Venezuela

Market overview

As Venezuela faces the worst economic crisis in its history, corporate transactions have almost come to a complete stop. Reports show that Venezuela's imports have plunged by around 40%, and that there is nearly no oil being exported. For a country that relies heavily on this export, times are hard, and the government's focus is on repairing the economy. This has contributed to the transfer pricing market remaining stable over the past year.

"The market is pretty static because the economy is very depressed," said Carlos Fernández-Smith, co-head of tax at Norton Rose Fulbright. "There are no big transactions in the market, and little investment, with a couple of exceptions."

While other countries are engaging heavily with the OECD's BEPS project, practitioners say that little has happened in Venezuela with regards to the project. Venezuela is not a member of the OECD, and the country has not committed to following the BEPS recommendations. "My impression is that we will eventually adopt some of the guidelines, but we're not actively engaging with them like some of the other countries," said Fernández-Smith.

Venezuela's tax authority, Servicio Nacional Integrado de Administración Aduanera y Tributaria (SENIAT), has over the past few years been active in its auditing of transfer pricing policies, and this trend continued in 2016.

"The tax authorities are aggressive because Venezuela is facing problems and the government, including the treasury department, wants to raise the country's revenue," said Bernardo Solano, senior partner at BaseFirma.

Fernández-Smith said that the overall attitude of the authorities had not changed significantly over the past year. However, two tax reforms in 2013 and 2015 have contributed to making it easier for the tax authorities to audit companies.

"They [the tax reforms] tend to be more stringent and give more power to the tax authority to increase tax collection," said Fernández-Smith. "The tendency is for the government to have legislation that increases tax collection and limits the rights of taxpayers rather than the other way around."


Tax authorities

Servicio Nacional Integrado de Administración Aduanera y Tributaria
Torre Capriles, Plaza Venezuela, Caracas
Tel: +58 212 709 2888/709 2064/709 2027
Website: www.seniat.gob.ve


Tax rates at a glance

(As of April 2016)

Corporate income tax rate 34% (a)
Capital gains tax rate 34% (a)
Branch tax rate 34% (a)
 
Withholding tax
Dividends 34/50/60%
Interest paid to residents
Individuals 3% (b)
Corporations 5% (c)
Paid to non-residents
Individuals 34% (d)
Corporations 34% (e)
 
Net operating losses (years)
Carryback 0
Carryforward 3 (f)

  1. This is the maximum progressive rate, which applies to income exceeding 3,000 tax units. Effective from February 26 2015, the value of a tax unit is VEF150. Petroleum companies and income from petroleum-related activities are taxed at a rate of 50%. Mining royalties and transfers of such royalties are subject to tax at a rate of 60%.
  2. The withholding tax applies to payments over VEF12,500.01. The tax is imposed on the payment minus VEF375.
  3. This withholding tax applies to payments over VEF25.
  4. For interest associated with a loan invested in an income-generating activity, the withholding tax is imposed on 95% of the gross payment. Consequently, the effective withholding tax rate is 32.3% (95% × 34%). For other cases, the tax base is the gross interest payment.
  5. In general, the withholding tax rate is determined under Tariff No. 2, which provides for a maximum tax rate of 34%. It is applied to 95% of the gross interest payment associated with a loan invested in an income-generating activity. For other cases, the tax base is the gross interest payment. Interest paid to foreign financial institutions that are not domiciled in Venezuela is subject to withholding tax at a flat rate of 4.95%.
  6. Losses may be carried forward three tax years, but they may not offset more than 25% of the income obtained in such tax years.

Source: EY 2016 Worldwide Corporate Tax Guide


Firm contact details

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