Market overview

The political turmoil in Venezuela has had an adverse effect on corporate transactions.

"There are much fewer cross-border transactions than in previous years. This has negatively affected the collection of taxes," said Manuel Candal, head of tax and transfer pricing at Taxand Venezuela.

"The last modification on the Venezuelan income tax law did not include any changes to the transfer pricing guidelines, since it intended to increase the tax rate paid by local taxpayers," said Jesús Pérez, head of transfer pricing at BaseFirma.

The law instead increased corporate income tax and introduced a new tax that would be applicable to certain financial transactions. As such transfer pricing has been on the backburner due to the political and economic instability.

However, Alberto Benshimol, head of tax and transfer pricing at D'Empaire Reyna Abogados, believes that "change is inevitable despite the Venezuelan authorities not taking any public steps to implement the BEPS action plan."

Venezuela will soon follow suit given the international response to the BEPS guidelines. In particular, Action 13 relating to country-by-country reporting.

"In this regard, most companies would have to prepare more information on their inter-company transactions, to comply with the information requested," Pérez added. This information would greatly benefit the tax authorities as they would made more information at their disposal to ensure that multinationals are paying their fair share in taxes.

Given the international trend, Candal opines that it would be relevant to review and adapt the current legislation to be more in line with international taxation. Candal argues the Venezuelan regulatory framework lacks sufficient guidance on the management of intangibles and the treatment for intra-group services or cost contribution arrangements.

Despite the lack of legislative changes, Venezuela's tax authorities have been actively conducting transfer pricing audits, particularly in the oil and gas sector.

Benshimol said: "In the past year, tax courts have become significantly more knowledgeable of transfer pricing issues and taxpayers have obtained favourable rulings which were difficult to obtain before."

Despite the instability that surrounds the country, the government has provided more training in this area to better equip the tax administration. Furthermore, due to the frequency of audits the judges, too, have developed their expertise in this area and have become more comfortable ruling on TP matters.

Tax authorities

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

Tax rates at a glance

(As of July 2017)

Corporate income tax 34%
Capital gains 34%
Branch tax rates 34%
Withholding tax
Dividends 34%
Interest paid to resident:
individuals 3%
corporation 5%
paid to non-resident:
individuals 34%
corporations 34%

Source: Deloitte, KPMG and PwC

Firm contact details

D'Empaire Reyna Abogados