Understanding Payroll in Bolivia: What Global Companies Need to Know About Bolivia Payroll
Dec 18, 2016
Bolivia, a landlocked South American nation with 10 million citizens, is a resource rich country experiencing strong growth compared to many of its Latin American counterparts. The primary industries for which Bolivia is best known include its natural gas reserves and exports, which carry about 50% of the nation’s exports and fund approximately half of its national budget.
For expanding companies – especially those that do business in mining, energy, or commodities –Bolivia can pose many benefits as an emerging market. Though the country is largely underdeveloped (and thus ranks as the 95th largest in the world and 85th in terms of purchasing power parity) the country has averaged 5.3% growth each year since 2009 and economic activity is gradually increasing through nationalization. However, the country’s weak rule of law, corruption, and murky international arbitration measures can be significant impediments to a company’s global operations.
With President Evo Morales predicting continued economic growth in Bolivia on the back of stronger stability in oil prices, new natural gas reserves, and a diversification of exports, now is an interesting time for multinational organizations with Bolivian operations. A key element of executing successful business operations in Bolivia is navigating the basics of its payroll laws and requirements.
Before you can manage payroll in Bolivia, you will need to establish your organization as a Bolivian employer by obtaining a name reservation certificate, filing your articles of incorporation and bylaws, registering with the National Tax Service, acquiring a business license, and placing a company deed in a national newspaper (announcing your shareholder information, bylaws, tax ID number, and so forth).
Once you’ve opened a Bolivian bank account and deposited the necessary capital, you can then complete your registrations with FUNDEMPRESA, the local Chamber of Commerce, the Ministry of Labor, and with the Bolivian health insurance and pension systems.
Bolivia’s labor laws, regulations, and statutory instruments provide workers with the freedom of association, the right to strike, and the right to organize and bargain collectively. The law prohibits antiunion discrimination and requires reinstatement of workers fired for union activity. Most labor activity in Bolivia is unionized and nearly all unions belong to the Confederation of Bolivian Workers (COB).
Written employment contracts are required in Bolivia and must be registered with the Labour Ministry. (They can be for a specified or an indefinite term.) Foreign employees do not require work permits but their work agreements must be registered with the Bolivian labor authorities within 90 days of signing. Workers need a special purpose visa to sign the agreement and a one-year residence visa to carry it out.
According to the International Trade Administration, 72% of enterprises in Bolivia have fewer than 20 employees. Unskilled labor is readily available in Bolivia, but skilled workers are often harder to find. Approximately two-thirds of Bolivia’s population is considered “economically active,” but the country’s low education and literacy levels limit labor productivity. An estimated 60-65% of workers participate in the “informal” (cash-based) economy.
Tax & Withholding Considerations
An individual resident in Bolivia is liable to pay income tax at the rate of 13% of his salary. Employers must deduct income tax from their employees’ wages and submit them to the National Service of Internal Revenue. To maintain ongoing compliance, employers must make compulsory social security contributions of 3% of the employee's gross salary, pay a ‘joint risk’ prime of 1.7%.
To varying degrees, employers also contribute to several other national funds:
- The health fund covers illness, maternity and short-term occupational hazards. Employer's contribution is 10% of employee's gross salary.
- The social fund covers the construction, enlargement and repair of schools and hospitals. Employer's contribution is 2% of employee's gross salary.
- The labour formation and training fund is optional and covers staff education and training. Employer's contribution is usually 1% of gross salary.
Foreign employees are subject to the same taxes as local employees but are exempt from social security contributions. For businesses, company profit tax is chargeable at 25% on the company's net profits and a 12.5% withholding tax is payable when Bolivian source income is paid to foreign beneficiaries. A 3% transactions tax 3% and applies to the transfer of ownership of movable assets, property, or the rights resulting from the exercise of a trade, industry, profession or business, among other things.
Compensation, Holiday & Leave Considerations
Minimum wages in Bolivia increased to 1805 BOB/Month in 2016 ($262/£212/€243). The maximum number of working days per week is six but there are no restrictions on hourly work, which is compensated at 100% of hourly pay. Office hours vary somewhat from city to city, but are generally 09:00 to 12:30 and 14:30 to 18:30.
Workers receive 15 days paid annual leave for one year of tenure and, 20 for five years of tenure, and 30 for 10 years of tenure. There are twelve recognized national holidays, though some cities observe local holidays that are formally recognized as well (such as La Paz Day, celebrated only in La Paz). Workers receive five fully paid sick days per year and women receive 90 days of maternity leave at 100% of their wages. Severance pay is not required for terminated workers.
|Date||Bolivia's Public Holiday Schedule|
|January 1st||New Years Day|
|January 22nd||Plurinational State Foundation Day|
|January 23rd||Plurinational State Foundation Holiday|
|Monday before Ash Wednesday (February - March, Floating)||Carnival Monday|
|Tuesday before Ash Wednesday (February - March, Floating)||Carnival Tuesday|
|Friday before Easter (March - April, Floating)||Good Friday|
|May 1st||Labor Day|
|Second Thursday after Whitsun||Corpus Christi|
|June 21st||Andean New Year|
|November 2nd||All Souls Day|
|December 25th||Christmas Day|
Payroll is always a complex issue, no matter where you locate your business. Yet payroll in Bolivia has its own set of complexities – making a managed global payroll solution highly beneficial to multinational companies with operations in Bolivia.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.