Venezuela Taxes
TAX TREATMENT OF FOREIGN-OWNED FIRMS: Except for the petroleum
sector, the current Venezuelan income tax law does not
differentiate between foreign-owned and Venezuelan-owned firms.
The maximum and most widely applicable individual and corporate
tax rate is 34% under a new income tax law which came into effect
on July 1, 1994 for tax years commencing on or after that date.
For those paying tax on a calendar basis, it will be applicable
from January 1, 1995. All companies and individuals are required
to register with the national tax authority. Income received
from any economic activity carried out in Venezuela is subject to
taxation.
There are several different corporate tax situations to which
foreign investors could be subject, depending upon the type of
economic activity in which they are engaged. Venezuela has
international double taxation agreements in the areas of air and
sea transport with several countries, including the U.S.
Venezuela is currently negotiating a double taxation agreement
with the U.S. which covers most business sectors.
TAXES
Tax Legislation
National Taxes
The Income Tax
Taxpayer
Tax rates
Tax Units
The Business Asset Tax
The Luxury Consumption and Wholesale Sales Tax
Taxpayer
Taxable activities
Tax rate
Determination
Period
Deduction of fiscal credits
Aditional Tax rate
State Taxes
Municipal Taxes
Constitutional Regulation
Tax on Profit-Making Activity (Industrial and Commercial License Tax)
The Urban Real Estate Tax
TAXES
Tax Legislation
The Venezuelan tax system consists fundamentally of taxes, fees,
and contributions, and is constitutionally grounded on the principle
of legality of taxation, which requires that all taxes
be created by a formal law (Constitution, Art. 224). But in exceptional
fashion, the National Executive is constitutionally empowered
to create taxes, by decree when they have the same legal rank
and efficacy of a law. This power has been used by the administration
on several occasions to enact Decree-Laws, under special laws
passed by the Congress authorizing the President to take specific
economic or financial measures of extraordinary nature (Article
190, Part 8, of the Constitution), including the creation of new
taxes.
Since Venezuela is a federal state (Constitution, Art. 2), and
since the public power is territorially distributed between the
national level (the Republic), the state level (the federated
states), and the local level (the municipalities), there are taxation
powers at each of those levels, which can be exercised, respectively,
through national laws enacted by the Congress of the Republic,
state laws enacted by the States Legislative Assemblies, and municipal
ordinances enacted by the Municipal Councils. Thus, there are
national, state, and municipal tax burdens. But the national tax
burdens are by far the most important ones, with the municipal
taxes in second place.
Taxation at national level is regulated by the Organic Code
Taxation (C.O.T.) (G.O. Nº 4.727 Extra. of May
25, 1994), which also has a secondary application to state and
municipal level taxation (Art. 1).
National Taxes
The Venezuelan Constitution (art. 136, Nº 8) reserves to
the national level the organization, collection, and supervision
of taxes on income, capital, successions and donations; taxes
on imports, registration fees, and stamp taxes, and taxes on the
production and consumption of goods totally or partially reserved
by the law to the National Government, such as those on alcohol,
liquor, cigarettes, matches, and salt production; those on mines
and hydrocarbon production, and all other taxes, fees, and revenues
not attributed to the States and Municipalities, created by the
law as national contributions.
The Income Tax
The Income Tax Law (Decree-Law Nº 188 of May
25, 1994, (G.O. Nº 4.727 Extra. of May 27, 1994) regulates
the tax falling on annual net and disposable earnings, obtained
in money or in goods, from economic activities performed in Venezuela
or assets located in the country (Art. 1).
Taxpayer
The taxpayers subject to the Income Tax (Art. 5) are: a) individuals;
b) corporations and limited liability companies; c) general partnerships,
simple limited partnerships, communities, and any other societies
of persons, including irregular or unincorporated ones; d) recipients
of earnings from hydrocarbon and related activities, such as refining
and transportation, their royalty payers, and persons obtaining
earnings from exports of minerals, hydrocarbons, or their derivatives;
and e) associations, foundations, corporations, and other legal
or economic entities not cited above.
Tax rates
The income rates are as follows:
Tax Table Nº 1:
This table is applied to the net overall annual income obtained
by individuals and taxpayers falling into the same category, except
when their income is obtained from the operation of mines and
hydrocarbon production (Arts. 6, 10, and 51). The tax obligation
is calculated in Tax Units (U.T.), as follows:
1. For the part up to 1,000 6%
2. For the part exceeding 1,000 and up to 1,500 9%
3. For the part exceeding 1,500 and up to 2,000 12%
4. For the part exceeding 2,000 and up to 2,500 16%
5. For the part exceeding 2,500 and up to 3,000 20%
6. For the part exceeding 3,000 and up to 4,000 24%
7. For the part exceeding 4,000 and up to 6,000 29%
8. For the part exceeding 6000 34%
Earnings obtained by individuals who are not residents of the
country, are subject to a tax rate of 34%.
Tax Table Nº 2:
This tax table applies to the net overall annual income obtained
by national or foreign companies and taxpayers falling into the
same category, except for those whose income derive from operation
or royalties and shares in the production of mines and hydrocarbons
(Arts. 7, 8, and 9).
Aditionaly, Table 2 is applicable to the companies incorporated
under association contracts entered into pursuant to the Organic
Act Reserving the Hydrocarbon Industry and Commerce to the State,
or through the national-interest contracts envisaged in the Constitution
(art. 124) for the execution of vertically integrated projects
in the field of extraction, refining, industrialization, emulsification,
transportation, and marketing of extraheavy crude oil, natural
bitumens, and offshore natural gas. Therefore, said companies
pay taxes under the ordinary regime established in the law for
corporations and other taxpayers falling into the this category
(Art. 9).
Tax Table Nº 2 is as follows (Art. 53), calculated in Tax
Units (U.T.):
1. For the part up to 2,000 15%
2. For the part exceeding 2,000 and up to 3,000 22%
3. For the part exceeding 3,000 34%
Net earnings from loans and other credits granted by financial
institutions incorporated overseas and not domiciled in Venezuela
are subject only to a proportional tax rate of 4.95%.
Tax Table Nº 3:
Tax Table Nº 3 applies to annual earnings from mining and
hydrocarbon activity, as follows:
1. A proportional rate of 60% on earnings by individuals and taxpayers
falling into the same category, societies, and communities, on
royalties and analogue participation provenient from the operation
of mines and the assignment of said royalties and participations
(Arts. 8, 9, and 54).
2. A proportional rate of 67.7% on earnings by individuals and
taxpayers falling into the same category, societies, communities,
and other taxpayers engaged in extraction of hydrocarbons and
related activities, as well as earnings from royalties and other
participations from operation of mines and the assignment of said
royalties and distributions (Arts. 9, 10, and 54).
Finally, taxpayers other than individuals and unsettled estates
engaged in extraction of hydrocarbons and related activities in
the country, are subject to a proportional 20% tax on the amount
of dividends percieved when said earnings come from companies
engaged in economic activities in the country, even when said
dividends are acquired in the form of shares (Art. 54).
Tax Units
The fractions shown above, as mentioned in the different tax tables
are expressed in Tax Units (U.T.). This concept was created in
the 1994 reform of the Organic Code of Taxation (Art. 229)
and included in the 1994 amendments to the Income Tax Law,
to serve as the new basis for calculation of tax liability. The
value of each U.T. was initially set in 1994 at Bs. 1,000. The
government is empowered to adjust it for 1995, in accordance with
the inflation rate.
The Business Asset Tax
The Business Asset Tax is regulated by Decree-Law Nº
3.266 of Nov. 26, 1993 (G.O. 4654 Extra. of Dec. 1º,
1993). It falls on all corporate entities or individuals engaged
in business activities and subject to the income tax which have
tangible and intangible assets used for the production of income
through commercial, industrial, mining or hydrocarbon and related
activities (Art. 1).
This tax does not provoke a material increase in tax burdens,
since the income tax is taken as a credit against it. As such,
the business asset tax payable under the Law is the difference
between the total liability under that tax and the income tax
incurred during the taxable year.
Homever, the Business Asset Tax is not deductible, for purposes
of determining the net taxable income subject to the Income Tax
Law (Art. 12).
The tax base for this tax is the average net value of tangible
and intangible assets at the beginning and end of the tax year.
It is not applicable to companies in the stage of designment,
construction, and installation of new assets, or to companies
in the pre-operating period (Art. 7). The tax rate is one per
cent (1%) of the taxable base (Art. 10).
The following are exempt from the Business Asset Tax, provided
they are non-profit institutions and do not distribute earnings
or profits of any kind: charitable and social aid institutions,
universities, scientific, technological, cultural, artistic, athletic,
and religious institutions, and professional, or labor organizations
(Art. 3).
The active subjects of this tax must be located in the country
or reputed as being so located (Art. 5).
The Luxury Consumption and Wholesale Sales Tax
The Luxury Consumption and Wholesale Sales Tax is regulated by
Decree-Law Nº 187 of May 25, 1994 (G.O. Nº
4.727 Extra. of May 27, 1994).
This tax applies throughout the national territory, on all allienation
of movable goods, rendering of services, and imports of goods
and services. It must be paid by individuals or corporate entities,
communities, irregular or unincorporated societies, consortia,
and other legal or economic entities, public or private, which
engage in activities defined as taxable by the Law, acting as
importers of goods or services (habitually or not) or as manufacturers,
producers, assemblers, merchants, and independent service renderers
(Art. 1).
Taxpayer
The ordinary taxpayers under the Luxury Consumption and Wholesale
Sales Tax Law (Art. 3) are:
a) Habitual importers of goods, merchandise, or services; b) producers,
processors, manufacturers, assemblers, packers, bottlers, and
others who habitually engage in activities involving transformation
of goods; c) merchants who make sales to corporate entities and
producers, processors, builders, manufacturers, distributors,
and other merchants and independent service renderers, individuals
or who have made sales exceeding 12,000 Tax Units (U.T.), during
the calendar year immediately preceding the entrance into force
of the Decree or expect to do so in the annual period immediately
following the commencement of activities; d) persons who have
rendered services to corporate entities and merchants, individuals
or who have rendered services exceeding 12,000 Tax Units (U.T.)
during the calendar year immediately preceding the entrance into
force of the Decree or expect to do so in the annual period immediately
following the commencement of activities.
Financial leasing companies and universal banks, both regulated
by the General Banks and Other Financial Institutions Law,
for financial leasing transactions exclusively respecting the
portion of the consideration or installments which amortize the
price of the goods in question, and excluding the interest contained
in said consideration or installments.
General storage warehouses, exclusively respecting the rendering
of storage services, and excluding the issuance of securities
secured by the goods in storage.
Importers of goods and services not included in any of the categories
stipulated above, are occasional taxpayers. Public enterprises
established as comercial companies public corporations, and other
decentralized agencies of the Republic, the States, and the Municipalities,
as well as the entities they may create, are likewise ordinary
or occasional taxpayers when they engage in the taxable acts contemplated
in the Law, even when other laws or ordinances have declared them
not subject to their provisions or have exempted or exonerated
them from the payment of any tax.
Taxable activities
The following activities, legal business operations, or transactions
are taxable acts under this Law (art. 8):
1. Sale of tangible movable goods, including shares in property
rights thereover, as well as withdrawals and retirements of movable
goods performed by taxpayers of this tax;
2. Permanent imports of movable goods;
3. Imports of service taxed under the Law;
4. Independent services rendered in the country. Consumption of
the services comprising the object, operation or activity of a
business is also a taxable act in the cases indicated in Nº
4 of Article 9 of the Law.
Sales and retirement of tangible movable goods are taxable when
the goods are located in the country and, regarding imports, when
the tax obligation has occurred (Art. 11). Lending services is
a taxable act when performed in the country, even when generated,
contracted for, perfected, or paid for abroad (Art. 13).
Tax rate
The tax rate applicable to the corresponding tax base must be
set annually in the Budget Act, and can vary from a minimum of
5% to a maximum of 20%. The luxury consumption goods defined in
the Decree are subject to additional tax rates of 10% and 20%,
according to the goods in question. The regular tax rate was set
for 1995 at 12.5%.
Without prejudice to the foregoing, a zero per cent (0%) rate
applies to export sales of movable goods and rending services,
the latter being understood to occur when the recipients of the
service are not domiciled or do not reside in the country, provided
such services are used exclusively abroad (Art. 25).
Determination
The tax obligation deriving from each taxable transaction is determined
by applying the tax rate to the respective tax base. For the calculation
of the tax liability of each taxation period, said obligation
will be known as "Fiscal debit" (Art. 26).
The fiscal debit amount can be passed along by ordinary taxpayers
to the purchasers of the goods sold or the recipients or beneficiaries
of the services rendered; the latter are obligated to bear that
transfer. The fiscal debit must be separately stated on the invoice
or equivalent document issued by the seller or service renderer,
only for transactions among ordinary taxpayers. In both cases,
the tax is part of the price.
The fiscal debit amount d in the invoice generates a fiscal credit
for the purchaser of the goods or recipient of the services, but
only when the latter is registered as a taxpayer in the respective
Taxpayers' Register.
For importers, the fiscal credit consists in the amount of tax
stipulated in the Law, paid when nationalizing the merchandise,
provided the importer is an ordinary taxpayer registered as such
in the Taxpayers' Register. The amount of the fiscal credit is
reduced or applied by the taxpayer, as provided for in the Law's
rules, to determine the tax liability owed by said importer (Art.
27).
Period
The tax incurred in favor of the National Treasury under the Law's
provisions is determined by taxation periods consisting of one
(1) calendar month, as follows: to the total amount of the fiscal
debits, properly ajusted if necessary, that legally correspond
to the tax payer for the taxable operation during the tax period,
the amounts of the fiscal credit in which the taxpayer has the
right, shall be deducted or sustracted (art. 30).
Deduction of fiscal credits
Only the activities defined as taxable acts by the Law, which
generate fiscal debits or are subject to the zero per cent tax
rate, have the right to the deduction of the fiscal credits borne
by ordinary taxpayers when acquiring or importing tangible movable
goods or services, providing they correspond to costs, expenses,
or outlays proper to the taxpayer's habitual economic activity,
and the taxpayer meets all the other requirements stipulated in
the Law (Art. 31).
For imports or acquisitions of capital goods and construction
contracts, as well as for services related thereto, by taxpayers
engaged in the execution of industrial projects stretching over
more than twelve (12) taxation periods, the use of the fiscal
credits generated by those imports or acquisitions is held in
suspension until the taxation period in which the company begins
to generate fiscal debits.
To this end, the fiscal credits generated in the different taxation
periods, must be adjusted to reflect the Consumer Price Index
(CPI) published by the Central Bank of Venezuela, from the period
in which the fiscal credits in question is originated through
the taxation period in which the first fiscal debit is generated
(Art. 38).
Aditional Tax rate
Not withs standing the Wholesale Sales Tax, for sales or similar
transactions, rendering services, or imports (the latter being
habitual or not) of the goods and services stipulated in Articles
57 and 58 of the Law, are subject to an additional tax
calculated on the basis of the taxable base for each of the transactions
which give rise to tax established in the law, even when the seller
is not an ordinary taxpayer under the provisions of the Decree
(Art. 56).
Transactions involving the goods listed below are subject to an
additional tax rate of ten per cent (10%):
a. Alcoholic beverages of all kinds;
b. Cigarettes and other tobacco products;
c. Vehicles or automobiles, whether regular or all-terrain, with
a capacity for 9 passengers or less, whose factory price in the
country or customs value, plus the taxes, surcharges, countervailing
duties, antidumping duties, interest for arrears, and other expenses
incurred in connection with their importation, in bolivares,
the equivalent from US$ 22,000 to US$ 44,000.
d. Articles made with fine or cultivated pearls, precious stones,
semiprecious stones, wrist watches, pocket watches, and similar
timepieces whose case is made of precious metals or gold or platinum
plated;
e. Jewelry articles and their precious metal or precious metal-plated
parts (Art. 57).
State Taxes
Up to the present time Federated State taxes have not reached
significant levels and cannot be viewed as a real tax burden.
The States in Venezuela depend fundamentally on financial transfers
from the national budget, under a constitutionally mandated revenue
sharing system called "Situado Constitucional"(Constitution,
Art. 229). Originally required for the distribution of a minimum
of 15% of the budget under the Constitution and now set at 20%
by the Organic Decentralization, Delimitation, and Transfer
of Public Powers Law (G.O. Nº 4.153 Extra. of
Dec. 28, 1989, art. 14). In fact, so small is the states' taxation
power that the Constitution contains a clause stipulating prohibitions
or limits on their ability to levy taxes (Art. 18) and another
clause virtually permitting, by law, the centralization or nationalization
of taxes not expressly assigned to the states and municipalities
(Art. 136, Part 8).
The Decentralization Law reserves the following revenue
sources for the states (Art. 12): revenues earned by rendering
the public services taken over by the states; revenues raised
by their own taxes, fees, and contributions, and those generated
by the administration of their properties.
In addition to the foregoing, beginning in 1994 the services transferred
from the national government to the states and certain development
projects can be funded from the Intergovernmental Decentralization
Fund, whose capital comes from a percentage of Wholesale Sales
Tax receipts, specified in Decree-Law Nº 3.265 of
Nov. 25, 1993 (G.O. Nº 35.359 of Dec. 13, 1993).
The following exclusive jurisdictions implying taxation were transferred
to the states under the Decentralization Act. They must now be
assumed by each state individually, under a law enacted by its
Legislative Assembly (Art. 11):
1. Organization, collection, supervision, and administration of
the sealed paper (stamp) tax;
2. Organization, collection, and supervision of the taxes on extraction
of construction and decorative stones or non-precious stones of
any other kind, including marble, jasper, kaolin, magnesite, sands,
slates, clays, calcium carbonate formations, gypsum, puzzolana,
peat, earthy substances, salt pans, and pearl oyster farms;
3. Fees for conservation, administration, and utilization of roads,
bridges, and highways in their territories;
4. Organization, collection, supervision, and administration of
specific consumption taxes not reserved to the national government;
and
5. Fees for the administration and maintenance of public ports
and airports for commercial use.
The burden of state taxation may steadily grow in importance as
a result of the step-by-step decentralization process under way
in Venezuela since 1989.
Municipal Taxes
Constitutional Regulation
The Venezuelan Constitution provides for the creation and collection
of taxes, and investment of the revenues therefrom, as a part
of the concept of municipal autonomy (Art. 29, Part 3).
Among the ordinary taxes established by the municipal governments
under the Organic Municipal Government Law (G.O. Nº
4.409 Extra. of June 15, 1989, Art. 11) are municipal taxes and
fees. The Constitution expressly provides as follows, in relation
to municipal taxation (Art. 31):
1. The products of their own lands and properties;
2. Fees for the use of their goods or services;
3. Industrial and commercial license taxes;
4. Taxes on motor vehicles;
5. Taxes on urban real estate;
6. Taxes on public entertainment events;
7. Other taxes, fees, and special contributions created by the
municipal governments in accordance with law.
The most important municipal taxes are the industrial and commercial
license tax and the urban real estate tax.
As said above, municipal taxes are created by local ordinances,
which have the rank, efficacy, and value of local laws. They are
enacted by the Municipal Council, the local legislative organ.
Tax on Profit-Making Activity (Industrial and Commercial License Tax)
The establishment of industrial and commercial activity requires
a municipal license or authorization, in accordance to each municipal
ordinance's provisions. The base for the tax on profit-making
(industrial and commercial) activities is the economic activity
carried out in the municipality's territory. The tax thus falls
on the taxpayer's annual gross income or sales. The tax rate is
set by each municipality in its own ordinance, and the tax is
paid at quarterly intervals in response to bulletins sent to the
taxpayers.
The Urban Real Estate Tax
The tax on urban real estate falls on real properties located
within the urban perimeter of each municipality, meaning that
real properties located in non-urban areas are exempt. The tax
applies only to real properties; movable properties, or properties
which are immovable due to their use, such as machinery or industrial
equipment, are exempt.
The tax rate is regulated by each municipality's ordinance, and
normally takes the form of a percentage applied to the appraised
value of the property as, declared by the taxpayer and accepted
by the administration. This tax is likewise paid at quarterly
intervals, in advance. The clearance certificate evidencing payment
is required to register any alienation of real properties.
General Economic Information of Venezuela
Venezuela Socio-Economic Data from the Inter-American Development Bank. This is the source for all the hard economic data you need. The particular country page is slow loading, but well worth the wait for you economic gurus.
Venezuela Tourism
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Venezuela's Legal System
LEGAL SYSTEM IN GENERAL
Basic organization of the Venezuela State
State Organs
General Structure
Head of State and Government.
Legislative body
Authorities of the Federated States and territorial authorities
The Judiciary
The Constitutional judiciary
Organization of law courts
Administrative judiciary
Prosecution
Sources of Law
The Constitution
Legislation
Other sources
Publication of Laws
Brief Historical Evolution of private law
LEGAL SYSTEM IN GENERAL
Basic organization of the Venezuela State
Venezuela is designated constitutionally as a republic that "is
forever and irrevocably free and independent of any domination
or protection by a foreign power" (Constitution of 23 Jan.
1961, art. 1), a formula retained in all constitutional texts
since independence from Spain was gained at the beginning of the
nineteenth century (1811).
In addition, the Republic is a federal state (Const. art.
2), but in a peculiar manner, as a result of the transformation
of the country divided in autonomous regions along the lines of
the federation established since 1811 and consolidated in 1864.
This federation functioned politically until the beginning of
this century, developed a growing tendency towards centralization
during de last 90 years, and has begun to be descentralized since
the enactement of the Organic Law for Descentralization
and Transfer of Powers (G.O. Nº 4153 Extra.
of Dec. 28, 1989), and the Law of the establishment of the
direct election of the Federated States governors in 1989
(Nº G.O. Nº 4086 Extra. of April 14, 1989).
As a consequence of the federal form of the State and for purposes
of political organization the country is divided into 22 Federated
States (Amazonas, Anzoátegui, Apure, Aragua, Barinas, Bolivar,
Carabobo, Cojedes, Delta Amacuro, Falcón, Guárico,
Lara, Mérida, Miranda, Monagas, Nueva Esparta, Portuguesa,
Sucre, Táchira, Trujillo, Yaracuy and Zulia); one Federal
District (Organic Law of 1986, G.O. Nº 3944
Extra. of Dec. 30, 1986) in which Caracas, the capital, is situated;
and Federal Dependencies made up of several islands in the Caribbean
(Organic Law 1938, G.O. Nº 19624 of July 20,
1938).
The Federated States are divided into Municipios. In 1996
there are 330 Municipios. The States are competent to create,
suppress and organize them (Const. art. 17, Nº 2), in accordance
with the Organic Law of Municipal Regime of 1989 (G.O.
Nº 4409 Extra. of June 15, 1989).
According to the Constitution, the Federated States are autonomous
and equal as political entities, even though they are obliged
to maintain the integrity of the nation and to comply with and
enforce compliance of the national Constitution and the laws of
the Republic (Const. art. 16).
The federal constitutional system grants their own powers to the
different territorial entities (Republic, Federated States and
Municipios or local governments) and any interference and
usurpation of functions between them is unconstitutional.
The Constitution provides that Municipalities are the primary
and autonomous political units within the national organization
(Const. art. 25), that are administered in accordance with the
principle of local selfgovernment; the creation of intermunicipal
associations for services is permitted, and has taken place for
some services in the Metropolitan Area of Caracas.
State Organs
General Structure
In accordance with the federal system, the Constitution makes
a distinction between organs proper to national and federal power,
states power and municipal power. On a national level, public
functions are distributed among a national legislative power,
a national executive power and a judiciary and are attributed
respectively to Congress, to the President of the Republic and
other executive organs, and to the Supreme Court of Justice and
other courts of justice. A distribution of functions with features
of separation of powers is therefore provided even though the
Constitution expressly demands collaboration between them for
the achievement of thc aims of the state (art. 118) .
Head of State and Government.
The President of the Republic is elected every five years by universal,
direct and secret voting by means of a relative majority (Const.
art. 183 and Organic Law on Suffrage of 1995, G.O. Nº
4918 Extra. June 8, 1995). He is at the same time Head of State
and Head of the national executive power (Government) (Const.
art. 181).
In this latter respect he is the supreme authority in the government
and administration of the state and exercises his powers in the
Council of Ministers or through the ministers whom he appoints
and removes.
The following are among his principal powers: He directs the Republic's
international relations and enters into and ratifies international
treaties, pacts and agreements; he declares the state of emergency,
takes the necessary measures for the defence of the Republic,
the integrity of the territory and its sovereignty in the case
of an international emergency; he summons Congress to extraordinary
sessions; he issues regulations for the execution of laws; and
he administers the National Treasury, negotiates national loans,
enters into contracts in the national interest, appoints and dismisses
civil servants, grants pardons, etc. (art. 190).
In all cases, the Pre
