Corporate tax in Bolivia

Summary

Corporate Income Tax Rate (%) 25
Capital Gains Tax Rate (%) 25 (a)
Branch Tax Rate (%) 25
Withholding Tax (%) (b)
Dividends 12.5
Interest 12.5
Royalties 12.5
Professional Services 12.5 (c)
Branch Remittance Tax 12.5
Net Operating Losses (years)
Carryback 0
Carryforward 3 / 5 (d)

a) See Section B.

b) A 12.5% withholding tax is imposed on all payments of Bolivian-source income to foreign beneficiaries (see Section B).

c) This withholding tax applies to services fees received for specified profes­sional services, including consulting, expert services, and technical, commer­cial or other advice.

d) A Bolivian-source loss incurred in a year may be carried forward to offset taxable income derived in the following three years. Loss carryforwards are not subject to inflation adjustment. For the oil and mining production sector and new projects with a minimum capital investment of BOB1 million, the carryforward period is five years. On the reorganization of companies, the carryforward period is four years.

Taxes on corporate income and gains

Corporate income tax. Bolivian companies and foreign companies with permanent establishments in Bolivia are subject to income tax on their Bolivian-source income.

Rates of corporate tax. The standard rate of corporate income tax is 25%.

Mining operations. Act No. 535 (New Mining Code), dated 28 May 2014, confirms the additional rate of corporate income tax of 12.5% (previously established by Act. No. 3787, dated 24 November 2007). This additional rate applies to additional taxable profits resulting from favorable price conditions for min­erals and metals. The following are significant aspects of this additional rate:

  • The 12.5% tax rate applies if mineral and metal quotations are equal or higher than the base quotations established by law.
  • The 12.5% tax does not apply to taxable profits attributable to sales that have lower quotations than the base quotations.

The tax referred to above must be paid on a monthly basis. The date of payment depends on the last digit of the Tax Identification Number. The monthly payments are considered advance payments of the tax determined at the end of the year. If the total of the advance payments is less than the amount determined at the end of the year, this difference must be paid. If the total of the advance payments exceeds the amount determined at the end of the year, the difference can be claimed as a tax credit against the standard corporate income tax for the year or the additional amount of corporate income tax for the following year.

Surtax. A 25% surtax is imposed on net income derived from mining, reduced by the following two special deductions:

  • A percentage of up to 33%, which varies according to the type of business, of accumulated investment in exploration, devel­opment, assets that qualify for environmental incentives and environmental protection, which is directly related to mining extractive activities performed after the 1991 tax year.
  • 45% of net income derived from non-renewable natural resource extractive activities. This deduction is limited to BOB250 mil­lion. The amount of BOB250 million is adjusted annually to reflect changes in the Unidad de Fomento de Vivienda (UFV) for each extracting operation. The UFV is an index published by the Statistics National Institute (INE) that reflects changes in Consumer Prices Index (IPC).

For mineral-producing companies, the net income for an extrac­tion operation is the value of the commercialized product in the mining market.

Hydrocarbon Direct Tax. The Hydrocarbon Direct Tax is imposed at a rate of 32% on hydrocarbon production in oil wells located in Bolivia. The Hydrocarbon Direct Tax is calculated and paid in the same manner as the 18% royal prerogatives, which apply to all extractive fields. The 18% royal prerogatives consist of the following:

  • A regional royal prerogative equal to 11% of the gross hydro­carbon production from oil wells, which is paid to the region where the hydrocarbons are produced
  • A national royal prerogative equal to 1% of the gross hydrocar­bon production, which is paid to Beni and Pando
  • An amount equal to 6% of the gross hydrocarbon production in oil wells, which is paid to the National Treasury after the deduc­tion of the necessary amounts for the management of the con­tracts

Capital gains. In general, capital gains are taxed in Bolivia. How­ever, capital gains derived from transactions on the Bolivian Stock Exchange are exempt from tax.

Administration. The law specifies the following tax year-ends, which vary according to the type of business.

Business Tax year-end
Industry (including oil and gas) 31 March
Agriculture and agribusiness 30 June
Mining 30 September
All other businesses 31 December

 

Annual tax returns and financial statements must be filed with the Internal Revenue Service (IRS) and income tax paid within 120 days after the end of the tax year. Advance payments are not required except for mining companies, which must make pay­ments of income tax when they export minerals or metals.

Debts owed to and credits due from the state are adjusted to reflect changes in the UFV (see Rates of corporate tax).

Fines and interest charges apply to late tax payments and other non-compliance with tax obligations. The IRS publishes interest rates for late tax payments.

The tax code provides that fraud exists if a tax debt exceeds an amount equal to 10,000 UFV, calculated as of the date of deter­mination of the fraud.

The following are the statutes of limitation for tax audits:

  • 2012 fiscal year: 4 years
  • 2013 fiscal year: 5 years
  • 2014 fiscal year: 6 years
  • 2015 fiscal year: 7 years
  • 2016 fiscal year: 8 years
  • 2017 fiscal year: 9 years
  • 2018 fiscal year: 10 years

The statute of limitation periods described may be increased by three years if the entity does comply with the obligation to regis­ter or registers under a different tax regime.

Withholding taxes. Local entities, including Bolivian permanent establishments of foreign companies, that pay Bolivian-source in come to foreign beneficiaries must withhold 12.5% of the amounts paid. For this purpose, Bolivian-source income includes all dividends, interest payments, branch remittances, royalties, professional service fees (includes consulting, expert services, and technical, commercial or other advice), commissions and other in come. In general, Bolivian-source income is income that is deriv ed from assets located, plac ed or economically used in Bolivia, or from activities developed in Bolivia. This rule applies regardless of the nationality, address, or residence of the recipient of the income or the parties involved in the activities, or where the relevant contract is executed.

For dividends paid by Bolivian companies, the withholding tax is payable when the dividends are actually paid, remitted or credit­ed. However, branch profits are deemed remitted when the cor­porate income tax return is due (120 days after the end of the tax year; see Administration).

Dividends. The 12.5% withholding tax on payments to foreign beneficiaries applies to dividends paid by Bolivian companies (see Withholding taxes). Dividends received from Bolivian com­panies subject to Bolivian corporate income tax are not taxed.

Foreign tax relief. The Bolivian tax code does not provide foreign tax relief.

Determination of taxable income

General. Taxable income is the income reported in the companies’ financial statements prepared in accordance with generally ac­cepted accounting principles in Bolivia, subject to certain adjust­ments for tax purposes. In general, all expenses necessary to generate income and to maintain the existence of the company (for example, con tri butions to regulatory-supervisory organiza­tions, contributions for social benefits and certain national and municipal taxes) are deductible. Donations and other gratuitous transfers to nonprofit organizations that are exempt from income tax may be deducted up to a maximum limit of 10% of taxable income derived in the year of the donation or gratuitous transfer.

Certain expenses are not deductible, including the following:

  • Personal withdrawals by owners or partners
  • Corporate income tax
  • Bonuses and other benefits that are not paid to employees with­in the time period in which the annual form must be presented for the year of payment
  • Interest paid to related parties, to the extent it exceeds, for for­eign loans, the London Interbank Offered Rate, plus 3%, or, for local loans, the official lending rate. In addition, interest paid to related parties may not exceed 30% of the interest paid to third parties

Royalties paid with respect to mining activities are creditable or deductible, depending on the price of the minerals and subject to certain limits established by law.

Revenue and expenses are reflected in the year they are accrued.

Documentation for deduction of expenses. To deduct expenses in an amount of BOB50,000 or greater, the taxpayer must have pay­ment supports issued by a financial intermediation entity reg­ulated by the Authority of Supervision of the Financial System (Autoridad de Supervisión del Sistema Financiero, or ASFI). These documents must have the following information:

  • Financial institution (issuer) business name
  • Transaction or operation number
  • Transaction date
  • Transaction amount

In June 2015, the IRS issued Normative Rule No. 10-0017-15, which states that payment supports of transactions equal or great­er than BOB50,000 (the Banking Report) must be prepared on an annual basis and must be sent to the IRS between the fifth and ninth day of the following February; the due date depends on the last digit of the taxpayer’s Tax Identification Number. Until June 2015, these reports were filed on a monthly basis. Exceptionally for the period from July 2015 to December 2015, the Banking Report must cover a semester (six-month) period. For 2016 and subsequent years, the Banking Report must be prepared for the entire year.

Inventories. Inventories are valued at the lower of market value or replacement cost.

Provisions. Provisions and reserves are not deductible for tax pur­poses, with the exception of the following:

  • Technical reserves in insurance companies
  • Mandatory provisions for financial entities
  • Severance provisions
  • Bad debt provisions
  • Provisions for environmental restoration

To claim deductions, certain conditions must be satisfied.

Depreciation and amortization. Fixed assets are generally depreci­ated using the straight-line method at rates specified by law. The following are some of the annual depreciation rates.

Assets Rate (%)
Buildings 2.5
Machinery, equipment and installations 12.5
Vehicles 20
Furniture and office equipment 10
Computer equipment 25

Trademarks and similar intangible assets may be amortized in five years if they are valued using the purchase price.

Depreciation charges resulting from changes in value based on professional appraisals carried out after 31 December 1994 are not deductible for tax purposes.

Groups of companies. Groups of companies may not file consoli­dated returns in Bolivia.

Relief for losses. A Bolivian-source loss incurred in a year may be carried forward to offset taxable income derived in the following three years. Loss carryforwards are not subject to inflation adjust­ment. For the oil and mining production sector and new projects with a minimum capital investment of BOB1 million, the carry-forward period is five years. On the reorganization of companies, the carryforward period is four years.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate
Value-added tax (VAT), on all sales of
goods and services and on imports;
VAT on capital goods imported by
companies in the agriculture and cattle
Raising industries and non-extractive
industries that will be used to produce
goods for export may be deferred for
up to 3 years if an advance payment
of 10% is made
13.00%
Transactions Tax, on gross revenue;
corporate income tax from the
preceding year may be credited against
Transactions Tax; sales of a limited
liability partnership’s capital quota
Are exempt
3.00%
Real estate tax, imposed annually on
the assigned value of real property
And vehicles
Various
Excise tax, on the production or
Importation of specified goods
Beer BOB3.36 per liter plus 1%
Wine BOB3.09 per liter plus 5%
Tobacco products; rate applied on the price 50% to 55%
Vehicles; rate applied on the price 10% to 18%
Special Tax on Hydrocarbons and
Derived Products; maximum rate of
BOB7.17 per liter (2016 rates)
Premium gasoline BOB2.18 per liter
Special gasoline BOB1.23 per liter
National diesel oil BOB1.25 per liter
Aviation gasoline BOB1.85 per liter
Kerosene BOB0.29 per liter
National jet fuel BOB0.32 per liter
Fuel oil BOB0.39 per liter
Mining royalty; imposed on gross revenue;
Rates vary according to the type of mineral
Various
Financial Transactions Tax (ITF); imposed
on the amounts of debits and credits to
savings and checking accounts; ITF is
not deductible for purposes of any other
tax; the ITF Act was effective from
13 April 2012 for a period of three years;
however, in July 2015, the Bolivian
government issued Act No. 713, which
extended the term of the ITF until
31 December 2018 and introduced
increasing rates for each year; certain
items are exempt including transactions
regarding savings accounts in US dollars
if the available balance is not greater
than USD2,000, savings accounts in local
currency or in UFV, securities transactions
and payments resulting from foreign
remittances; tax is withheld by banks and other financial institutions and other
entities carrying out transactions in
payment system; rates under Act No. 713
2015 0.15%
2016 0.20%
2017 0.25%
2018 0.30%
Tax on foreign-currency sales; applicable
to banking and nonbanking financial
institutions and exchange houses; tax
Imposed on the gross transaction amount
0.70%
Additional financial aliquot (tax rate) for
corporate income tax; applicable to banking
and nonbanking institutions regulated by the
ASFI; tax applicable if return on equity exceeds
13%; tax is neither offsettable nor deductible
12.50%
Social security contributions
Employer
Health care; on monthly gross revenue per employee 10.00%
Housing fund; on monthly gross revenue per employee 2.00%
Professional risk insurance; on monthly gross revenue per employee 1.71%
Solidarity Fund 3.00%
Solidarity Fund for mining entities 2.00%
Employees
Retirement fund 10.00%
Common risk insurance 1.71%
Solidarity Fund (fixed contribution) 0.50%
Solidarity Fund (variable and cumulative contribution)
Difference between the total salary and BOB35,000 10.00%
Difference between the total salary and BOB25,000 5.00%
Difference between the total salary and BOB13,000 1.00%
Christmas bonus (Aguinaldo);
general paid between 1 December
and 20 December each year; if
employment is less than a year, the
Bonus is reduced pro rata
One month’s salary
Second Christmas bonus (second
Aguinaldo); must be paid if Bolivian
gross domestic product increases by
more than 4.5%
One month’s salary
Termination compensation; bonus
for termination of employment;
amount depends on length of
employment and whether the
employee was fired or resigned
Various

Miscellaneous matters

Foreign-exchange controls. The Bolivian currency is the boliviano (BOB).

No restrictions are imposed on foreign-exchange transactions, including the repatriation of capital and the remittance of divi­dends and royalties abroad. A system of free-floating exchange rates exists in Bolivia. No special registration requirements apply to foreign investment.

The current exchange rate is BOB6.96 = USD1.

Transfer pricing. In July 2014, Act No. 549 introduced a transfer-pricing regime in Bolivia, effective from the 2015 fiscal year. Under this regime, commercial and/or financial transactions per­formed between related parties must be valued using the arm’s-length principle. The transactions must be valued as if they were performed between unrelated parties in comparable markets.

The following methods may be used to value transactions between related parties:

  • Comparable uncontrolled price
  • Resale price
  • Cost-plus
  • Profit-split
  • Transactional net margin
  • Notorious price in transparent markets (applicable to the import or export of commodities)

For this purpose, the IRS may verify if the transactions are valued according to the above methods and make any adjustments or re­valuation if the agreed value, regardless of the adopted legal form, does not conform to the economic reality or causes lower taxation in Bolivia.

In April 2015, the IRS issued Normative Rule No. 10-008-15, which imposes the following obligations:

  • If annual operations with related parties are greater than BOB15 million (USD2,155,172), a transfer-pricing study and Form No. 601 must be delivered to the IRS.
  • If annual operations with related parties are between BOB7,500,000 (USD1,077,586) and BOB15 million (USD2,155,172), only Form No. 601 must be delivered to the IRS.
  • If annual operations with related parties are less than BOB7,500,000 (USD1,077,586), the company must retain information to demonstrate that the operations were made at market values.

Reorganizations. Profits arising from company reorganizations, which are mergers, divisions or transformations, are not subject to corporate income tax. Regulations on reorganizations are ex­pected to be issued in the near future.

Tax treaties

Bolivia has entered into tax treaties with Argentina, France, Ger­many, Spain, Sweden and the United Kingdom. It has also signed the Andean Pact, which includes a tax treaty, with Colombia, Ecuador and Peru. However, the government is reviewing these treaties to determine whether they accomplish new government policies. As a result, these treaties may be ratified or revoked.