DS 5327: What every business must know about the new compensation IUE-IT

The Supreme Decree N° 5327published February 5, 2025, has generated great expectations in the business environment due to the changes introduced in the form to compensate for the Tax on the Earnings of the Companies (SUI)with the Transaction tax (IT). In essence, the standard now determines the deduction of UIE only to payments made until the due date. This change not only impacts the tax planning of companies, but that can directly affect your cash flow and the management of payment plans for the future. Below, we offer an in-depth analysis of the main aspects that brings you to this provision and how organizations can prepare to comply with the new legal requirements without compromising their operational or financial.

GENERAL CONTEXT

In Bolivia, the Law N° 843 (Text Orderly Force, hereinafter “TOV”) regulates, among others, the Transaction Tax (IT) and the Tax on the Earnings of the Companies (IUE). The Supreme decree (DS) N° 21532sets the rules for IT and, together with the DS N° 24051, regulates different aspects of the IUE and its interrelationship with other taxes.

The Article 77 of the Law N° 843 TOV provides that the IUE paid by the taxpayer can be used as a payment on account of IT. The text points out that the compensation will be made “in the form, proportion and conditions established in the regulation.” Under this premise, the Executive branch is empowered to issue regulations, provided that they do not contradict the Law.

WHAT CHANGED WITH THE SUPREME DECREE N° 5327?

The DS N° 5327published on 05 February 2025 introduces changes in the Article 7 of the DS N° 21532. In the previous version, provided that the IUE actually paid may be used as a credit against IT without specifying a time limit. With the new wording, add the phrase “until its maturity date”, limiting the compensation payments of UIE made before or until the expiration date.

IMPLICATIONS OF THE MODIFICATION

• Restriction on the timing of the compensation: Previously, the actual payment of the IUE, even after the expiration, you could compensate. Now, only the IUE paid until the last day of maturity is credited against IT.

• Impact on payment plans (Payment Facilities): Taxpayers that are subject to a payment plan for the IUE after the due date will no longer be able to compensate for these fees with IT.

• Involvement of the cash flow: Many companies planned their partial payments of the IUE to compensate for monthly IT. With the change, you must cancel the IUE (or a large part of it before the due date if they wish to take advantage of the compensation.

WHAT IS THIS MODIFICATION CONTRARY TO THE NORM?

• Law N° 843 (Article 77): Sets the IUE shall be considered a payment on account of IT “in the form, proportion and conditions established in the regulation.”

• Legal Debate:

• Stance: The Supreme Decree is part of the regulatory power of setting conditions, as the maximum period of payment.

• Stand against: The Law does not set a time limit strict; therefore, a DS should not impose it, as it could restrict a right established by law.

Certain interpretations argue that it could bring legal or constitutional, arguing that the regulatory standard may exceed the power conferred by the Law.

VALIDITY OF THE MEASURE

The Single Transitional Provision DS N° 5327 indicates that the modification is applied to the IUE whose expiry date subsequent to the entry into force of the Decree. According to the text, the measure shall apply from the management 2025.

For taxpayers with close management of December 31, the expiration of the IUE occurs on the 30th of April of the following year. Therefore, the first maturity affected could be the April 2025, if it coincides with the entry into force of the full DS N° 5327.

THE PRACTICAL EFFECTS FOR THE COMPANIES

• Pressure to pay before the due date: In order not to lose the compensation, the taxpayer must pay the IUE during or before the expiration.

• Less flexibility of cash flow: Those who lack the liquidity to pay the IUE to time may be required to request payment facilities, but will not get the compensation for fees paid after the due date.

• Deductibility as an expense: If you are not able to offset the IUE with the IT, the amount paid may be deducted as an expense for the next fiscal year, although this will have an impact on the immediate liquidity.

ANALYSIS OF THE STATEMENT OF THE MINISTRY OF ECONOMY AND PUBLIC FINANCE

The Ministry of Economy and Public Finance (GFSM) issued a press release (07/02/2025) stating that:

• The compensation is not deleted or violate the regulations, since it continues to exist.

• We keep the Payment Facilities up to 30 months for taxpayers without liquidity.

• Only fees paid until the expiration date may be compensated for IT.

This finding confirms the read more restrictive DS N° 5327. If the taxpayer intends to compensate for something, you will need to pay in advance or until the last day of the expiration of the IUE.

RECOMMENDATIONS AND CONCLUSIONS

• Tax planning: Companies must rethink its strategy of payments of the IUE, trying to pay off all or part of the tax before the due date in order not to lose the credit against IT.

• Assessment challenges: There is the possibility of guilds or companies affected to consider the legality of this provision and to initiate an action before the Constitutional Court or before the contentious-administrative.

• Monitoring of the regulations: It is recommended to follow closely the evolution of this standard and possible clarifications, modifications, or pronouncements additional tax authorities.

• Operational impact: It is suggested to evaluate in detail the cash flow and payment schedules, especially if the company would defer the IUE or eligible for payment plans extended.

• Validity: For the moment, the DS N° 5327 continues in effect and will be applicable in practice from the management 2025, depending on the maturity date of each particular contributor.