Supreme Decree No. 5503 establishes, on an exceptional basis, an “Extraordinary, Temporary and Voluntary Regime for the Regularization and Repatriation of Capital,” issued in the context of the economic emergency declared. The regime aims to broaden the asset base incorporated in the nation’s economic and financial system, strengthen domestic liquidity and international reserves, encourage productive investment and promote financial formalization, thereby contributing to macroeconomic and financial stability.
Nature and scope of the regime
The regime is extraordinary and does not constitute amnesty or a general pardon for crimes. It is an asset regularization mechanism with economic and financial objectives, applicable for a limited period to be defined in specific regulations, which would reasonably be issued by the Ministry of Economy and Public Finance, without the possibility of automatic extension. The Supreme Decree does not set an initial effective term, which naturally impacts on any preliminary analysis by potential participants.
Voluntary regularization of assets
Under the new regime, Bolivian or foreign individuals and legal entities may voluntarily declare assets, goods, foreign currency, rights or economic resources that have not been recorded or declared with the competent authorities, whether located in Bolivia or abroad.
A regularization carried out under the regime will not give rise to prior administrative, civil or criminal prosecution, exclusively with respect to violations related to the lack of declaration, registration or formalization of the relevant assets. This protection does not extend to assets deriving from expressly excluded crimes, such as drug trafficking, terrorism and its financing, trafficking in persons, public corruption with a final conviction, and money laundering where the criminal proceedings have concluded.
Legal effects of regularization
Assets duly regularized are deemed lawful for all administrative, tax and financial purposes as of their valid declaration. Regularization has releasing effects regarding: (i) administrative infringements for failure to register or declare; (ii) ancillary tax obligations linked exclusively to non-declaration; and (iii) formal penalties deriving from breaches of reporting duties.
The Decree also clarifies that regularization does not imply acknowledgment of illegal acts and does not constitute a confession, an admission of liability or evidentiary precedent in other proceedings. However, the Decree does not precisely identify the taxes covered or clear mechanisms for allocating incentives, which increases uncertainty for potential participants.
Tax incentives
The regime provides for exceptional tax treatment for assets and foreign currency regularized. A 0% rate applies when foreign currency remains for at least twenty-four (24) continuous months in the domestic financial system, or when resources are directly and effectively allocated to productive investments. If resources are withdrawn, transferred abroad or removed from the domestic financial system before completion of such period, a 5% rate applies.
Productive use of funds
The Decree considers productive investment to include, among other purposes, the acquisition of productive fixed assets, expansion or modernization of installed capacity, infrastructure projects, energy, mining, agribusiness or manufacturing projects, as well as working capital associated with formal productive activities. Regulations are expected to establish simplified verification mechanisms prioritizing good faith and ex post controls.
Confidentiality and compliance
Information provided under the regime is confidential and may only be used for tax, financial and statistical control purposes. Its use as evidence in proceedings other than those expressly permitted is prohibited, and breaches of confidentiality may entail administrative, civil and criminal liability. The Decree does not specify which proceedings are permitted, adding an additional layer of uncertainty.
The regime is expressly compatible with anti-money laundering and counter-terrorism financing rules. Financial institutions must apply enhanced due diligence procedures, without denying, delaying or blocking regularization when legal requirements are met.
Conclusion
Although capital repatriation can, in theory, support domestic liquidity and formalization, such regimes require a detailed, safeguards-based, clear and predictable framework from the outset. Supreme Decree 5503 remains largely programmatic and awaits detailed iregulations providing more certainty. Until those rules are issued, it is reasonable to expect market participants to take a cautious approach, particularly because capital movements often involve costs and decisions that are not easily reversible.