Bolivia Proposes Full VAT Credit on Fuel Purchases

Bolivia’s Ministry of Economy and Public Finance has proposed a draft law to eliminate the current VAT credit limit on fuel purchases, allowing businesses to recover VAT paid on gasoline and diesel fully. Moreover, the proposal seeks to remove the existing cap and restore full VAT credit recognition. 

The Ministry noted that with this proposal, it reinforces the government's commitment to transparency, regulatory coherence, and economic stability, and underscores its aim of a tax system that supports productive activity, encourages formalization, and addresses the country’s needs responsibly.

Proposed Changes to VAT Credit

The proposed rule aims to restore the system's prior treatment of fuel-related VAT effectively. In practice, this means removing the 70% cap and restoring the 100% VAT credit recognition. With this proposal, the Ministry is reverting an emergency measure introduced under Supreme Decree No. 5503, which had restricted VAT credit recovery as part of broader efforts to stabilize the economy and regulate the fuel market.

During the implementation of the fuel VAT credit restriction, the government concluded that legal adjustments were necessary to preserve tax consistency and legal certainty. Consequently, the proposed changes intend to repeal Article 18 of Law No. 1356, as incorporated into Law No. 2042, which ultimately restricted the full recognition of the tax credit for the purchase of gasoline and diesel for VAT and the Complementary Regime to VAT (RC-IVA).

As stated by the Ministry, the proposal to repeal the measure is a carefully considered step within a broader, responsible sequence of economic reforms. Moreover, the legislative proposal should restore fair tax treatment without introducing new taxes or increasing existing tax burdens.

Conclusion

By restoring full VAT credit recognition and correcting a measure that hindered tax-abiding persons, Bolivia's government is reinforcing the principle that tax policy should support productive activity rather than create unintended economic burdens. Moreover, this act highlights that emergency intervention and short-term fixes can create long-term impracticalities. 

Source: Bolivia’s Ministry of Economy and Public Finance