SIGNIFICANT DEVELOPMENTS
Social security, unemployment benefit and housing savings plans are currently under revision.
NOTE
The following information related to taxation issues in Venezuela is current as of January 1,1999. For subsequent developments, consult the PWC contact listed above.
TERRITORIALITY AND RESIDENCE
Income is taxable to residents and nonresidents of Venezuela when it arises from economic activities carried out in Venezuela or from assets located in Venezula.
Individuals are considered to be Venezuela residents for tax purposes when they spend more than 180 days in Venezuela during a tax year or if they spent more than 180 days in Venezuela in the preceding year. Thus, an individual who spends 181 days in Venezuela in 1999 will be deemed to be a resident for both 1999 and 2000.
GROSS INCOME
Employee gross income/Resident and nonresident individuals are taxed on salaries and wages and on any other remuneration for personal services, such as meal allowances, pensions, profit sharing, and similar remuneration, regardless of the place of payment or currency used. Employees are not taxed on reimbursements made related to travel expenses and representation allowances. Employees are also not taxed on pensions, on termination indemnities allowed according to the labor law or collective bargaining (employer/union) contracts and interest therein, or on income from trusts established to administer employer contributions to the Fund.
Resident individuals are subject to tax using graduated rates. The maximum rate is 34%. Income for nonresident individuals arising from nonbusiness professional activities is subject to tax of 34% on 90% of the gross payments. Salary and other income received by nonresidents for services performed in Venezuela are subject to a flat 34% tax, withheld at source (see "Tax rates" below).
Foreign-source income is not taxable in Venezuela.
Tax units/The 1994 income tax reform law established the concept of a taxable unit (TU) as an element that will reduce the negative effect created by inflation on the determination of the tax rates. The Tax Code established the initial TU at Bs. 1,000, with annual basis adjustment based on the variation of the CPI from the previous year. For 1998 the TU is Bs. 7,400. For 1999 the TU will be close to BS.9,620.
Capital gains and investment income/Capital gains are taxable as ordinary income. Individuals are taxed on any Venezuelan-source income, including income derived from industrial and commercial activities, earnings derived from the sale of personal property or services, and royalties and interest.
Investments in the stock market/Income earned by individuals investing in the local stock market (sale of shares) are subject to a flat tax of 1% (via withholding). Profits and losses related to the same activity cannot be taxable or deductible against the ordinary taxable income.
Dividend income is not taxable to individuals. Income received in the form of interest, royalties or proceeds from the sale of real estate is taxable when paid. Interest earned from savings deposit or savings bonds are tax exempt.
Foreign-source income is not taxable in Venezuela.
DEDUCTIONS
Business deductions/Resident individuals who are not employees can deduct expenses allowed by law, using the same rules applicable to corporations. Taxable income does not include travel expense reimbursements or limited representation allowances. Business deductions from salary income are not allowed.
Nonbusiness expenses/In determining taxable income, Venezuela residents can deduct the following expenses.
1. Educational payments made in Venezuela on behalf of the taxpayer and dependent children under 25 years of age.
2. Life, surgery, hospitalization, and maternity insurance premium payments.
3. Medical, dental and hospitalization payments.
4. Rent or interest payments on loans granted for the acquisition or enlargement of the taxpayer's home. This amount cannot exceed 5,000 TU per year.
Taxpayers should attach the invoices (with the RIF number) to the tax return.
Special deductions/Taxpayers have the option of claiming a special deduction of 750 TU. However, taxpayers claiming the special deduction cannot apply for the deductions listed above. No documentation is necessary to support the claim for the special deduction.
Personal allowances/Residents receive a personal tax credit of 10 TU for the taxpayer, spouse and any dependent.
Foreign tax credits/There are no foreign credits.
OTHER TAXES
Social security taxes/Social security taxes are 4% of the salary, up to a maximum salary of 75,000 per month. This tax is currently under reform.
Unemployment benefit program/Funds to finance this program are obtained from
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