Venezuela: Business Environment

Company Tax

Progressive rate up to 34%. The system of levy is expressed in tax units (unidad tributaria) that specify tax rates. The value of a tax unit is 1.500 sovereign bolivars in 2020.

Tax Rate For Foreign Companies

Resident corporations are taxed on their worldwide income, while non-resident corporations are subject to taxation for their Venezuela-source income and foreign income derived by their permanent establishment in the country.
Companies incorporated in Venezuela and registered with the Mercantile Registry as established by commercial law and foreign companies registered to be domiciled in Venezuela as branches duly registered with the Mercantile Registry are considered resident for tax purposes. The positive difference between a branch's annual book and taxable income is deemed to be remitted to the branch's head office and is subject to a 34% flat dividend tax unless the branch can provide proof of reinvestment of its profits for a five-year period.

Capital Gains Taxation

Capital gains are taxed as ordinary income at the corporate tax rate, while capital losses are deductible from ordinary income. Gains arising from the sale of shares registered on the Venezuelan stock exchange are subject to a 1% tax on the gross proceeds.
Gains upon liquidation or reduction of capital are taxable to the liquidating entity.

Main Allowable Deductions and Tax Credits

Depreciation of tangible and intangible assets (used to generate income) is tax-deductible. Goodwill can be generally amortised for tax purposes whereas depreciation of real estate used as rental property is not tax-deductible (same as for fines and penalties).
The current tax code does not include any provisions for the deduction of start-up costs.
Interest charges and bad debts (for loans that are part of the main business activity and were initially included in its gross income) are tax-deductible.
Donations to charitable organisations are deductible up to 10% of taxable income. This rate is reduced to 8% for companies with taxable income over UT 10,000 (tax unit, "unidad tributaria" in Spanish). The deduction is limited to 1% of the amount of tax due for oil extraction companies.
Payments imposed on the employer by the Labour Code - such as profit distribution or severance pay - are generally deductible.

Tax losses can be carried forward for up to three years. For each of these years, the amount of tax losses to be carried forward cannot exceed 25% of the tax due in a given year. The carryback of losses is not permitted. Furthermore, foreign tax losses can only be offset against profits earned abroad.

Other Corporate Taxes

Social security contributions payable by the employer could amount to 10%, 11% or 12% of salary, with rates varying according to the risk associated with the employee's work (capped at five minimum salaries). Employers also pay an amount equal to 2% of the salary for the unemployment insurance system (up to ten minimum salaries), and 2% of the salary for each of the housing assistance scheme and the training of the employee. Furthermore, employers contribute under the Organic Law on Prevention, Working Conditions and Working Environment (LOPCYMAT) at rates varying between 0.75% and 10% depending on the type of work.

Municipal authorities levy a tax on professional activities of the firm at rates varying between 0.1% and 10% depending on the location and the type of activity. A municipal tax is levied on real estate at variable rates.

Companies with a certain level of income or employees are liable for additional taxes: companies with an annual gross income exceeding 10,000 UT pay a fee under the Science, Technology and Innovation Act (LOCTI) at rates varying between 0.5%, 1% and 2% of gross income depending on the type of activity. They also contribute 1% of gross income under the Sports and Physical Activity Act if their annual gross income exceeds 20,000 UT. Finally, companies with 50 employees or more pay a contribution of 1% of gross revenue (2% for companies involved in the production or import of alcoholic beverages and tobacco as a contribution to anti-drug operations) to the National Antidrug Fund.

There are several stamp duties on the issuance of official documents ranging from 0.01 UT to 10,000 UT. Companies designated as "special taxpayers" are also liable for a 2% tax on the total bank debit or taxable transaction.

Capital duty amounts to 1% of capital (2% in the Capital District), while the sale of an active business is subject to a tax of 2% of its value. An inheritance/gift tax is applicable at rates up to 55%.

Under the Hydrocarbons Organic Law, the state is entitled to 30% of the volume of hydrocarbons extracted from any deposit, by way of royalties, while for the Gaseous Hydrocarbons Organic Law the royalty is equal to 20%. Furthermore, 10% of the value of each cubic metre of hydrocarbon by-products produced and consumed as fuel in wholly-owned operations, based on the price of the end consumer, is due as a tax
Sound and television broadcasting are subject to a 1% levy, whereas other telecommunication services are subject to a 2.3% rate (plus several other contributions).

Taxpayers whose net equity (for companies) exceeds 150 million TUs are subject to a wealth tax at 0.25% of total equity.

Other Domestic Resources

SENIAT

Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Tax Rate

Allowable Deductions and Tax Credits

Legal deductions include the following:
- a standard deduction of TU 774 plus TU 10 for the taxpayer, spouse, and any dependant (in this case the taxpayer cannot use the itemised personal deductions listed below)
- education expenses for the taxpayer and for dependent children under 26 years of age
- life, surgery, hospitalisation, and maternity insurance premium
- medical, dental and hospitalisation payments
- rent or interest payments on loans granted for the acquisition or enlargement of the taxpayer's home (capped at TU 1,000 for interest on loans or TU 800 for the leasing of main or permanent housing.

Resident individuals who are not employees can deduct expenses following the rules that apply to corporations.

Special Expatriate Tax Regime

Resident individuals are subject to tax on their worldwide income. Foreign resident individuals with a fixed base in Venezuela must pay taxes on their income derived from the said base, whether it is sourced in Venezuela or abroad. Non-resident individuals are liable for their Venezuela-sourced income.
Income for non-resident individuals arising from non-business professional activities is subject to tax at 34% on 90% of the gross payments. Salary and other income received by non-residents for services performed in Venezuela are subject to a flat 34% tax, withheld at source.