Taxes and Audits: Considerations to be taken into account.

The correct fulfillment of the formal duties and a good management of the accounting of your company prevent from and in some cases eliminate fines and tax penalties.

Bolivia prioritize the Source Principle, that is to say, that all income generated in the national territory will be taxed regardless of the nature or origin of the company. The three main taxes are Value Added Tax -IVA (it taxes all usual trading activities), the Tax on Transactions -IT (reaches all the transactions carried out in Bolivia) and the Tax on the Profits of Companies -IUE (which taxes all the gains obtained in a fiscal year).

Within the fiscal year of a company, it must comply with the payment of taxes corresponding to that period. Moreover, those taxes must be correctly declared (adequately fill  the Forms and amounts) and the company should also comply with the so-called Formal Duties, such as access to banking services, purchase ledger, transfer prices, among things of the similar nature. Failure to comply with these duties or the misrepresentation of taxes may lead to penalties ranging from pecuniary fines to the beginning of actions of collection by the Tax Authority that conclude in bank account freezes, mortgages and even auctions of such mortgaged property.

The greater risk of non-compliance arrives when the company tries to regularize payments or tax debts, since the amounts owed are increased by the complements that accompany the tax debt (interests, maintenance of value, arrears and fines). As a result, debts can show severe increases over time.

On the other hand, each company is subject to revisions or audits by the Fiscal Authority in order to verify the veracity of the tax declarations, the correct compliance of the tax rules and the payment of taxes arising from the transactions carried out by the companies. In many cases, companies may be subject to objections by the auditors due to the interpretation that the administrative authority and / or the officials in charge have. In this type of situation companies can be affected, if it is not possible to adequately support the management and / or development of each company, since the observations made by the tax authority lead to severe penalties, increases in tax debts and generations of fines.

Although such concepts can be challenged or appealed in other instances, the right to opt for a challenge could obtain as a result an increase in interest tax debts, maintenance of value, arrears and fines above mentioned.

It is necessary to point out that the success of any fiscal year, will depend on a correct accounting management of the companies, together with a documentary control of the transactions that are carried out, since these will be the indispensable tools to be able to face any control / verification / supervision of its operations by the tax authority.“, advises Candys Dorado, Lawyer Responsible for the Tax Department of Indacochea & Asociados, Abogados, Sociedad Civil.