The COVID-19 crisis had severe consequences on the health of the population, but also on the viability of economies, as a result of limitations on the movement of people and goods and the paralysis of production chains. More specifically, the case of Bolivia, an economy based on the extraction and export of natural resources -mainly mining and gas- that has been seriously affected by the decline in tax revenues and the slowdown in economic activity.
Against this backdrop, the country’s Government has taken a series of measures in order to mitigate the urgent impacts of the crisis, using instruments such as tax incentives, boosting entrepreneurial activity, aid to the population considered vulnerable, loans and payment facilities to the business sector to sustain the production chain and protect jobs, and strengthening the infrastructure and capacity of the health system to deal with the health emergency.
On July 24, the Bolivian government issued Supreme Decree 4298, which provides tax incentives for economic recovery and also establishes a set of measures to encourage the creation of new businesses, in addition to promoting the consumption and production of goods made in Bolivia.
The following is a summary of the main tax incentives contained in Decree 4298:
- Taxpayers under the Complementary VAT Regime may charge an additional proportion equivalent to 20% of the VAT paid on purchases of products made in Bolivia since the publication of Decree 4298, until 31 December 2020.
- Companies may calculate for VAT tax credit, purchases of food, acquisition of biosecurity supplies and medicines, hiring private health services and transportation in national territory of their dependents.
- Companies may, on a voluntary basis, have access to accelerated depreciation for their fixed assets acquired between 1 April and 31 December 2020, from the time when they are first put into use until they are completely exhausted, consisting of the application of half their useful life.
- The uncollectible provisions from the management of the fiscal year 2019 will be deductible from the Business Income Tax in the management of the fiscal year 2020, considering for the second year: the real uncollectible credits of the management 2019, or alternatively, 60% of the real uncollectible credits of the management 2020, whichever is greater.
- Extensions for the payment of VAT and Transaction Tax are established under the following schedule:
- July and August fiscal periods, to be paid in September,
- Fiscal periods of October and November, to be paid in December.
- Companies may compute 50% of employer contributions paid for wages and salaries that individually do not exceed (4) Four National Minimum Wages as a payment on account of VAT.
The employer contributions referred to in the preceding paragraph include the Employer Contribution for Housing, Professional Risk Premium and Employer Contribution, Short Term Social Security that were effectively paid in the same VAT fiscal period that is declared.
This benefit, aimed at preserving employment in the face of the emerging health crisis of COVID 19, is of an exceptional nature and will be in force only until December 31, 2021.
- For natural persons exercising liberal professions or trades, the taxable base of the Tax on the Profits of Companies will be constituted by the total income accrued during the fiscal management less the Value Added Tax declared for these concepts and the contributions made to the Social Security system, until December 31, 2021.
- The Bolivian National Customs (ANB) will establish payment facilities for up to 36 months for the payment of customs duties.
- The Tariff Rate is temporarily deferred to zero percent (0%), until December 31, 2021, for the import of machinery, equipment and functional units, destined to the food, agro-food, textile and metallurgical industries.
- The payment of the Corporate Income Tax, corresponding to the management closed on March 31, 2020, is deferred until October 30, 2020 for industrial companies, including construction companies that have been categorized by the National Tax Service as industrial; in addition, industrial companies that only reach 50% of the declared tax up to October 30, will have an extension until November 30 to pay the remaining 25% and the final 25%, until December 31, 2020.
Additionally, Supreme Decree 4298 creates the Special Integrated System of Transition for Entrepreneurs to the General System (SIERE-RG), which consolidates the payment of Value Added Tax (VAT), Transaction Tax and Corporate Income Tax. This General Regime is intended to promote entrepreneurial activity and reaches those taxpayers who meet the following conditions:
- Sole proprietorship or independent professional
- To develop productive manufacturing or service activities with a projected annual income equal to or less than two hundred and fifty thousand Bolivians (Bs. 250,000)
- Have a maximum of two establishments or economic units
- Accept the use of Electronic Payment Instruments for the sale of goods or services.
The tax treatment for SEVEN-RG taxpayers will be as follows:
- Bimonthly payment of a mono-tax equivalent to 5% of their gross sales in that period
- They will issue authorized invoices that will not generate a tax debit for the issuer, but a 5% tax credit for the buyer subject to VAT or VAT.
- They will accumulate the tax credit contained in the invoices of their purchases linked to their activity, to be used when the entrepreneur stops at the General Regime.
- Automatic migration to the General Regime when they have gross annual sales of more than two hundred and fifty thousand Bolivianos (Bs. 250,000) or when they comply with the transitional period of three (3) years computable from their registration.
Excluded from Regime SEVEN-RG are those who carry out extraction activities of natural resources, commission agents or consignees; sell or produce goods subject to Specific Consumption Tax and those who are registered in another Tax Regime.
The Coronavirus crisis is presenting significant challenges for all companies and in this context, information is essential. In Auxadi we are experts in providing value added services in accounting, finance, tax compliance, payroll management and technology, being a strategic partner of your business. If you need more information, please contact us.