The Income Tax Law establishes a base exemption for individuals domiciled in Venezuela. Individuals domiciled in Venezuela, deriving worldwide income below 1,000 Tax Units (Bs. 150,000.00 for fiscal year 2015 or Bs. 177,000.00 for fiscal year 2016)1 and gross taxable income not exceeding 1,500 Tax Units (Bs. 225,000.00 for fiscal year 2015 or Bs. 265,500.00 for fiscal year 2016)2 are not required to declare and pay income tax. Individuals domiciled in Venezuela whose income exceeds the limits indicated above must file their income tax return online and pay the corresponding income tax on their worldwide income. Tax tariff No. 1, applicable to individuals, provides different tax brackets ranging between 6% and 34%, depending on the amount on the taxpayer's net income. The 6% rate applies to the portion of the income not exceeding 1,000 Tax Units.

Presidential Decree No. 2,266 ("Decree 2,266") (Official Gazette No. 40,864, of March 8, 2016, reprinted because of material errors in Official Gazette No. 40,865, of March 9, 2016), exonerated from income tax liability the Venezuelan source annual net income derived by individuals domiciled in Venezuela during fiscal years 2015 and 2016 not exceeding 3,000 Tax Units (e.g., Bs. 450,000.00 for fiscal year 2015 or Bs. 531,000.00 for fiscal year 2016). Decree 2,266 entered into force on March 8, 2016.

In practice, Decree 2,266 increased the base exemption from 1,000 to 3,000 Tax Units. Only individuals that file their final income tax return by March 31, 2016 with respect to fiscal year 2015 and by March 31, 2017 with respect to fiscal year 2016, will benefit from the exoneration.

It is not clear how the exoneration will work. It seems that it should work as a reduction of the taxpayers' net taxable income in 3,000 Tax Units from. Therefore, an individual whose net taxable income was 5,000 Tax Units must report in its final income tax return 3,000 Tax Units in the section "Other Exempt and Exonerated Income," and 2,000 Tax Units as net taxable income (i.e., 5,000-3,000=2,000)3 and pay income tax according to Tariff No. 1. An individual whose net income was 2,700 Tax Units must file the corresponding income tax return, report 2,700 Tax Units in the section "Other Exempt and Exonerated Income", report zero net taxable income, and pay no tax. In the absence of any adjustment to the SENIAT's Website (www.seniat.gob.ve) whereby the 3,000 Tax Units are automatically excluded, the option described above will be the most appropriate mechanism for taxpayers to declare in full the income derived in the fiscal year and benefit from the exoneration. As of March 15, 2016, SENIAT's Website did not automatically apply the 3,000 Tax Units exoneration.

According to Decree 2,266 individuals who filed their income tax return and paid their income tax before March 8, 2016 without taking into consideration the exoneration, will have a tax credit equal to the income tax paid in excess. These individuals may (i) offset the tax credit against federal taxes other than VAT (for example, to their income tax applicable to fiscal year 2016); or, (ii) assign the tax credit to other taxpayers for the same offsetting purposes. These assignments are usually made at discount. Decree 2,266 does not refer to it, but the orthodox way of reporting the tax paid in excess is for the taxpayer to file an amended income tax return in which the individual reports the exonerated taxable base, the lower payable income tax, and the tax credit derived from the overpayment of tax. Taxpayers must file the amended return within the 12 months following March 31, 2016. If they file the return after that term they may be subject to a 50 tax Units fine.