SIGNIFICANT DEVELOPMENTS
There have been no significant tax or regulatory developments regarding individual taxation in the past year.
TERRITORIALITY AND RESIDENCE
Bolivia taxes its citizens and residents on their Bolivian-source income only. Foreign-source income is not taxable in Bolivia. The Bolivian-source income of nonresident aliens is subject to Bolivia tax. Domicile and citizenship do not affect the tax base.
GROSS INCOME
Employee gross income/A resident is taxed on salaries, bonuses (except obligatory year-end bonus), profit participation, living allowances, housing allowances, tax reimbursements, benefits-in-kind, and any other form of income earned as an employee for work carried out in Bolivia. There are
no concessions to short-term foreign residents. A nonresident is taxed on Bolivian-source earnings at the rate of 12.5% of gross income.
Capital gains and investment income/ Investment income from a Bolivian source (except dividends paid to residents) is taxed as ordinary income. Capital gains are not subject to tax. Interest, dividends, and so on, earned in Bolivia by nonresidents are subject to a withholding tax of 12.5% when
remitted or credited to a personal account. Investment income from outside Bolivia is not taxed in Bolivia.
Deductions Business deductions/ No business expenses may be deducted from income.
Nonbusiness expenses/ A resident may deduct social security taxes paid.
No other expenses are deductible.
Personal allowances/ Residents have a basic deduction of two minimum salaries per month. As of December 31,2000, the minimum salary was Bs400 per month.
Tax credits All value added tax paid by individuals as part of the price of items for personal consumption is deductible from the personal income tax payable, provided the purchases are properly documented.
In addition to the tax credit for VAT, the law allows an additional tax credit equivalent to 13% of two minimum salaries per month.
Other taxes Social security taxes/ Pension funds are administered privately and only employees contribute toward their retirement pension, at a rate of 12.5% of salary, with a ceiling of approximately US$470 per month (12.5% of 60
minimum salaries). This payment is registered under an individual account.
Local taxes on income/Other than the tax on salaries, there are no local taxes on income earned by employees. However, income earned for independent activities, as well as that arising from local investments, is subject to a 12.5% annual income tax.
Tax administration Returns/The tax on an employee’s salary is withheld by the employer, who presents a global tax return. No further tax-further tax-filing requirement exists for this tax. Individual taxpayers must submit tax returns on a
monthly basis for value added tax and transactions tax and on an annual basis for income tax. There is no joint filing for husband and wife.
Payment of tax/ Employers file and pay taxes withheld to their personnel.
Investment and other income must be declared on an individual basis, and the related tax liability is paid by the taxpayer on an annual basis.
Tax rates The tax rate s a flat 13% on salaries and 12.5% on other income.
INDIVIDUAL TAX CALCULATION
Income year 2001
(Taxes are liquidated on a monthly basis)
Gross income
Salary Bs 336,000
Profit participation (one month’s salary) 28,000
Investment income 6,000
370,000
Less-Nonbusiness deductions:
Social security taxes-12.5%*288,000(60*400*12) 36,000
334,000
Less-Pers
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