Transfer Pricing in Bolivia
Transfer pricing legislation in Bolivia is not longstanding, being 2014 the year in which the regulation in this matter is introduced, through Law 549 or “Investment Promotion Law”, which modifies Articles 45, 45 bis and 45 ter of Law No. 843 (the Law).
In the same year, Supreme Decree No. 2227 was published, which regulates the provisions of the Law in question, regulating the cases of connection, methodology, and documentation to be presented, among other guidelines.
Later, in 2015, the Regulatory Resolution of the Board of Directors No.10-0008-15 was published, which establishes the subjects obliged to present the Transfer Pricing Study and the Informative Affidavit; as well as the deadlines for presentation and form.
Although Bolivia’s transfer pricing regulations had not mentioned the Organization for Economic Cooperation and Development (OECD) until that time, it was not until 2017 that the National Tax Service (SIN) made reference to this organization by means of RND 1017000001 when it included the list of countries with low or no taxation.
What is transfer pricing?
Transfer prices are the prices or values agreed in transactions between related parties or also known as intercompany transactions.
Principle of full competition: Concept
This principle governing transfer pricing, also known as the “arm’s length” principle, is based on the fact that prices agreed between related parties are in accordance with market value, as if they had been agreed upon by independent parties.
This principle is also regulated in the Bolivian transfer pricing legislation, in Article 45 of Law No. 843, which states that the prices agreed in commercial and/or financial transactions between related parties must be those agreed between independent parties.
Definition of related parties in Bolivia
In accordance with the third paragraph of Article 45 of the Law, two or more companies will be considered as related parties when a person, whether natural or legal, participates in the management, control, administration or capital of another company.
Such linkage will also be formed when a third party, directly or indirectly, participates in accordance with the provisions of the preceding paragraph in two or more companies.
In relation to this, Article 2 of the D.S. No. 2227, indicates certain cases of linkage, such as the following:
- A person, whether natural or juridical national, participates in a direct or indirect manner in the direction, control, administration or holds capital in one or more foreign companies.
- A natural or juridical person residing abroad participates, as indicated in the preceding paragraph, in one or more domestic companies, or in the branches, affiliates, or subsidiaries of foreign companies operating in the national territory.
- A person, whether natural or juridical, that has operations in Bolivia, that maintains direct and indirect commercial and/or financial relations, with natural or juridical persons that are domiciled or that carry out operations in countries with low or no taxation.
- When a company, whether a branch, subsidiary or affiliate in Bolivian territory maintains operations with its parent company abroad, or vice versa.
- When commercial and/or financial operations are carried out between a subsidiary, affiliate or branch in the country and another or others abroad, corresponding to the same parent company.
- Commercial and/or financial operations are carried out between a national company and another domiciled abroad, whose owners, shareholders or partners, managers or board members are related up to the fourth degree of consanguinity and second degree of affinity.
Likewise, with respect to countries or regions with low or no taxation, the Annex to the 2017 Board of Directors’ Resolution No. 1017000001, which lists these, must be taken into account.
Transfer pricing methods in Bolivia
According to Article 7 of the D.S. No. 2227, transfer pricing legislation in Bolivia provides for six methods to analyze whether prices agreed between related parties comply with the principle of full competition:
- Comparable Uncontrolled Price Method.
- Resale price method.
- Added cost method.
- Profit distribution method.
- Method of the net margin of the transaction.
- Notorious price method in transparent market transactions.
The standard also states that the most appropriate method for the type of operation will be applied.
Comparability analysis in Bolivia
In order to compare whether two or more transactions are comparable, the following will be taken into consideration, according to Article 5 of the Decree in question:
- The characteristics of the goods or services.
- The functions assumed by the parties, for which risks and assets used will be identified.
- The contractual terms of the transaction.
- The characteristics of the market or other influencing factors.
- The commercial strategies.
Formal transfer pricing obligations in Bolivia
The following are obligations of the taxpayer in transactions with related parties, according to Article 3 of the D.S. No. 2227:
- Every company, affiliate or subsidiary established in the country must keep its own records separately.
- Companies domiciled in the country that carry out transactions with related parties must carry out their transactions at market values.
- The taxpayer must submit to the National Tax Service a transfer pricing study on related-party transactions.
Transfer pricing information affidavit
According to Article 7 of the Normative Directorial Resolution Nª10-0008-15, those taxpayers who are in the following situation are obliged to present an Informative Affidavit of Operations with Related Parties:
- Those whose transactions with related parties accumulated in an annual management are equal to or greater than Bs7,500,000 (Seven million five hundred thousand 00/100 Bolivianos).
Such declaration shall be filed on Form No. 601 through the Da Vinci application, which can be found on the SIN page.
Transfer pricing documentation in Bolivia
Articles 3 and 4 of RND No. 10-0008-15, indicate the characteristics and requirements that the Transfer Pricing Study that the taxpayer must submit must contain.
Likewise, Article 7 indicates the taxpayers obliged to submit the study:
- Taxpayers whose transactions with related parties, accumulated over the course of one year, are equal to or greater than Bs15,000,000 (Fifteen million 00/100 Bolivianos).
In this case, as indicated in the regulation, the taxpayer must submit both the study of the reference and the declaration mentioned above.
If the transactions with related parties do not exceed Bs7,500,000, they shall only keep the supporting documentation to prove that their transactions with related parties are in line with market value.
Deadline for submission
The term to send both physically and digitally the Firm, when required, as well as the Affidavit will be, according to Article 9 of RND No. 10-0008-15, within the term established for the submission of the Affidavit and payment of the Corporate Income Tax (IUE).
Sanctions for noncompliance with transfer pricing in Bolivia
Sanctions for non-compliance with transfer pricing obligations are regulated by Article 162 of Law 2492 or “Bolivian Tax Code”, which depend on the type of infringement committed.
Likewise, it should be noted that Annex I of RND No. 10-0033-16 has established the sanctions for each of the infringing conducts, in accordance with the aforementioned article of the Tax Code.
For those related to transfer pricing obligations, they are regulated from paragraph 3.23 to 3.31 of the aforementioned Annex, which range from 2500 UFV to 5000 UFV.
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