Venezuela Personal Income Tax

Tax resident individuals pay tax on their worldwide income. Residents are subject to tax if their annual worldwide gross income exceeds 1,500 tax units or if their annual world­wide net income exceeds 1,000 tax units. For the 2016 tax year, the value of a tax unit is VEF177. For the 2015 tax year, the value of a tax unit was VEF150. The bolivar to tax unit ratio is modi­fied each year by the tax administration, subject to the approval of the National Assembly. Nonresident individuals are taxed on Venezuelan-source income, regardless of where the payment is made.

Individuals are considered resident for tax purposes if they are physically present in Venezuela for more than 183 days in the current or immediately preceding calendar year. An individual resident in a jurisdiction with which Venezuela has entered into a double tax treaty is protected under the independent or dependent personal services clause.

Income subject to tax. The taxation of various types of income is described below.

Employment income. Taxable net employment income consists of all compensation or profit, regular or accidental, resulting from the provision of personal services under a dependence relation­ship, regardless of the character of the wages.

Severance indemnities received by employees or their beneficia­ries and travel-expense reimbursements related to rendering per­sonal services are excluded from total income.

Non-tax residents are subject to a final withholding tax at a flat rate of 34% on their income from Venezuelan sources.

Self-employment and business income. The taxable income for self-employed individuals is determined in accordance with the rules described in Employment income.

Annual gross income in excess of 1,500 tax units or net taxable income in excess of 1,000 tax units must be formally declared. To determine net taxable income, individuals may deduct all costs and expenses necessary to produce self-employment and business income.

Nonresident individuals are subject to a final withholding tax at a flat rate of 34% on income derived from Venezuelan sources.

Directors’ fees. Directors’ fees relating to activities performed in Venezuela and received from resident companies are taxed as employment income at the rates described in Rates.

In addition, an individual is subject to social security contribu­tions on directors’ fees. The contribution is based on a percentage of monthly salary earned.

Investment income. Interest received by resident and nonresident individuals from savings instruments issued by Venezuelan banks and other financial institutions are tax-exempt. Other interest is aggregated with other income and taxed at the rates described in Rates.

Nonresident individuals are subject to a final withholding tax at a rate of 34% on royalties derived from Venezuela.

Effective from January 2001, dividends paid by Venezuelan com­panies are subject to withholding tax at a rate of 34% to the extent that income before taxes exceeds net taxable income for tax years beginning on or after the effective date. “Income before taxes” is defined as financial income before tax reconciliation, and “net taxable income” is income subject to tax after tax reconciliation. Recipients are subject to tax at the same rate on dividends from non-Venezuelan companies, less any foreign taxes paid.

Capital gains. Capital gains are taxed with other income accord­ing to the Tariff No. 1 rates described in Rates.

Deductions

Personal deductions and personal tax credit. Tax-resident indi­viduals are allowed to deduct the following items:

  • Mortgage interest payments for a principal dwelling, limited to an amount equivalent to 1,000 tax units, rent payments for a principal dwelling, limited to an amount equal to 800 tax units.
  • Payments to educational institutions in Venezuela for taxpayers and their children under 25 years of age. The age limit does not apply to expenses incurred on the education of handicapped children and adults under the tutelage of the taxpayer.
  • Premiums for surgery, hospitalization and maternity insurance paid in Venezuela to domiciled companies (no limit).
  • Medical, dental and hospitalization expenses incurred in Venezuela for the taxpayer, spouse and ascendants or descen­dants (no limit).

Taxpayers must keep the documentation (receipts and vouchers) supporting the deductions mentioned above in case of a tax audit.

Tax residents may opt for a standardized deduction equal to 774 tax units, instead of all of the itemized deductions mentioned above. No supporting documentation is required for the standard­ized deduction.

Deductible expenses incurred in Venezuela may offset only Venezuelan-source gross income. Foreign-source deductible expenses may offset only foreign-source income. The supporting documents for the tax return must contain the taxpayer’s tax information number.

Resident individuals receive an additional annual personal rebate of 10 tax units. They are also entitled to a family rebate of 10 tax units for each family member who lives in Venezuela (spouse, ascendants and descendants who have not attained the legal age required by Venezuelan law, unless they are handicapped and unable to work or are studying and are less than 25 years old).

Business deductions. Individuals may deduct all expenses neces­sary to produce self-employment and business income.

Rates. Resident individuals are subject to the progressive tax rates of Tariff No. 1, which are applied to taxable income expressed in tax units (see Who is liable). The following are the applicable rates.

 

Taxable income    
Exceeding Not exceeding Rate
Tax units Tax units %
0 1000 6
1000 1500 9
1500 2000 12
2000 2500 16
2500 3000 20
3000 4000 24
4000 6000 29
6000 _______________ 34

Relief for losses. Business losses of a self-employed person may be carried forward for three years but cannot exceed 25% of the income in each tax year. Loss carrybacks are not allowed.

Inheritance and gift taxes

Resident nationals, resident foreigners and nonresidents are sub­ject to inheritance and gift taxes only on assets located in Venezuela. In heritance tax is levied at the following rates, which vary depending on the relationship of the beneficiary to the deceased or donor.

 

Beneficiary Rate (%)
Spouse, ascendants and descendants 1 to 25
Siblings, nephews and nieces 2.5 to 40
Other relatives 6 to 50
Unrelated persons 10 to 55

Social security

The social security system provides the following benefits:

  • Medical assistance for the worker and the worker’s spouse, parents and children
  • Indemnities for temporary disability and death
  • Pensions for disability, old age and dependent survivors

Employers and employees are required to make social security contributions in accordance with the following table.

 

 

Type of contribution Amount of contribution (%)
Social security contributions on monthly salary of each employee, up to a ceiling of five minimum salaries; paid by:
Employer 11 / 12 / 13
Employee 4
Unemployment insurance regime contributions on monthly salary of each employee, up to a ceiling of five minimum salaries; paid by:
Employer 2
Employee 0.5
Housing regime contributions on total monthly salary; paid by:
Employer 2
Employee 1
National Socialist Training Institute contributions (required if employer has five or more employees); paid by:
Employer, on total employee remuneration 2
Employee, on any profit-sharing received from the employer at the year-end 0.5

Social security treaties. Venezuela has entered into social secu­rity treaties with Chile, Ecuador, Greece, Italy, Portugal and Spain.

Under the above treaties, nationals of the treaty countries who are working in Venezuela or Venezuelans who are working in the treaty countries may rely on the treaties to avoid double social taxation for the time period stated in the treaties. However, according to the Social Security Institute, the only treaty that is in effect for Certificates of Coverage is the Spain treaty.

Tax filing and payment procedures

For individuals, the tax year in Venezuela is the calendar year. Tax returns must be filed by 31 March of the following tax year. The tax liability indicated on the return may be paid in three por­tions. The first is due when the return is filed, the second one within 20 days after filing the return and the third one within 40 days after the return is filed.

Married persons are taxed either jointly or separately, at the tax­payers’ election, on all types of income.

Double tax relief and tax treaties

Income is separated into two baskets, one for foreign-source income and expenses and another for domestic-source income and expenses. Foreign taxes paid on the foreign-source income may offset the Venezuelan tax on that income only. However, losses in the Venezuelan-source basket may be offset against foreign-source income.

Venezuela has entered into double tax treaties with the following countries.

Austria                         Germany                      Russian Federation

Barbados                      Indonesia                      Spain

Belarus                         Iran                               Sweden

Belgium                       Italy                              Switzerland

Brazil                           Korea (South)               Trinidad

Canada                         Kuwait                          and Tobago

China                           Malaysia                       United Arab

Cuba                            Netherlands                  Emirates

Czech Republic            Norway                        United Kingdom

Denmark                      Portugal                        United States

France                          Qatar                            Vietnam

Venezuela has signed a double tax treaty with Mexico, which has not yet entered into force.

Temporary visas

Venezuela issues tourist visas. Foreign nationals with tourist visas may not work as employees or engage in business in Venezuela. Business visas allow individuals to conduct commercial affairs or to provide technical assistance.

Work visas and permits

Under the Immigration Law, foreign citizens who intend to ren­der services in Venezuela for more than 90 days must obtain a labor permit (authorization) and a labor visa (Working Transient Visa; known as “TR-L”). The company that intends to employ the foreign citizen requests the labor permit. If a foreign citizen will not be in Venezuela for more than 90 days, neither a labor permit nor a labor visa is required.

To obtain a TR-L, the foreign citizen must have a passport that had been issued by the respective authority at least 6 months before the request for the TR-L, as well as an employment con­tract with a Venezuelan entity. The visa has a term of one year and may be renewed for an additional term of one year. The holder of the TR-L may make multiple entries into Venezuela or may stay in Venezuela for the entire period of the visa.

To obtain a labor visa and work permit, the company must file an application with the Office of Migration and the Ministry of Labor, which will issue the labor visa and the labor permit respectively, within 15 business days following the request. In practice, the period for the issuance of the visa may be extended for an additional 15 days.

Work visa. To obtain a work visa, the following documents must be submitted to the Office of Migration (Dirección de Extranjería):

  • Proof of payments by the employer to the National Socialist Training Institute (Instituto Nacional de Capacitación y Educación Socialista, or INCES)
  • Proof of last three payments by the employer to the social secu­rity system
  • Copy of municipal license of the company
  • Copy of last income tax return of the company
  • Authorization letter
  • Justification letter (providing reasons for requesting labor visa)
  • Entry request form, issued by the Administrative Service Office for Identification, Immigration and Foreign Purposes (Servicio Administrativo de Identificación, Migración y Extranjeria, or SAIME)
  • Two wallet-sized photos of the foreign worker
  • Copy of the entire passport (including blank pages)
  • Notarized employment contract (original)
  • University or college or technical or associate degree, translated into Spanish if in another language, and legalized in the country of residence before the Venezuelan consulate, or annotated
  • Résumé, translated into Spanish if in another language, and legalized in the country of residence before the Venezuelan consulate, or annotated

Work permit. To obtain a work permit, the following documents must be filed with the Ministry of Labor:

  • Copy of the document of incorporation and bylaws of the con­tracting company
  • Copy of notarized employment contract
  • Employment declaration form and hours worked (this form is issued by the Ministry of Labor)
  • Justification letter (providing reasons for requesting labor permit)
  • Format of job offer issued by Ministry of Labor (original and two copies)
  • Information filed with the Labor Inspector Office (Inspectoría del Trabajo), including a copy of the Tax Identification Number (Registro Unico de Información Fiscal, or RIF) of the contract­ing company, company name, number of employees and work­ers and authorization letter

The authorities may require additional documents that they con­sider to be necessary for this process.