Venezuela amends income tax provisions, creates new financial transaction tax

Tax Insights
from International Tax Services
Venezuela amends income tax
provisions, creates new financial
transaction tax
January 20, 2016
In brief
Venezuela published two decrees on December 30, 2015: one amends certain provisions of the existing
Income Tax Law; the other creates a new tax on ‘large financial transactions.
Decree No. 2,163 of 2015 increases the corporate income tax (CIT) rate for companies in the financial and
insurance industry. The decree also eliminates new investment tax credits and removes the right of
‘special taxpayers’ to use tax inflation adjustments.
Decree No. 2,169 of 2015 creates a new tax on certain financial transactions performed by ‘special
taxpayers’ or their related entities.
In detail
Decree No. 2,163 of 2015:
Amendments to the Income
Tax Law
This decree, the provisions of
which are effective January 1,
2016, increases the CITrate for
the banking, insurance, and
reinsurance industries to 40%.
The headline CIT rate for other
industries remains at 34%.
Pursuant to the decree, most
items will be taxed solely on an
accrual basis. Only income
arising in connection with a
labor relationship, as well as
capital gains, will be taxed
under the cash method.
The decree eliminates the
deduction recapture rule for
deductions taken on an accrual
basis in a given tax year and not
paid in the following taxable
year.
The applicable inflation
adjustment mechanism for
taxable income determination
no longer will be available to
‘special taxpayers.’ The
Venezuelan tax authorities
determine whether a taxpayer is
a ‘special taxpayer’ based on the
taxpayer’s income or size.
The decree also repeals tax
credits granted for new
investments.
Decree No. 2,169 of 2015: Tax
on large financial
transactions
This decree, which takes effect
on February 1, 2016, imposes a
new 0.75% tax on certain
financial transactions entered
into by ‘special taxpayers.’
The new financial transactions
tax applies to the following
transactions, among others:
 withdrawals from bank
accounts or any other
instruments held in financial
entities
 second endorsement
transfers of securities
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 acquisitions of cashier’s checks
 cross-border payments, and
 debt payment obligations, even if
those payments are not executed
through a formal financial system.
The tax is not deductible for
Venezuelan income tax purposes.
We expect the government to issue
regulations that would, in principle,
designate withholding agents, terms
for filing the corresponding returns,
and terms for payment of the new tax.
The decree also exempts certain
transactions from taxation, including
state-issued securities, certain tax
payments, and transfers of funds
among accounts controlled by the
same person or entity.
The takeaway
Multinational companies with
investments in Venezuela should
consider how these changes may affect
their investments or operations in the
country.
Let’s talk
For a deeper discussion of how this might affect your business, please contact:
International Tax Services, United States
John A. Salerno, US LATAX Leader
+1 (646) 471-2394
[email protected]
Jose Leiman
+1 (305) 381-7616
[email protected]
María Bel
+1 (646) 471-1268
[email protected]
Lucia Echenique
+1 (646) 471-6294
[email protected]
Daniel Landaluce
+1 (646) 471-7762
[email protected]
Camila Silva
+1 (646) 471-8794
[email protected]
International Tax Services, Venezuela
Jose J. Garcia
+58 (212) 700-6083
[email protected]
Gladys Rahbe
+58 (212) 700-6650
[email protected]
Anna Rita Restaino
+58 (212) 700-6217
[email protected]
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