VAT, GST and Sales Tax in Venezuela

Summary

Name of the tax Value-added tax (VAT)
Local name Impuesto al valor agregado (IVA)
Date introduced 1-Oct-93
Trading bloc membership Mercosur Member
Administered by Ministry of Finance http://www.mefbp.gob.ve/ Tax Administration (SENIAT) (http://declaraciones.seniat.gob.ve)
VAT rates
Standard 12%
Other Maximum 16.5%, minimum 8%; additional (luxury consumption tax) maximum 20%, minimum 15%; zero-rated and exempt
VAT number format Not applicable
VAT return periods Monthly
Thresholds
Registration None
Recovery of VAT by non-established businesses No

Scope of the tax

VAT applies to the following transactions:

  • The sale of tangible movable goods
  • The final importation of goods
  • The export of goods and services
  • The provision of independent services performed or used in the country, including those coming from abroad

The definition of “services” includes the following activities:

  • Any independent activity in which an obligation “to do some­thing” is a principal element
  • The provision of water, electricity, telephone and garbage col­lection services
  • Civil works contracts, including personal and real property
  • The lease of personal and real property intended to be used for purposes other than residential use
  • The assignment of use of rights included in and regulated by the laws on industrial property (patents and marks) and intellectual property (copyrights), for valuable consideration

Who is liable

Taxable persons are ordinary taxpayers such as habitual importers of goods, manufacturers, traders, service providers, and, in gen­eral, individuals or legal entities that as part of their business activities carry out activities classified as taxable for VAT pur­poses.

Financial leasing companies and banks are ordinary VAT taxpayers with respect to the portion of the tax payable on the amortization of the price of tangible movable property, excluding interest.

Recipients of imported goods and services purchased from non-domiciled persons or entities are responsible for the tax due. As the “party responsible for the tax,” the service recipient must declare and pay the VAT due on the imported goods or services. The tax paid by the recipient is treated as input tax for the respon­sible party and must be included in the tax return corresponding to the tax period in which the taxable event occurs.

Occasional taxpayers are non-habitual importers of tangible mov­able property.

Formal taxpayers are persons that exclusively carry out activities or operations that are exempt or exonerated from VAT.

Withholding of VAT. The SENIAT has designated taxpayers quali­fied as “special taxpayers” as the persons responsible for the payment of VAT in their capacity as withholding agents. Special taxpayers must serve as withholding agents of the VAT generated by the purchase of personal property or the provision of services provided by suppliers who are ordinary taxpayers.

The amount to be withheld is calculated by multiplying the price invoiced for the goods or services provided by 75% of the pro­portional tax rate (currently 12%). As a result, the effective with­holding rate is 9%.

The VAT withheld is treated as an advance payment for the sup­plier and may be deducted from the tax liability in the period in which the withholding is made or in the period in which the with­holding receipt was received, whichever is later.

If the tax withheld is higher than the VAT proportional rate in the relevant monthly period, the excess tax paid may be carried for­ward to the following monthly periods until it has been deducted in full. If three monthly periods expire and the excess has not yet been deducted, the taxpayer may choose to request a refund of the amount from the tax authorities.

If the withholding is made in the period from the 1st to the 15th day of the month, the tax withheld must be submitted by the withholding agent to the national treasury within the following five working days. If the withholding is made from the 16th to the last day of the month, the tax withheld must be paid to the national treasury within the first five working days of the follow­ing month. For taxpayers who have been qualified by the SENIAT as “special taxpayers,” a different due date applies in accordance with the calendar issued by the SENIAT.

Group registration. Not available.

Non-established businesses. Businesses that conduct business in Venezuela are required to register and obtain a taxpayer identifi­cation number even if they are not domiciled in the country.

Tax representatives. Part of the required process for becoming a VAT-registered entity is to appoint a tax representative.

Reverse charge. As a result of the “reverse-charge mechanism,” the obligation to self-assess the VAT is switched to the recipient of the service. The law states the tax is self-assessed by the recipient “responsible” and “on behalf of the provider,” but the VAT input belongs to the recipient (the Venezuelan entity).

Registration procedures. Individuals, corporations and entities, domiciled or not domiciled in the country, that conduct business in Venezuela are required to obtain a taxpayer identification num­ber (RIF). Registration can be submitted online. Having a tax­payer identification number (RIF) is not a per se condition for being considered a taxpayer.

Late-registration penalties. The penalty for late registration is closure of the office (when applicable) for five days and a fine of 50 tax units (currently, the value of one tax unit is VEF150 [USD23] at the FX rate of VEF6.3 to USD1).

Digital economy. There are no specific rules for the digital econ­omy.

Deregistration. This occurs upon notification to the tax adminis­tration.

VAT rates

The VAT law provides that the proportional rate is fixed in Venezuela’s annual budget law. The VAT law indicates that the minimum rate is 8% and the maximum rate is 16.5%. The National Executive also has the authority to determine the respective VAT rate (general rate and luxury consumption rate) within ranges provided in the VAT law. Currently, the general VAT rate is 12%. This rate applies to all supplies of goods and services, unless a specific measure provides for a different rate.

The luxury consumption tax (additional rate) is currently 15% and applies to the following services: 1) membership and main­tenance fees of restaurants, nightclubs and bars with restricted access, 2) the rental of ships or aircraft for civilians, among oth­ers, for recreational activities or sports, and 3) services provided by third parties through text messaging or other technological means.

Regarding the sale or import of certain goods specified in the VAT law, the additional 15% rate applies to, among others, the following goods:

  • Cars imported with a value equal to or higher than USD40,000 or manufactured in the country with a value equal to or higher than 6,000 tax units (currently, the value of one tax unit is VEF150)
  • Motorcycles imported with a value equal to or higher than USD20,000 or manufactured in the country with a value equal to or higher than 2,500 tax units
  • Airplanes used for exhibitions, advertisement, recreation or sports purposes
  • Gaming machines that use coins or cards
  • Caviar

The VAT law also provides a zero rate (0%) for the export of tangible personal property and tangible movable property, and the export of services.

Exempt goods and services are not liable to tax. The Venezuelan VAT law provides for the exemption and exoneration from VAT. Exemption is the entire or partial exemption of the payment of the tax obligation, granted by the special tax law. Exoneration is the entire or partial exemption of the payment of the VAT obliga­tion, granted by the Executive Power.

Examples of exempt supplies of goods and services

  • Food and goods for personal consumption such as bread, rice, salt, sugar, coffee, milk, pasta, and margarine
  • Books, newspapers and magazines
  • Education provided by institutions registered in the Ministry of Education, Culture and Sports and the Ministry of Superior Education
  • Public transportation of passengers by land or sea
  • Tickets to national parks, museums and cultural centers
  • Banking and insurance services
  • Imports made by diplomatic agents, in accordance with inter­national treaties subscribed to by Venezuela
  • Medical assistance services
  • Residential electricity
  • Fertilizers

Option to tax for exempt supplies. Not available.

Time of supply

VAT generally becomes due when the taxable event occurs.

Tangible property. For sales of tangible personal or tangible mov­able property the following is the time of supply:

  • For sales to public entities: when the payment order is authorized
  • For all other sales: when the invoice or the necessary documents are issued, or when the payment is due or made, whichever is earlier

Services. For supplies of services, the following is the time of supply:

  • For supplies of electricity, telecommunications, and broadcast­ing and television services: when the invoice is issued
  • For services rendered to public entities: when the payment order is authorized
  • For other services: when the invoice or equivalent document is issued, when the payment occurs or when the service is pro­vided, whichever is earlier
  • For services received from abroad that are not subject to cus­toms procedures: when the invoice or equivalent documents are issued, when the payment occurs or when the service is pro­vided, whichever is earlier

Imports. The time of supply for imports is when the registration of the customs return is due.

Other supplies. For all other supplies not listed above, the time of supply is when the invoice or equivalent document is issued, when payment is made or when the property is received, whichever is earlier.

Recovery of VAT by taxable persons

Input tax (tax credit) is tax paid on supplies of goods and services acquired in the course of a taxable business activity. Input tax is deducted from the amount of output tax, which is the tax charged on the taxpayer’s operations during the tax period. Input tax credit arises from the tax paid on the purchase and import of personal property or the receipt of services that are related to costs or expenses properly incurred in the habitual economic activity of the taxpayer. Under the VAT law, input tax is considered to be effectively paid by the recipient of the goods or services when the taxable event occurs.

If the input VAT is higher than the output VAT in the relevant monthly period, the difference may be carried forward to the fol­lowing monthly periods until it has been fully deducted.

Tax credits. If the amount of the deductible input tax is greater than the total tax payable in a monthly period, the resulting dif­ference is treated as a tax credit in favor of the taxpayer, which may be carried forward to the next or subsequent monthly tax periods.

The right to offset tax paid (tax credit) against the tax payable on sales (tax debit) is a personal right of each ordinary taxpayer. This right may not be transferred to third parties, except in the following cases:

  • Drawback of tax credits related to the purchase and acquisition of goods and services in the normal course of export activities (see Drawback of tax credits for exporters).
  • Merger or absorption of companies. In a merger, the resulting company enjoys the remaining balance of the tax credit that corresponded to the merged companies.

Drawback of tax credits for exporters. Ordinary taxpayers that export domestic goods or services are entitled to a drawback of the tax credits paid for the acquisition and receipt of goods and services with respect to their export activities.

Application for drawback. To obtain the drawback of credits, the exporter must file an application with the SENIAT, stating the amount of the tax credit claimed. The SENIAT must give its opinion on the admissibility of the application within 30 business days. If the SENIAT does not express its opinion with respect to the application in the period of 30 business days, the taxpayer may choose to wait for the decision or consider the expiration of the period to be equivalent to the rejection of the application. In the latter case, the taxpayer may take the appropriate judicial action.

The drawback becomes effective on the issuance of special tax drawback certificates (Certificados Especiales de Reintegro Tributario, or CERT), with a face value equal to the amount approved by the SENIAT with respect to the claim. The exporter may use this amount to offset its own tax payments due to the National Treasury or it may transfer the credit to third parties.

Suspension of tax credits. A taxpayer that is involved with the development of an industrial project that takes more than six tax periods to be developed may suspend the use of the tax credits generated during the preoperational stage of the project. The taxpayer may use domestic and imported capital goods and pur­chase services that add value to the goods or that are necessary for the goods to perform the function for which they are designed, until the tax period in which they begin to generate taxable income. The tax credits are adjusted taking into account the con­sumer price index for the Caracas metropolitan area published by the Central Bank of Venezuela, from the period when the tax credits arose until the tax period in which the first tax payment is generated.

With the approval of the SENIAT, taxpayers that are involved in industrial projects aimed essentially towards exporting or gener­ating foreign currency may choose to be refunded the tax paid during the preoperational stage.

Recovery of tax credits for special taxpayer. In the case where the withheld tax is higher than the tax quota of the respective tax period, the surplus that has not been discounted can be carried forward to the next tax period or the following ones, until its total discount. If after three tax periods there is a surplus that has not been discounted, the taxpayer can request the full or partial recovery of the accrued amount.

Recovery of tax credits for exporters. Taxpayers that carry out export activities related to goods or services of national produc­tion are entitled to recover the tax credits supported by the acqui­sition and reception of goods and services for their export activities.

Recovery of tax credits for oil industry. Mixed companies (empre­sas mixtas) that carry out activities related to oil and gas. For the sale of natural hydrocarbons sold in the country to Petroleos de Venezuela, S.A. or its subsidiaries.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for making taxable supplies or for other business purposes (for example, goods acquired for private use by an entrepreneur) or that are related to services of catering, alcoholic beverages or entertainment. In addition, input tax may not be recovered if no documentation supports the transaction or if one or more formal invoice require­ments are not fulfilled.

Partial exemption. There are no partial exemptions. Exonerations are temporary and can last up to five years.

Refunds. Not applicable.

Preregistration costs. Not applicable.

Recovery of VAT by non-established businesses

There is no procedure for the recovery of the VAT for non-established businesses.

Invoicing

VAT invoices. Taxpayers must provide VAT invoices for all sales of goods and supplies of services. Invoices may be replaced by other documents authorized by the SENIAT after such authoriza­tion is granted.

Foreign-currency invoices. Under Venezuelan law, if a VAT invoice is issued in foreign currency, it must also indicate the value of the supply in bolivars (VEF), using the exchange rate published by the Venezuelan Central Bank in the Official Gazette for the date of the transaction.

Administrative Order 00071, which contains general guidelines for issuing invoices and similar documents for VAT, was issued by the SENIAT and published in Official Gazette No. 39,795, dated 8 November 2011.

VAT returns and payment

VAT return. The tax is assessed for monthly tax periods. The tax return and payment of any tax due must be submitted within the first 15 days following the tax period. It should be filed online.

Special schemes. The taxpayers qualified as “special” as with­holding agents of VAT will act as withholding agents for the VAT invoiced by their suppliers of goods or services.

Electronic filing and archiving. Electronic filing applies in all cases.

Annual returns. No annual returns are required.

Penalties

Penalties apply to a range of VAT offenses. The master tax code provides that the following offenses, among others, are formal breaches of the VAT law:

  • Failure to file the VAT declaration
  • Incomplete filing of the VAT declaration
  • Filing of the declaration in a form not authorized by the SENIAT
  • Failure to exhibit accounting books when ordered to by the SENIAT
  • Providing the SENIAT with false information
  • Breaching the SENIAT’s requirements for purchases and sales books
  • Failure to issue invoices or required documents
  • Issuing invoices that do not comply with tax requirements

The master tax code provides that the following offenses, among others, are “material breaches” of the VAT law:

  • Late payment or nonpayment of VAT due
  • Failure to withhold VAT

These breaches are penalized through fines and closure of the establishment.

The penalty for tax fraud is a term of imprisonment, ranging from six months to seven years.