Bolivia Mining and metals tax guide May 2017 Contents A.At a glance... 1 B. Fiscal regime... 1 C. Capital allowances... 3 D. Incentives... 3 E. Withholding taxes... 3 F. Financing considerations.. 4 G. Transactions... 4 H. Indirect taxes... 4 I. Other... 5 Contacts Juan Pablo Vargas Partner/Principal Tax Ernst & Young Ltda juan.vargas@bo.ey.com +59 12243 4313 Ximena Enriquez Senior Manager Tax Ernst & Young Ltda ximena.enriquez@bo.ey.com +59 12243 4313 This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global EY organization accepts any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, you should seek appropriate advice A. At a glance Corporate income tax 25% Royalties 0% 7% Bonuses B. Fiscal regime Losses can be carried forward for five years in the mining sector In Bolivia, the fiscal regime applicable to the mining and metals industry consists of a combination of corporate income tax and royalty-based taxation. Corporate tax Generally, resident Bolivian corporations are subject to income tax on their nonexempt worldwide income at a rate of 25%. Income of nonresident corporations is taxed on a basis as having a Bolivian source, although taxes can apply to income or gains on a basis other than having a Bolivian source. The income of nonresidents is subject to a tax rate of 25% while income generated from Bolivian mining activities is also subject to the 25% tax rate. Corporate income tax (IUE for its Spanish abbreviation) is applied on a company s profits (resulting from the financial statements at the closing of each year), adjusted according to the corresponding tax regulation. In 2007, an additional tax was established with Act N 3787, dated 24 November 2007 (an amendment to Act N 1777 Mining Code), which applies an additional tax rate of 12.5% on profits when prices of minerals and metals are equal to, or higher than, the base quotations established by law.
Act N 3787 stipulates the following: If within a tax year, there are sales lower than the base tax rate, the tax on the portion of profits generated by such sales is not applied. This latest treatment is subject to a regulation that, as of this date of this publication, has not yet been issued. In order to encourage transformation of raw material in Bolivia, companies producing metal or nonmetal minerals with added value will pay only 60% of the additional tax rate of the IUE. In Bolivia, profit from one project can be offset against the losses from another project held by the same tax entity (as determined by the tax identification number). Similarly, profits and losses from exploration activities can be offset against production activities undertaken by the same entity. Corporate income tax is levied on taxable income. Taxable income equals assessable income less allowable deductions. Deductions include expenses incurred in producing assessable income or incurred in carrying on a business for the purpose of producing assessable income. Profits from mining activities by a Bolivian resident company in a foreign country are generally not taxed in Bolivia, unless they are undertaken through a foreign permanent establishment. Capital gains tax In Bolivia, net capital gains are taxed at 25% for companies. Capital losses can only be offset against capital gains and not against other taxable income. However, trading losses are deductible against net capital gains, which are included in taxable income. Net capital losses can be carried forward for five years as a tax loss. Functional currency Taxpayers may calculate their taxable income in the local currency (boliviano). Transfer pricing Transactions between Bolivian companies comprised of foreign capital and foreign companies, and individuals who directly or indirectly control the company are deemed to be entered into by independent parties. On the basis of this, a new transfer pricing regime is being enforced since FY15. For mining companies, the regime has been in force since 1 October 2014. For mining products (commodities), the method of notorious price on transparent market transactions must be used. This consists of setting the price for import and export of goods, irrespective of the presence of an international intermediary, using the prices of the shipment date. For intermediate products (e.g., concentrates), the comparable uncontrolled price (CUP) method can be used. Dividends Dividends paid by Bolivian resident individuals or companies are not taxed. Dividends paid or credited to nonresident shareholders are subject to a final 12.5% withholding tax (the rate is generally reduced by any applicable double taxation treaty). Subject to tax treaty relief, the withholding tax is deducted at source on the gross amount of the dividend. Failure to withhold and remit the withholding tax to the Tax Office has penalty consequences for the payer. Bolivia has entered into tax treaties with Argentina, France, Germany, Spain, Sweden and the UK. It has also signed the Andean Pact, which includes Colombia, Ecuador and Peru. On the basis of the source principle, dividend payments should be taxed at the moment of: Remittance or payment Any other kind of accreditation to a foreign company (e.g., capitalization) Tax year A mining company s tax year runs from 1 October to 30 September of each year. Royalty regimes Royalties are taxes levied on production from mining operations. Royalties are generally levied on the realized value of the processed product (e.g., gold ingots and nickel pellets) and not on the value of the resource extracted in its natural state (e.g., the mineral-bearing ore). Mining and metals tax guide: Bolivia EY 2
C. Capital allowances Depreciation and amortization Fixed assets are generally depreciated using the straight-line method at rates specified by the law. The following are some of the annual depreciation rates. Assets Rate) Buildings 2.5% Machinery and equipment 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. D. Incentives Exploration Expenditures on exploration can be immediately deductible for income tax purposes. Tax losses For mining entities, income tax losses can be carried forward for five years. E. Withholding taxes Interest, dividends and royalties Interest, dividends and royalties paid to nonresidents are subject to a final Bolivian withholding tax. In addition, some double taxation treaties specify that business incomes are taxed in the home country and not in Bolivia. Branch remittance tax Branch profits are deemed remitted when the corporate income tax return is due (120 days after the end of the tax year). This presumption can be avoided if there is a reinvestment of dividends registering a reserve in the equity. Withholding taxes Local entities, including permanent establishments of foreign companies that pay Bolivian-source income to foreign beneficiaries, must withhold 12.5% of the amount paid. For this purpose, Bolivian-source income includes all dividends, interest payments, branch remittances, royalties, professional service fees (including consulting, expert services, and technical, commercial or other advice), commissions and other income. Bolivian-source income is derived from assets located, placed or economically used in Bolivia, or from activities developed in Bolivia. This rule is applicable 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. Mining and metals tax guide: Bolivia EY 3
F. Financing considerations According to Bolivian regulations, the following apply: Interest on loans from owners or partners are nondeductible as to the portion that is higher than the active bank rates or London interbank-offered rate (LIBOR) plus 3%. The deductible interest paid to owners cannot exceed 30% of the interest paid to third parties. On the other hand, if there is no interest paid to third parties, the amount of interest paid to owners will be nondeductible. On sale of Bolivian companies shares, according to the source principle, the possible gains that could arise are considered Bolivian-source income and, therefore, such gains are taxable. Likewise, gains derived from financial transactions effected through the Bolivian Stock Exchange are not taxed. G. Transactions Not applicable. H. Indirect taxes Value-added tax Value-added tax (VAT) is imposed on real estate sales, services, construction contracts and other definite imports. VAT is not imposed on the following: Interest on granted credits and deposits received by financing institutions Stock sales or purchases and debentures Securities and financial claims Transfers due to reorganization of companies (mergers and legal transformations of a partnership) The rate is 14.94% over the net price (i.e., 13% over the gross sale including VAT), and the tax must not be shown separately in the tax invoice. The liquidation term is monthly, and is done between the 13th and the 22nd day of the following month from the tax period being paid. The due dates are determined based on the last digit of the tax identification number (NIT for its Spanish abbreviation). Import duties All goods, equipment and materials that enter Bolivia from overseas are subject to customs import duties. The general rate of customs duty applied to the customs value of imported goods is 0% to 40%. However, this rate may fluctuate depending on several variables, including the type of commodity, its end use, constituent material and country of origin. On the other hand, Bolivia has signed commercial treaties with the following countries in order to reduce the custom duties Colombia, Ecuador, Peru, Argentina, Brazil, Uruguay, Paraguay, Chile, Mexico, Cuba and Venezuela. Export duties There are no duties applied to goods exported from Bolivia. Mining and metals tax guide: Bolivia EY 4
Other taxes The following table summarizes other significant taxes. Nature of tax Rate VAT on all sales of goods and services and on imports 13% Transactions tax on gross revenue: IUE from the preceding year may be credited against transactions tax 3% Real estate tax imposed annually on the assigned value of real property and vehicles 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; ITF was effective from 25 July 2006 for a period of three years and an extension of this period through the National Budget Law of 2009 for three additional years. Finally, in 2012, the period was extended for three more years, effective from July 2012. Certain items are exempt, including transactions regarding savings accounts in US dollars (if the available balance is not higher than US$2,000), savings accounts in local currency, securities transactions and payments resulting from foreign remittances. Tax is withheld by banks and other financial institutions and other entities carrying out transactions in the payment system. Various 0.15% I. Other Foreign exchange controls 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. Business presence Forms of business presence in Bolivia typically include companies, foreign branches and joint ventures (incorporated and unincorporated). In addition to commercial considerations, the tax consequences of each business are important to consider when setting up a business in Bolivia. Unincorporated joint ventures are commonly used by companies in the exploration and development of mining projects. Visas Most foreign nationals do not need to obtain visas before entering Bolivia. Tourist visas are generally issued on arrival to individuals who intend to visit Bolivia for family, health, recreational or sporting purposes and who have no intention of immigrating or engaging in remunerated activities. Tourist visas are valid for 90 days and are renewable for two 90-day periods. An expatriate who wants to engage in remunerated activities in Bolivia must apply for a visa or a residence permit that entitles them to work. The most common of these documents are the provisional work permits for tourists, subject-to-contract visas and temporary visas. Except for provisional work permits, these permits may be obtained after the expatriate has entered the country. Individuals may also obtain the documents before their arrival through a Bolivian consulate abroad. Foreign nationals may establish businesses in Bolivia if they comply with all legal requirements. Companies may be headed by foreign nationals who are resident or domiciled in Bolivia for tax purposes. The visas mentioned above allow individuals to reside and work in Bolivia. Mining and metals tax guide: Bolivia EY 5
How EY s Global Mining & Metals Network can help your business With increasingly positive sentiment in the sector, miners are focused on restoring balance sheet strength and liquidity in preparation for growth. The sector s key opportunity is still productivity. Although many have made productivity improvements, the critical next wave of gains needs a strong focus on loss elimination, with digital being a key enabler. EY has significant experience in assisting companies to evaluate and implement strategic initiatives, with deep sector knowledge to support you on finance initiatives, such as portfolio optimization and capital planning, and through to operational improvement programs, such as productivity and digital enablement. Area contacts EY Global Mining & Metals Leader Miguel Zweig +55 11 2573 3363 miguel.zweig@br.ey.com Oceania Scott Grimley +61 3 9655 2509 scott.grimley@au.ey.com China and Mongolia Peter Markey +86 21 2228 2616 peter.markey@cn.ey.com Japan Andrew Cowell +81 3 3503 3435 andrew.cowell@jp.ey.com Africa Wickus Botha +27 11 772 3386 wickus.botha@za.ey.com Commonwealth of Independent States Boris Yatsenko +7 495 755 9860 boris.yatsenko@ru.ey.com Canada Jim MacLean +1 416 943 3674 jim.d.maclean@ca.ey.com Brazil Afonso Sartorio +55 11 2573 3074 afonso.sartorio@br.ey.com Chile María Javiera Contreras +56 2 676 1492 maria.javiera.contreras@cl.ey.com Service line contacts EY Global Advisory Leader Paul Mitchell +61 2 9248 5110 paul.mitchell@au.ey.com EY Global Assurance Leader Alexei Ivanov +7 495 228 3661 alexei.ivanov@ru.ey.com EY Global IFRS Leader Tracey Waring +61 3 9288 8638 tracey.waring@au.ey.com EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. 2017 EYGM Limited. All Rights Reserved. EYG no. XXXXXX ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice. ey.com/miningmetals France, Luxemburg, Maghreb, MENA Christian Mion +33 1 46 93 6547 christian.mion@fr.ey.com India Anjani Agrawal +91 22 6192 0150 anjani.agrawal@in.ey.com EY Global Tax Leader Andrew van Dinter +61 3 8650 7589 andrew.van.dinter@au.ey.com EY Global Transactions Leader Lee Downham +44 20 7951 2178 ldownham@uk.ey.com United Kingdom & Ireland Lee Downham +44 20 7951 2178 ldownham@uk.ey.com