Probably because without informal commerce thousands of people and families would have no income at all, and without other viable income and job opportunities to offer them, the government has been slack about making these vendors pay the Bolivian sales tax. Some statistics indicate that nearly 80% of vendors in Bolivia work under the "informal" business bracket!

So what does all of this have to do with you as a shopper? Well, plenty actually.

First, products bought from informal vendors usually cost less (since there is no sales tax), but you won’t get an invoice or receipt. If you’re buying something for your business, you may need one to deduct from your own business taxes.

Second, there are no warrantees or guarantees when you buy products without a receipt, or when you buy products from informal vendors or in outdoor markets. Most will not take returns. So if the product is defective, there is no way to make a claim nor any way to return it for replacement.

Third, products that are imported without going through customs (basically imported in a clandestine manner) are not inspected. So they may be defective, imitations or fakes, or their expiration dates may have already passed. Buyer beware.

Shopping at outdoor markets is interesting, even fun, and usually cheaper. But is this always your best option? Probably not. Only you can decide if you need a receipt, if quality is your priority, or if you’ll want a warrantee.

Some vendors and shops are formally registered and can issue invoices but prefer not to, in order to not pay taxes (tax avoidance is illegal, yes). So... often when you shop the vendor will ask you "con facture o sin facture?" This means "with or without an invoice?" To be correct, you should always ask for an invoice. But if you choose not to, what this really means is that they will offer you a lower price.

Lastly, shoppers frequently use this to their advantage. After all, the fun part of shopping is bargaining with the vendors, and whether or not you pay the Bolivian sales tax is a part of the negotiation before coming to an agreement on a final price. Knowing about sales taxes will make you a more informed and skilled buyer and bargainer.

Don’t let this whole tax thing take the fun out of your shopping. Just keep these tips in mind when you decide where to shop, and this depends on what you are purchasing. Should you buy a plasma TV on the open market just to avoid the Bolivian sales tax? Probably not. On the other hand, do you need a receipt for a dozen pencils or an ice cream cone? Probably not either. Learn about bartering in Bolivia ...and by this I actually mean "bargaining" or "bargaining prices down". I've recently been told "bartering" is the incorrect word in English. Oopsies!

The Bolivian sales tax (known as the IVA, or Impuesto al Valor Agregado)... which means VAT (Value Added Tax) is currently about 13%.




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