New Bolivian Pension Tax for Private Consultants Working Both In and Outside of Bolivia

On 26 January 2011 the Bolivian government passed Supreme Decree No. 778 requiring all persons, contracted as "private consultants" to provide a service or opinion to any company or organization, to pay into a Bolivian retirement pension fund. This includes foreigners who live and work in Bolivia, even if you do not plan to retire in Bolivia AND foreign consultants who provide these services even if they never travel to Bolivia.

Per the law, it includes "any natural person, national or foreign, who lends services under a civil contract".

"Private consultant" is defined, for the purposes of this decree, as "any natural person who lends services to a private entity for a specific time, and in an independent manner, within the framework of a civil contractual relationship."

What about foreign consultants who work for just a few days, weeks or months in Bolivia? No matter how long or short the work period is, even if it's just a few days, this tax must be paid.

What about foreign/international consultants who receive payment from a Bolivian organization or company for their opinions - even if they never set foot in Bolivia? They are also obligated to pay this tax. The Bolivian organization or company paying them will be obligated to retain 14.42% prior to issuing payment of the remaining amount.

This law obligates you to pay into the pension fund whether or not you have a written or oral contract with your client.

You must pay this tax on all services you invoice as of February 2011.

The tax must be paid on the full (gross) amount invoiced, NOT on your income after business expenses and/or taxes.

You pay this tax if you provide a service to an organization or company, but not services you provide to individual persons.

Your tax must be paid by the 5th of the following month for it to apply to that month of your pension. After the 5th of the month, it will apply to the next month of your pension.

The new law stipulates that the self-employed must pay 14.42% of all income (from the provision of this type of service) into an AFP (Bolivian pension fund). You can do this monthly, by adding up all your income and filing a single form, or you can do this per invoice by filling out a form and paying the AFP tax each time you issue an invoice.

The problem for the self-employed is that companies and organizations that contract your services are also required to request proof that you've paid the AFP tax and must hold off paying you the invoiced amount until you've provided a copy of the receipt showing you've paid the tax. This means, you have to pay the AFP tax out-of-pocket prior to receiving payment from your client.

Therefore, it stands to reason that it is much more advantageous to fill out an AFP form and pay the tax on each invoice individually so that you can issue your invoice immediately. Waiting until the end of the month to pay the AFP tax on your total monthly income will also mean you'll have to hold off on issuing all invoices until you do so (thereby also delaying payment to you).

Another option would be to request (or stipulate in your service contract) that your customers pay you a portion of the amount they will owe you, in advance, especially if the amount you plan to invoice will be very high. Of course, your clients will let you know whether or not their company policies will allow them to do this or not.

For expatriates who live and work (self-employed) in Bolivia, who do not plan to retire in Bolivia, you will not lose your pension fund. We've been told that even if you retire overseas, you are still entitled to your Bolivian retirement pension even if you live overseas. However, to ensure you remain entitled to it, you must remain in contact with the AFP you choose to affiliate with by sending them a form every three months to let them know you are still alive.

In addition, if you have children, at the time you affiliate with an AFP you can fill out a form stating you have children which will ensure they inherit, and have access to, your pension fund if you pass away.

Sources and Disclaimer:

a) Some of this information was given us by employees at the PrevisiĆ³n AFP building on Avenida San Martin in the Equipetrol neighborhood in Santa Cruz, Bolivia and this is their understanding of this law at this time.

b) The attached "legal bulletin" (published by attorneys, in Spanish) was sent to us by friends and provides answers to 24 common questions regarding this law. Download it here (PDF format). Some of the definitions above were translated from this bulletin.

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