venezuela-vat by worldtradepresss

Worldwide VAT, GST and Sales Tax Guide

Caracas GMT - 4½

Mendoza, Delgado, Labrador & Asociados

Avenida Francisco de Miranda

Centro Lido, Torre A, Piso 13 Caracas 1060 Venezuela

Indirect tax contacts

José Antonio Velazquez +58 (212) 905-6621 jose.a.velazquez@ve.ey.com

Ivette Jimenez +58 (212) 905-6753 ivette.jimenez@ve.ey.com

Damian Gomez +58 (212) 905-6788 damian.gomez@ve.ey.com

Saul Medina +58 (212) 905-6716 saul.medina@ve.ey.com

A. At a glance

Name of the tax

Value-added tax (VAT)

Local name Impuesto al Valor Agregado (IVA)

Date introduced 1 October 1993

Trading bloc membership MERCOSUR

Administered by Ministry of Finance (http://www.mppef.gob.ve/) Tax Administration (SENIAT) (http://declaraciones.seniat.gob. ve)

VAT rates

Standard 16%

Other

VAT number format

VAT return periods

Thresholds

Additional rates (5%–25%); zero-rated

Tax ID number (known as RIF) J-XXXXXXXX-X (numbers established by the tax administration)

Monthly for VAT ordinary taxable persons/fortnightly for special taxable persons (high level of income taxable persons)

Registration None

Recovery of VAT by non-established businesses No

B. 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

Effective use and enjoyment. To avoid instances of non-taxation or double taxation, jurisdictions can apply “use and enjoyment” rules that allow a service that is “used and enjoyed” in the jurisdiction to be taxed or prevent a service that is “used and enjoyed” outside the jurisdiction from being taxed. If a service is taxed in the jurisdiction under the “use and enjoyment” provisions, a non-established supplier of the service may be required to register for VAT in every jurisdiction where it has customers that are not taxable persons. In Venezuela, no services are subject to the “use and enjoyment” provisions.

Transfer of a going concern. Normally the sale of the assets of a VAT-registered or VAT-registrable business will be subject to VAT at the appropriate rate. A transfer of a going concern (TOGC) is the sale of a business or part of a business capable of separate operation including assets. In Venezuela for a TOGC, the transfer of immovable property and intangible goods (e.g., intellectual property rights, goodwill, contracts) are outside the scope of the tax. There are no conditions to be met for such transfers. However, tangible movable assets transferred as part of the TOGC will be subject to VAT at the standard rate.

Transactions between related parties. In Venezuela, there are no specific rules that indicate the value for VAT purposes for transactions between related parties.

C. Who is liable

Taxable persons are ordinary taxable persons 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 taxable persons 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 taxable persons are non-habitual importers of tangible movable property.

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

Exemption from registration. The VAT law in Venezuela does not contain any provision for exemption from registration.

Voluntary registration and small businesses. The VAT law in Venezuela does not contain any provision for voluntary VAT registration, as there is no registration threshold (i.e., all entities that make taxable supplies are obliged to register for VAT). The only exception would be a non-domiciled entity, which is not subject to registration, but still can file for a voluntary registration. This

will be applicable unless the foreign entity is conducting direct business in Venezuela and carries out VAT-taxable transactions on a permanent basis, in which case the VAT registration is mandatory.

Group registration. Group VAT registration is not allowed in Venezuela.

Fixed establishment. In Venezuela, there is no legal definition of a fixed establishment for VAT purposes. However, the permanent establishment rules for direct taxation may apply for VAT.

Subsequently, according to Article 7 of Income Tax Law, it defines a PE as any of the following:

• Fixed place through which the business of a foreign enterprise is wholly or partly carried on, either directly or indirectly through a representative or an employee. It specifically encompasses a place of management, a branch, an office, offices, factories, workshops, installations, warehouses, stores or other establishments; works of construction or installation, when its duration extends for more than six months, agencies or representations with the authority to bind the corporation in the country, a mine or any other form of extraction of natural resources (hydrocarbon, agricultural, farming, forestry, livestock farms)

• The undertaking of professional or artistic activities through a fixed place of business either by itself or through its employees, agents, representatives or other personnel hired for that purpose also trigger the creation of a PE

• Agents acting independently are excluded from this definition, unless they have the power to conclude contracts on behalf of the principle

Non-established businesses. Entities that conduct business in Venezuela are required to register and obtain a taxable person identification number even if they are not domiciled in the country. The non-domiciled taxable persons must request a temporary taxable person ID (RIF) from the tax authority, which is issued online.

Tax representatives. Appointing a tax representative is mandatory in Venezuela. To become a VATregistered entity, it is required to appoint a tax representative. Tax representatives are responsible for the companies in front of the tax administration. Said representatives can be directors, managers, administrators or legal representatives of the entities who will be appointed through the website of the tax administration (SENIAT).

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 input tax belongs to the recipient (the Venezuelan entity).

Domestic reverse charge. There are no domestic reverse charges in Venezuela.

Digital economy. No specific VAT rules apply for digital economy transactions. For business-tobusiness (B2B) digital transactions, the customer is required to self-assess corresponding VAT using the reverse-charge mechanism, only when the provider is not domiciled in Venezuela.

For business-to-consumer (B2C) digital transactions, since individual consumers are unlikely to be registered taxable persons, no VAT is anticipated. As such, non-established businesses that provided electronically supplied services (B2C) do not need to register for VAT. There are no other e-commerce rules for imported goods.

Online marketplaces and platforms. No special rules exist for online marketplace and platforms in Venezuela.

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

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. Option to tax for exempt supplies is not allowed in Venezuela.

E. Time of supply

VAT generally becomes due when the taxable event occurs.

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, or the tangible property is delivered, whichever is earlier

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 services rendered on a recurrent basis: when invoice is issued, payment is due or made, whichever is earlier

• 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 service is received

For all other supplies, 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.

Deposits and prepayments. There are no special time of supply rules in Venezuela for deposits and prepayments. As such, therefore the general time of supply rules apply (as outlined above). This establishes that for all other supplies not listed in the VAT law, 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.

Continuous supplies of services. VAT becomes due for services rendered on a recurrent basis when invoice is issued, payment is due or made, whichever is earlier.

Goods sent on approval for sale or return. There are no special time of supply rules in Venezuela for supplies of goods sent on approval for sale or return. As such, the general time of supply rules apply (as outlined above). This establishes that for all other supplies not listed in the VAT law, 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.

Reverse-charge services. There are no special time of supply rules in Venezuela for supplies of reverse-charge services. As such, the general time of supply rules apply (as outlined above). This establishes that for other supplies not listed in the VAT law, 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.

Leased assets. There are no special time of supply rules in Venezuela for supplies of leased assets. As such, general time of supply rules apply (as outlined above). This means VAT must be accounted for upon issuance of the invoice, payment or when consideration is enforceable.

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

F. 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 taxable person’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 taxable person. 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 tax is higher than the output tax in the relevant monthly/weekly period as the case may be, the difference may be carried forward to the following periods until it has been fully deducted.

There is no set time limit for a taxable person to reclaim input tax in Venezuela. This means that effectively the input tax (VAT credit) may be carried forward indefinitely until its complete recovery. If the input tax is reflected in the VAT return, it can be used at any time to be offset with output tax.

Nondeductible input tax. Input tax may not be recovered on purchases of goods and services that are not used for making taxable supplies. Input tax may not be recovered if no documentation supports the transaction or if one or more formal invoice requirements are not fulfilled.

Examples of items for which input tax is nondeductible

• Goods acquired for private use by an entrepreneur

Examples of items for which input tax is deductible (if related to a taxable business use)

• Input tax is deductible on every item that complies with the requirements (subject to VAT and related to a taxable business use)

Partial exemption. In Venezuela, partial exemption is not applicable. There are, however, exonerations (total or partial exemption from the payment of the tax obligation, granted by the Executive Power in the cases authorized by the law) that are temporary and can last up to one year. In the case of input tax partially associated to taxable transactions, it can be recognized as input tax only on a pro rata basis, in cases where no separate accounts are used to discriminate both taxable and nontaxable transactions.

Capital goods. There are no specific input tax recovery rules for capital goods. As such, the general input tax rules apply. The acquisition and sale of tangible movable assets will be taxable for VAT purposes whether or not such goods are referred to capital goods. In cases where an acquisition of goods is used for both taxable and exempted activities, the attribution of the input tax shall be on a pro rata basis, if it is not separately recognized. Regarding the use of the input tax

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

Pre-registration costs. Input tax incurred on pre-registration costs in Venezuela is not recoverable. Bad debts. Output tax accounted for on supplies that do not get paid by the recipient (i.e., bad debts) cannot be recovered in Venezuela.

Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Venezuela.

G. Recovery of VAT by non-established businesses

Input tax incurred by non-established businesses that are not registered for VAT in Venezuela is not recoverable.

H. Invoicing

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

Credit notes. The VAT ruling establishes that the exchange or return to the seller of goods, merchandise or products purchased, made because they are in poor condition, expired, damaged, for not matching quality or characteristics to those actually acquired, or other causes will not constitute a new sale, but will give rise to the issuance of credit notes or the issuance of new substitute invoices of the previously issued ones, which will be annulled.

If the merchandise is returned only in part, the tax credit will be limited to the part of the price corresponding to such part. The credit notes must be registered with a negative sign in the invoice column of the sales book. When substitute invoices are issued, it must be recorded in the sales book, in the same column where the amount of the voided invoice was recorded.

Electronic invoicing. Electronic invoicing is allowed in Venezuela, but not mandatory.

Scope of electronic invoicing. For B2B, B2C and business-to-government (B2G) supplies, electronic invoicing is allowed but not mandatory in Venezuela. In Venezuela, electronic invoicing is only permitted for taxable persons that are large services providers (usually utilities) and can be private or public legal entities, as per the following operations:

• Electricity

• Travel agencies and similar

• Airlines.

• Insurance companies

• Cargo courier and messaging

• Issuance of vouchers, coupons, tickets and electronic cards for food, health, toys and other social benefits

• Drinking water

• Domestic gas

• Urban cleaning

• Basic telephone services

• Mobile telephone services

• TV by subscription

• Internet

• Delay exceeding two years from the expiration date

Late payment: an additional fine to what was previously indicated equivalent to 150% of the amount due

The penalty for nonpayment of VAT is a fine between 100% and 300%.

Failure to withhold VAT may result in the following penalties:

• For not withholding, a penalty equivalent to 500% of the tax not withheld will be applicable

• For applying a withholding in a lower amount, 100% of the 100% of the tax not withheld will be applicable

• For late payment of the withholding tax (WHT), a penalty equivalent to 5% of the amount withheld for each day of delay up to a delay up to a maximum of 100 days will be applicable delay up to a maximum of 100 days will be applicable

• For nonpayment of WHT, a penalty of 1,000% of the WHT due and possible imprisonment between six months to seven years will be applicable

Supplementary VAT returns (substitutive) are allowed when there is a VAT amount to be paid (output tax higher than input tax). Submission of substitutive (rectifying) declarations is subject to fines only after the file of the second substitution or when the first substitute declaration is submitted after the 12 months following expiration of the deadline for the presentation of the substituted declaration. In these cases, a fine equivalent to 50 times the official exchange rate of the currency of greater value published by the Central Bank of Venezuela will apply.

For failing to notify the tax authorities of a change in VAT status, the taxable person will be sanctioned with closure of five continuous days of the office or establishment, in case it is applicable, and a fine of the equivalent of 100 times the official exchange rate of the highest value currency, published by the Central Bank of Venezuela.

In those cases, in which more than one substitute tax return is filed or the first substitute tax return is filed after the term established in the respective regulation, a fine equivalent to 50 times the official exchange rate of the currency of greater value published by the Central Bank of Venezuela will apply.

Penalties for errors. Noncompliance of formal duties are sanctioned as follows:

• Filing of the declaration in a form not authorized by the SENIAT

– Penalty: fine equivalent to 50 times the official exchange rate of the currency of greater value published by the Central Bank of Venezuela will apply.

• Failure to exhibit accounting books when ordered to by the SENIAT

– Penalty: closure of the office (when applicable) for 5 days and a fine of the equivalent of 100 times the official exchange rate of the highest value currency, published by the Central Bank of Venezuela.

• Providing the SENIAT with false information

– Penalty: fine equivalent to 100 times the official exchange rate of the currency of greater value published by the Central Bank of Venezuela will apply.

• Breaching the SENIAT’s requirements for purchases and sales books

• Failure to issue invoices or required documents

– Penalty: closure of the office (when applicable) for 10 days and a fine of the equivalent of 150 times the official exchange rate of the highest value currency, published by the Central Bank of Venezuela.

• Issuing invoices that do not comply with tax requirements