The Law Approving the Convention between the Government of the Bolivarian Republic of Venezuela and the Government of the Saudi Arabian Kingdom to Avoid the Double Taxation and Prevent the Tax Evasion regarding Income Tax (''Convention'') was published in Official Gazette No. 40,819 of December 30, 2015.  The Convention will enter into force the first day of the second month subsequent to the month in which the Contracting States exchange the last diplomatic note confirming that all domestic procedures were fulfilled for the Convention to enter into force.  The following are some of the most relevant aspects of the Convention.
 
1.         Scope of Application
 
The Convention applies to taxes on income and capital imposed by each of the Contracting States, their political subdivisions and local authorities.  Specifically, it will apply to the following taxes: (i) in the case of Saudi Arabia to (a) the Zakat (the Zakat is considered a religious tax imposed by Islam; it is a fixed proportion of the personal net worth); and, (b) income tax (including the tax on natural gas investment); and (ii) in the case of Venezuela: to income tax.
 
2.         Permanent Establishment
 
The following concepts are included within the concept of permanent establishment: (i) places of management, branches, offices, factories, workshops and mines; (ii) building sites or construction or installation projects if they exceed of a period of six months; and (iii) the provision of services through employees or other hired staff of a company of a Contracting State in the other Contracting State, as long as they provide services for more than six months within a twelve-month period.  In this case, the Convention sets that the addition of six months should be calculated based upon a twelve-year period, however, we consider that this is a typo and should be understood as a twelve-month period.
 
3.         Business Profits
 
Business profits obtained by a company of a Contracting State shall be taxable only in that State.  However, the other Contracting State may tax such profits if the company performs activities in that other Contracting State through a permanent establishment, but only insofar as these profits are attributable to such permanent establishment.  The Convention sets a ''force of attraction'' rule on permanent establishments.  According to this rule, the business profits that a company of a Contracting State receives in the other Contracting State may be taxed in that other Contracting State when such income derives from: (a) sales made in the other Contracting State of goods similar to those sold through the permanent establishment; or, (b) other commercial activities performed in the other Contracting State, similar to those performed through the permanent establishment.
 
The business profits' article has the following particularities: (i) the term ''business profits'' does not include the provision of services by an individual in its capacity of employee or independent agent; (ii) the dispositions of this article will not affect the application of the domestic laws of a Contracting State regarding income tax of non-residents derived from insurance activities, if such domestic law existed at the time of subscription of the Convention; and, (iii) business profits will not be attributed to a permanent establishment because of the mere purchase of goods and assets for the company.
 
4.         Dividends
 
As general rule, dividends shall be taxed by the Contracting State where the receiving shareholder resides.  Nevertheless, the Contracting State where the distributing company resides may also tax such dividends in accordance with its laws, but if the beneficiary of the dividend is the beneficial owner, the tax may not exceed 5% of the gross amount of dividends.  The rules mentioned above do not applicably if (i) the beneficial owner of the dividends has a permanent establishment or a fixed base in the Contracting State where the company that distributes the dividends has its domicile; and (ii) the dividend is attributable to such permanent establishment or fixed base.  In that case, the business profits' general rule will apply.
 
5.         Interest
 
Interest arising from a Contracting State and paid to a resident of the other Contracting State, will be taxable by the Contracting State where the interest receiver resides.  However, those interests may be taxed by the Contracting State they come from, but if the beneficiary of the interest is the beneficial owner, the tax may not exceed 5% of the gross amount of interests.
 
Notwithstanding the foregoing, the interest arising from a Contracting State and paid (i) to the government of the other Contracting State, including its administrative subdivisions or local authorities; (ii) to the Central Bank of the other Contracting State or any financial institution property of that government or that develops governmental functions; or (iii) to any resident of the other Contracting State by concept of insured or financed interest by the Government of the other State, the Central Bank or any other financial institution, mentioned for the first time, will be exempt from income tax in that Contracting State.
 
6.         Royalties
 
For purposes of the Convention, royalties arising from a Contracting State and paid to a resident of the other Contracting State shall be subject to tax in the other Contracting State.  However, the Contracting State from which those royalties arose may tax them, but if  the beneficial owner is a resident of the other Contracting State, the tax may not exceed the 8% of the gross amount of the royalties.
 
7.         Capital Gains
 
Gains obtained by a resident of Saudi Arabia or Venezuela that arise from the disposal of real estate property, may be taxed in the Contracting State where the asset is located.  On the other hand, (i) gains arising from the transfer of movable property that belongs to a permanent establishment of a company of a Contracting State located in the other Contracting State; or, (ii) movable property  that belongs to a fixed base that the resident of a Contracting State has in the other Contracting State for the provision of independent professional services, including the earnings from the transfer of such permanent establishment (alone or with the whole enterprise) or of such fixed base may be taxed in that other Contracting State.
 
Gains derived from the sale of ships or aircrafts used in international traffic, or from the sale movable property destined to the exploitation of such ships and aircrafts, will only be taxed in the Contracting State of the company's (seller) domicile.
 
Gains derived from the sale of a company's shares domiciled in a Contracting State, shall be taxed in such Contracting State.
 
Finally, gains derived from the sale of goods different to those mentioned above will only be taxed in the Contracting State of the transferor's domicile.
 
8.         Independent Professional Services
 
As a general rule, income derived by a resident of a Contracting State in respect of independent professional services shall only be taxable in that Contracting State.  However, such income may be taxed in the other Contracting State if (i) the person normally has at his/her disposal activities in the other Contracting State, but only for the portion attributable to such fixed base; or (ii) the person resides in the other Contracting State for one or more periods which together exceed 183 days in any twelve-month period, but only for the portion attributable to the services provided in that Contracting State.
 
9.         Salaries, wages and other Remuneration for Dependent Personal Services
 
Salaries, wages and other remuneration paid to directors, professors and researchers, as well as pensions that a resident of a Contracting State receives for previous employment, may only be subject to tax in that Contracting State, unless the employment is performed in the other Contracting State. 
However, such remunerations may only be taxed in the State of residence, if (i) the beneficiary resides in the other Contracting State for one or more periods that do not exceed a total of 183 days in any consecutive twelve-month period beginning or ending during the calendar year in question; (ii) the remunerations are paid by or in the name of an employer who is not resident of the other Contracting State; and (iii) the remunerations are not borne by a permanent establishment or fixed base that the employer has in the other Contracting State.