Corporate tax in Venezuela

Summary

Corporate Income Tax Rate (%) 34 (a)
Capital Gains Tax Rate (%) 34 (a)
Branch Tax Rate (%) 34 (a)
Withholding Tax (%)
Dividends 34 / 50 / 60 (b)
Interest
Paid to Residents
Individuals 3 (c)
Corporations 5 (d)
Paid to Nonresidents
Individuals 34 (e)
Corporations 34 (f)
Royalties (g)
Paid to Residents (g)
Individuals 1
Corporations 2
Paid to Nonresidents (h)
Individuals 34 (.i)
Corporations 34 (j)
Professional Fees
Paid to Residents
Individuals 3 (c)
Corporations 5 (d)
Paid to Nonresidents 34 (k)
Rent of Immovable Property
Paid to Residents
Individuals 3 (c)
Corporations 5 (d)
Paid to Nonresidents
Individuals 34
Corporations 34 (l)
Rent of Movable Goods
Paid to Residents
Individuals 3 (c)
Corporations 5 (d)
Paid to Nonresidents
Individuals 34
Corporations 5
Technical Assistance
Paid to Residents
Individuals 1
Corporations 2
Paid to Nonresidents (m)
Individuals 34 (n)
Corporations 34 (o)
Technological Services
Paid to Residents
Individuals 1
Corporations 2
Paid to Nonresidents (p)
Individuals 34 (q)
Corporations 34 (r)
Sales of Shares (s)
Sales by Residents
Individuals 3 (c)
Corporations 5 (d)
Sales by Nonresidents
Individuals 34
Corporations 5
Net Operating Losses (Years)
Carryback 0
Carryforward 3 (t)

a) This is the maximum progressive rate, which applies to income exceeding 3,000 tax units. Effective from 26 February 2015, the value of a tax unit is VEF150. For further details, see Section B. 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%.

b) For details, see Section B.

c) The withholding tax applies to payments over VEF12,500.01. The tax is im­posed on the payment minus VEF375.

d) This withholding tax applies to payments over VEF25.

e) 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% x 34%). For other cases, the tax base is the gross interest payment.

f) In general, the withholding tax rate is determined under Tariff No. 2 (see Section B), 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%.

g) The law does not explicitly set forth any withholdings for royalties paid to residents. However, in practice, it is possible that the Tax Administration could consider the operation to be a provision of services and, accordingly, a 1% or 2% rate of withholding tax would apply.

h) Royalties paid to nonresidents are taxed on a deemed profit element, which is 90% of gross receipts.

i) Because royalties paid to nonresidents are taxed on a deemed profit element (see footnote (h) above), the effective withholding tax rate is 30.6% (90% x 34%).

j) The withholding tax rate is determined under Tariff No. 2, which provides for a maximum tax rate of 34%. Because royalties paid to nonresidents are taxed on a deemed profit element (see footnote (h) above), the maximum effective withholding tax rate is 30.6% (90% x 34%).

k) Professional fees paid to nonresidents are taxed on a deemed profit element, which is 90% of gross receipts. Consequently, the effective withholding tax rate is 30.6% (90% x 34%).

l) The withholding tax rate is determined under Tariff No. 2, which provides for a maximum tax rate of 34%.

m) Payments to nonresidents for technical assistance are taxed on a deemed profit element, which is 30% of gross receipts.

n) Because payments to nonresidents for technical assistance are taxed on a deemed profit element (see footnote (m) above), the effective withholding tax rate is 10.2% (30% x 34%).

o) The withholding tax rate is determined under Tariff No. 2, which provides for a maximum tax rate of 34%. Because payments to nonresidents for technical assistance are taxed on a deemed profit element (see footnote (m) above), the maximum effective withholding tax rate is 10.2% (30% x 34%).

p) Payments to nonresidents for technological services are generally taxed on a deemed profit element, which is 50% of gross receipts.

q) Because payments to nonresidents for technological services are taxed on a deemed profit element (see footnote (p) above), the effective withholding tax rate is 17% (50% x 34%).

r) The withholding tax rate is determined under Tariff No. 2, which provides for a maximum tax rate of 34%. Because payments to nonresidents for techno­logical services are taxed on a deemed profit element (see footnote (o) above), the maximum effective withholding tax rate is 17% (50% x 34%).

s) This tax applies to transfers of shares of corporations domiciled in Venezuela that are not traded on national stock exchanges. The withholding tax rates are applied to the sale price.

t) Losses may be carried forward three tax years, but they may not offset more than 25% of the income obtained in such tax years.

Taxes on corporate income and gains

Corporate income tax. Companies domiciled in Venezuela are sub­ject to income tax on their net annual income from Venezuelan and foreign sources. Companies organized in Venezuela are deem­ed to be domiciled in Venezuela. In addition, Venezuelan perma­nent establishments of foreign companies are also considered to be domiciled in Venezuela. How ever, only income attributable to a permanent establishment is taxable in Venezuela.

Rates of corporate income tax. Domestic corporations and branch­es of foreign corporations are subject to the corporate income tax rates of Tariff No. 2, which are progressive and are expressed in tax units. Effective from 26 February 2015, the value of a tax unit is VEF150. The Venezuelan Budget Law may change the value of the tax unit each year. The following are the corporate income tax rates provided in Tariff No. 2.

Taxable income Rate
Exceeding tax units Not exceeding tax units %
0 2000 15
2000 3000 22
3000 34

Net income arising from mining and related activities is taxed under Tariff No. 2. Petroleum companies and income from petroleum-related activities, such as transportation and exploitation, are taxed at a rate of 50%. Mining royalties and transfers of such royalties are subject to tax at a rate of 60%.

For tax years beginning on or after 31 December 2015, taxpayers that perform banking, financial, insurance and reinsurance activi­ties are taxed at a proportional rate of 40%.

Interest paid to foreign financial institutions that are not domi­ciled in Venezuela is subject to a 4.95% withholding tax.

Capital gains. Capital gains are not taxed separately, but are tax­able as business profits. For the computation of gains from sales of shares, the tax basis is zero if such shares had been received as a result of a dividend paid with new shares of the payer of the dividend.

Administration. Companies must file an annual income tax return, self-assess and pay any resulting balance of tax due, within three months after the end of their fiscal year.

Companies must make estimated tax payments during their fiscal year.

Dividends. Dividends paid by Venezuelan companies and profits remitted by permanent establishments of foreign companies to the countries of their home offices are taxable to the extent that “net income” exceeds its “net taxable income.” For this purpose, “net income” is the financial income approved by the sharehold­ers’ meeting based on the financial statements, and “net taxable income” is the resulting income subject to tax after the tax recon­ciliation. The tax reconciliation is the procedure for determining the income tax liability. However, the tax does not apply to remit­tances paid by permanent establishments of foreign companies if the permanent establishment can prove that the excess amount is reinvested in Venezuela for at least five years.

The tax is withheld at source. The applicable rate depends on the business of the payer of the dividends. For dividends paid by hydrocarbon or mining companies subject to the 50% or 60% rates of corporate income tax (see Rates of corporate income tax), the dividend tax rate is the corporate tax rate applicable to the company. For dividends paid by other companies, the dividend tax rate is 34%.

Foreign tax relief. A credit is granted for income taxes paid on foreign-source income, up to the amount of Venezuelan tax pay­able on such income.

Determination of trading income

General. Corporate tax is based on the annual net taxable account­ing profits calculated in accordance with generally accepted ac­counting principles, subject to certain adjustments for non-taxable income and nondeductible expenses defined by law.

To determine the net taxable income, deductions are subtracted from gross income. In general, most expenses, including cost of production, are deductible, provided that they are normal and necessary for the earning of the income.

Under reconciliation rules, the determination of the Venezuelan and foreign-source income is made separately (two baskets). The reconciliation rules include detailed measures for the allocation of allowances and deductions to the two baskets.

Inventories. Inventories may be valued using any method in accor­dance with generally accepted accounting principles. The method chosen must be applied consistently. Because of tax indexation (see Tax indexation), inventory is effectively valued using the last-in, first-out (LIFO) method, adjusted for inflation.

Tax indexation. Companies must apply an annual inflation adjust­ment. A company carries out this adjustment by adjusting its non-monetary assets, some of its non-monetary liabilities and its eq­uity to reflect the change in the consumer price index from the preceding year. These adjustments affect the calculation of de-preci ation and cost of goods sold. The net effect of these adjust­ments is recorded in an inflation adjustment account and is added to tax able income or allowed as a deduction.

Effective for tax years beginning after 22 October 1999, the tax indexation rules apply only to the reconciliation of Venezuelan-source income. Therefore, foreign-source non-monetary assets and liabilities are not subject to tax indexation.

For tax years beginning on or after 18 November 2014, for pur­poses of determining the adjustment for inflation, the National Index of Consumer Prices must be used instead of the Index of Consumer Prices, which was applicable for previous tax years. In addition, taxpayers that engage in banking, financial, insurance and reinsurance activities are excluded from the tax indexation system set forth in the Income Tax Law.

In addition, for tax years beginning on or after 31 December 2015, taxpayers appointed as “Special Taxpayers” are also ex­cluded from the tax indexation system set forth in the Income Tax Law.

Provisions. Provisions for inventory obsolescence and accounts receivable are not deductible; amounts are deductible only when inventories or accounts receivable are effectively written off.

Depreciation. In general, acceptable depreciation methods are the straight-line and the units-of-production methods. The declining-balance method and accelerated depreciation are not accepted. Venezuelan law does not specify depreciation rates. If the esti­mated useful life of an asset is reasonable, the depreciation is accepted. Esti mated useful lives ranging from 3 to 10 years are commonly used.

Relief for tax losses. Operating losses from Venezuelan sources may be carried forward for three tax years, but they may not off­set more than 25% of the income obtained in such tax years. No carryback is permitted.

Losses in the foreign-source basket (see General) may not offset Venezuelan-source income. Such foreign-source losses may be carried forward three tax years to offset foreign-source income only and are also subject to the limitation described above.

Under the amendment of the Income Tax Law published on 18 November 2014 in Official Gazette No. 6,152, losses attribut­able to tax indexation for tax years beginning on or after that date cannot be carried forward.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Value-added tax (VAT), imposed on goods
and services, including imports; the National
Executive may exonerate from tax acquisitions
of goods and services; the law provides an
indexation system for input VAT during the
preoperational period for enterprises engaged
in certain industrial activities; input VAT
generated during the preoperational phase
of industrial projects intended primarily for
export is refunded
12
Municipal tax; business activity tax, usually
based on gross receipts or sales; rate varies
depending on the industrial or commercial
activity and the municipal jurisdiction
0.5 to 10
Social security contributions, on monthly
salary of each employee, up to five minimum
salaries; paid by
Employer 11 / 12 / 13
Employee 4
National Institute of Cooperative Education; contributions required if employer has five or more employees; paid by
Employer, on total employee remuneration 2
Employee, on profit share received, if any,
from employer at year-end
0.5
Housing policy contributions, on the integral
salary (any remuneration, benefit or advantage
received by an employee in consideration for
services rendered, provided it can be evaluated in
terms of cash value) of each employee; paid by
Employer 2
Employee 1
Unemployment and training contributions, on
the monthly salary of each employee, up to
five minimum salaries; paid by
Employer 2
Employee 0.5

Miscellaneous matters

Foreign-exchange controls. Under the foreign-exchange control system in Venezuela, the purchase and sale of currency in Vene­zuela is centralized by the Central Bank of Venezuela. This limits foreign-currency trade in Venezuela and other transactions.

Debt-to-equity rules. For fiscal years beginning on or after 16 Feb­ruary 2007, a new law disallows deductions to companies for

interest payments to related parties domiciled abroad if the aver‑

age of the companies’ debts (owed to related and unrelated par­ties) exceeds the average amount of their fiscal equity for the respective fiscal year.

Transfer pricing. Under transfer-pricing rules, cross-border income and expense allocations in transactions with related parties are subject to analysis and special filings. The rules contain a list of related parties and provide a list of acceptable transfer-pricing methods.

Controlled foreign corporations. Under controlled foreign corpo­ration (CFC) rules, income derived by a CFC (as defined) domi­ciled in a low income tax jurisdiction is taxable to its Venezuelan shareholders. The tax authorities have issued a list of low income tax jurisdictions.

Treaty withholding tax rates

  Dividends

%

Interest (a)

%

Royalties

%

Austria 5/15 (c) 4.95/10 (m) 5
Barbados 5/10 (e) 5/15 (o) 10 (s)
Belarus 5/15 (b) 4.95/5 (ll) 5/10 (mm)
Belgium 5/15 (b) 10 5
Brazil (kk) 10/15 (j) 15 15 (t)
Canada 10/15 (h) 10 5/10 (u)
China 5/10 (d) 5/10 (o) 10
Cuba 10/15 (h) 10 5
Czech Republic 5/10 (c) 10 12 (v)
Denmark 5/15 (b) 5 5/10 (w)
France 0/5/15 (k) 5 5
Germany 5/15 (c) 5 5
Indonesia 10/15 (l) 10 10/20 (x)
Iran 5/10 (c) 0/5 (r) 5 (y)
Italy 10 10 7/10 (z)
Korea (South) 5/10 (d) 5/10 (o) 5/10 (aa)
Kuwait 5/10 (d) 5 20
Malaysia 5/10 (d) 4.95/15 (nn) 10 (oo)
Mexico (kk) 5 4.95/10/15 (q) 10 (s)
Netherlands 0/10 (f) 5 5/7/10 (cc)
Norway 5/10 (d) 5/15 (o) 9/12 (dd)
Portugal 10 10 10/12 (dd)
Qatar 5/10 (d) 4.95/5 (pp) 5
Russian      
Federation 10/15 (i) 5/10 (o) 10/15 (ee)
Spain 0/10 (f) 4.95/10 (n) 5
Sweden 5/10 (b) 10 7/10 (ff)
Switzerland 0/10 (f) 5 (gg) 5
Trinidad and      
Tobago 5/10 (b) 15 10
United Arab      
Emirates 5/10 (d) 10 10
United Kingdom 0/10 (g) 5 5/7 (hh)
United States 5/15 (d) 0/4.95/10 (p) 0/5/10 (bb)
Vietnam 5/10 (d) 4.95/10 (n) 10
Non-treaty
countries
34/50/60 (ii) 4.95/34 (jj) 34 (jj)

a) Under Venezuelan domestic law, a reduced withholding tax rate of 4.95% applies to interest paid to financial institutions not domiciled in Venezuela.

b) The 5% rate applies to dividends paid to a parent company that owns at least 25% of the capital of the payer of the dividends. Under the Denmark and Sweden treaties, to benefit from the 5% rate, the recipient of the dividends must have direct control of at least 25% of the voting shares of the payer of the dividends. The higher rate applies to other dividends (portfolio divi­dends).

c) The 5% rate applies if the beneficial owner of the dividends is a company that owns at least 15% of the capital of the payer of the dividends. Under the trea­ties with Austria, Czech Republic and Iran, to benefit from the 5% rate, the beneficial owner of the dividends must have direct control of at least 15% of the capital of the payer of the dividends. The higher rate applies to other dividends (portfolio dividends).

d) The 5% rate applies if the beneficial owner of the dividends is a company that owns at least 10% of the capital of the payer of the dividends. Under the treaties with China, Korea and Norway, to benefit from the 5% rate, the beneficial owner of the dividends must have direct control of at least 10% of the capital of the payer of the dividends. The higher rate applies to other dividends.

e) The 5% rate applies if the beneficial owner of the dividends is a company that owns directly at least 5% of the capital of the payer of the dividends. The higher rate applies to other dividends.

f) The 0% rate applies to dividends paid to certain recipients who own at least 25% of the voting shares of the payer of the dividends. Under the treaty with Switzerland, to benefit from the 0% rate, the recipient of the dividends must have direct control of at least 25% of the voting shares of the payer of the dividends. The higher rate applies to other dividends.

g) The 0% rate applies if the beneficial owner of the dividends is a company that directly controls at least 10% of the capital of the payer of the dividends. The 10% applies to other dividends.

h) The 10% rate applies if the beneficial owner of the dividends is a company that owns at least 25% of the capital of the payer of the dividends. Under the treaty with Cuba, to benefit from the 10% rate, the beneficial owner of the dividends must have direct control of at least 25% of the capital of the payer of the dividends. The 15% rate applies to other dividends.

i) The 10% rate applies if the beneficiary of the dividends is a company that owns at least 10% of the capital of the payer of the dividends and if it has an investment in the payer of at least USD100,000. The 15% rate applies to other dividends.

j) The 10% rate applies if the beneficiary of the dividends is a company that controls at least 20% of the capital of the payer of the dividends. The 15% rate applies to other dividends.

k) The 0% rate applies if the beneficial owner of the dividends is a company that holds directly or indirectly at least 10% of the payer of the dividends. The 15% rate applies if the beneficiary of the dividends is a resident of Venezuela that receives from a company resident in France dividends that would give rise to a tax credit (avoir fiscal). For dividends received by a resident of France, the recipient has a right to a payment from the French Treasury in an amount equal to the avoir fiscal. The 5% rate applies in all other cases.

l) The 10% rate applies if the beneficiary of the dividends is a company that controls directly at least 10% of the voting power of the distributing company. The 15% rate applies to other dividends.

m) The 4.95% rate applies to interest paid to banks. The 10% rate applies to other interest payments.

n) The 4.95% rate applies to interest paid to financial institutions. The 10% rate applies to other interest payments.

o) The 5% rate applies to interest paid to banks. The higher rate applies to other interest payments.

p) The 0% rate applies to interest paid to the Eximbank, Federal Reserve Bank, Private Investment Corporation, Foreign Trade Bank, Central Bank of Venezuela and Venezuelan Investment Fund. The 4.95% rate applies to inter­est paid to financial institutions or insurance companies. The 10% rate applies to other interest payments.

q) The 4.95% rate applies to interest paid to banks or insurance companies. The 10% rate applies if the beneficial owner of the interest is not one of the enti­ties mentioned in the preceding sentence and if either of the following addi­tional conditions is satisfied:

  • The interest is paid by banks
  • The interest is paid on bonds or other credit securities that are traded regularly and substantially on a recognized securities market.

The 15% rate applies to other interest payments.

(r)   The following interest payments are exempt:

  • Interest paid to the government of the other contracting state, or a local authority or central bank of such state
  • Interest paid for the sale on credit of industrial, commercial or scientific equipment
  • Interest on bank loans

The 5% rate applies to other interest payments.

s) The 10% rate also applies to technical assistance fees.

t) The 15% rate applies to royalties related to copyrights, trademarks, know-how, literary, artistic or scientific works, or films. A protocol to the treaty provides that payments for technical assistance services are treated as royal­ties and are therefore also subject to the 15% rate.

(u)    The 5% rate applies to the following:

  • Copyright royalties and similar payments with respect to the production or reproduction of literary, dramatic, musical or other artistic works (but not including royalties for motion picture films or works on film or videotape or other means of reproduction for use in connection with television broadcasting)
  • Royalties for the use of, or the right to use, computer software, patents or information concerning industrial, commercial or scientific experience (but not including royalties paid in connection with rental or franchise agreements) if the payer and the beneficial owner of the royalties are not related persons

The 10% rate applies to other royalties.

v) The 12% rate also applies to technical assistance fees.

w) The 5% rate applies to technical assistance fees resulting from the rendering of technical, managerial or consultancy services if such services make avail­able technical knowledge, experience, skills, know-how or processes. The 10% rate applies to the following royalties:

  • Royalties paid as consideration for the use of, or the right to use, copy­rights of literary, artistic or scientific works, including cinematographic films, patents, trademarks, designs or models, plans, and secret formulas or processes
  • Royalties for information concerning industrial, commercial or scientific experience

x) The 10% rate applies to payments for technical assistance. The 20% rate applies to royalties.

y) This rate applies to royalties and to amounts paid for technical assistance services.

z) The 7% rate applies to copyright royalties and similar payments with respect to the production or reproduction of literary, dramatic, musical or other ar­tistic works (but not including royalties with respect to motion picture films, or works on film, videotape or other means of reproduction for use in con­nection with television broadcasting); and royalties for the use of, or the right to use, computer software or patents or for information concerning indus­trial, commercial or scientific experience (but not including royalties paid in connection with rental or franchise agreements) if the payer and the benefi­cial owner of the royalties are not related persons. The 10% rate applies to other royalties.

(aa) The 5% rate applies to royalties paid for the use of, or the right to use, industrial, commercial, or scientific equipment. The 10% rate applies to other royalties.

(bb) The 0% rate applies to royalties paid for technical services, scientific, geo­logical or technical studies, engineering works, consulting or supervision services, if the recipient does not have a permanent establishment. The 5% rate applies to royalties paid for industrial, commercial or scientific equip­ment. The 10% rate applies to royalties paid for the following:

  • Patents, designs or models, plans, or secret formulas or processes
  • Industrial, commercial or scientific know-how
  • Trademarks
  • Copyrights with respect to literature, arts or sciences, motion pictures, or movies and tapes for radio or television broadcasting

(cc) The 5% rate applies to payments for the following:

  • Patents, designs or models, plans, or secret formulas or processes
  • The use of, or the right to use, industrial, commercial, or scientific equip­ment
  • Information concerning industrial, commercial or scientific experience The 7% rate applies to amounts paid for trademarks or trade names. The 10% rate applies to amounts paid for copyrights of literary, artistic or scien­tific works, including cinematographic films or tapes for television or broadcasting.

(dd) The lower rate applies to payments for technical assistance. The 12% rate applies to royalties.

(ee) The 10% rate applies to technical assistance fees, which are all payments in consideration for the rendering of technical, managerial or consultancy services, if such services make available technical knowledge, experience, skills, know-how or processes. The 15% rate applies to royalties.

(ff) The 10% rate applies to royalties related to literary, artistic or scientific works, or films. The 7% rate applies to other royalties.

(gg) This is the general rate. Certain special rules apply.

(hh) The 5% rate applies to royalties for patents, trademarks, designs or models, plans, or secret formulas or processes, or for information (know-how) con­cerning industrial, commercial or scientific experience. The 7% rate applies to royalties for copyrights of literary, artistic or scientific works, including cin­ematographic films, and films or tapes for radio or television broadcasting.

(ii)    For details, see Section B.

(jj)    See Section A.

(kk) This treaty has been signed, but it has not yet been ratified and is not yet in force.

(ll)    The 4.95% rate applies to interest paid to financial institutions. The 5% rate applies to other interest payments.

(mm) The 5% rate applies to royalties paid for the use of, or the right to use, copyrights of scientific works, software and trademarks, and to payments for the use of, or the right to use, equipment and transportation vehicles. The 10% rate applies to other royalties.

(nn) The 4.95% rate applies to interest paid to banks. The 15% rate applies to other interest payments.

(oo) The 10% rate applies to royalties paid for the use of, or the right to use, copyrights of literary, artistic or scientific works, cinematographic films, patents, trademarks, designs or models, plans, or secret formulas or pro­cesses, and to payments for the use of, or the right to use, industrial, com­mercial, or scientific equipment or for information (know-how) concerning in dustrial, commercial or scientific experience. It also applies to gains de – rived from the alienation of such rights or property to the extent that such gains are contingent on the productivity, use or disposition of such property.

(pp) The 4.95% rate applies to interest paid to banks. The 5% rate applies to other interest payments.

Venezuela has signed other tax treaties that cover only air and maritime transportation.