On January 1, 2025, Law 1613 regarding the General State Budget 2025 (PGE) was enacted. The PGE outlines the allocation of state resources aimed at implementing public policies across the country. Additionally, the budgetary framework provides a forecast of management expenses and revenue.

Among the specific provisions of this Law, Chapter Two introduces an innovative measure allowing private companies and public entities to acquire virtual assets for settling obligations with their creditors. This provision expands payment options in contracts involving the State. However, the regulations governing this provision have yet to be published.

Some economic analysts view this measure as a desperate response to the shortage of foreign currency in the Bolivian domestic economy. However, within the country's business and technological sector, it could be considered as an advance in public-private contractual relations.

In addition, the PGE 2025 maintains industrialization tax incentives provided under the PGE 2024 for the importation and commercialization of capital goods and industrial plants. Notably, the PGE 2025 establishes a zero VAT (Value Added Tax) rate for the following sectors:

• Agriculture
• Industrial
• Construction
• Mining

This benefit applies to both the importation and domestic sale of capital goods and the commercialization of industrial plants. The specific list of capital goods and industrial plants subject to this provision is detailed in Supreme Decree No. 5302, which regulates Law 1613.

In contrast to the 2024 budget, the PGE 2025 introduces a new provision that aims to encourage the reinvestment of profits obtained by companies and/or branches of foreign companies. This provision offers a percentage exemption on the Tax on Corporate Profits - Beneficiaries Abroad (IUE-BE, by its acronym in Spanish). The exemption is calculated based on the reinvestment percentage of the profit obtained from Bolivian sources, as follows:

• Reinvestment equal or greater than 75%: 3.125% on the profits paid or remitted.
• Reinvestment between 50% to 74.99%: 6.25% on the profits paid or remitted.
• Reinvestment between 25% to 49.99%: 11.25% on the profits paid or remitted.

Reinvesting profits or dividends on the company or branch must be recorded in a capital reserve account to be used for fixed assets, new projects, or inventories within the business line by the end of the UIE's fiscal term in which the reinvestment occurs.

If the capital reserve is distributed or is not reinvested in accordance with the aforementioned conditions, the Tax Administration will consider that the tax was perfected on the due date of filing the Financial Statements for the fiscal year in which the profits were generated. Therefore, the tax debt, for the non-payment of the tax in form and term, will be calculated.

It is important to note that the exemption benefit is not dependent on the date of remittance of funds abroad. Instead, the profits and dividends presented to the Tax Administration as of the filing deadline for the Financial Statements will be considered.

Although this provision is limited in scope, its objective is still linked to retaining as much capital as possible within the country.

Likewise, directly concerning the private sector, the PGE 2025 provides payment facilities for tax debts and fines not complied with until December 31, 2024, even for those under tax enforcement. Taxpayers may continue paying their installments, provided payments are resumed until March 31, 2025. Upon resumption, any ongoing tax enforcement or contravention proceedings, as well as measures adopted by the Tax Administration, will be stayed.

From this regulation, it is evident that the State aims to create a more attractive investment environment for the private sector by reducing taxes that typically exceed companies' financial capacities and hinder investment within Bolivia.

Ultimately, these measures are aimed at serving as tax incentives to promote business development and attract foreign investment in the country.