Bolivia does not include group taxation rules within its legislation.
The value of commercial and/or financial transactions carried out between related parties must be the value that would have been agreed between independent parties if they had engaged in the same transaction under the same circumstances. In addition, domestic companies related to foreign companies must prepare their accounting records separately, so that their financial statements determine taxable net profits from Bolivian-source income.
Existence of relationship
There is a relationship when an individual or a corporate entity participates in the direction, control, administration, or has capital in the other company, or when a third party directly or indirectly participates in the direction, control, administration, or has capital in two or more companies.
When individuals or domestic companies directly or indirectly conduct commercial and/or financial transactions with individuals or companies domiciled in countries or regions with low or null taxation (tax havens), these transactions will be considered as if they were carried out between related parties. Note that the Bolivian legislation initially approved Administrative Resolution 10170000001, which includes a reference list of countries/regions considered low or nil taxation jurisdictions based on guidelines set forth by Supreme Decree 2993. On 15 February, Administrative Resolution 101900000002 was issued, which updated the countries/regions considered low or nil taxation jurisdictions for tax purposes.
Requirement to submit a transfer pricing study
Taxpayers must submit a transfer pricing study to the Bolivian IRS in regards to the transactions carried out between related parties, together with the statutory financial statements and the annual CIT return. The transfer pricing study must include, among others:
- Complete identification of the taxpayer and related parties.
- Description of the activity carried out.
- Description, characteristics, amounts, and volume of transactions carried out between related parties.
- Tax identification number and country of residence of related parties.
- Commercial strategies, including determination of prices and other special circumstances.
- Functions carried out by the taxpayer within the related transaction from a commercial and industrial perspective.
Transfer pricing methods
Each of the following six methods may be used to determine the value of a commercial and/or financial transaction carried out between related parties:
- Comparable uncontrolled price.
- Resale price method.
- Cost plus method.
- Profit split method.
- Transactional net margin method.
- Evident price on transparent markets method.
The application of the above-mentioned methods will depend on the nature and the real economic situation of the transactions under analysis and the circumstances of each case (i.e. rule of the best method). Definitions of the methods are in line with international principles defined by the OECD, except for the sixth method, which comes from Argentinian legislation with some variations.
When it is not possible to determine the value of a transaction through one of the above-mentioned methods, taxpayers can apply other methods that are in accordance with the nature and real economic situation of the transaction.
Bolivian legislation does not include provisions for thin capitalisation apart from establishing restrictions on deductibility of interest when funding is provided by shareholders (see Interest expense in the Deductions section).
Controlled foreign companies (CFCs)
There are no CFC provisions in Bolivia.