- VAT Law amendment
Presidential Decree No. 1.436 ("Decree 1.436") (Official Gazette No. 6.152 Ext. of 18 November 2014) partially amended the Decree with Rank, Value and Force of the VAT Law (the "Abrogated Law") (Official Gazette No. 38.632 of February 26, 2007). Decree 1.436 entered into force on 1 December 2014. The most relevant aspects of Decree 1.436 are the following:
Cooperatives as VAT Regular Taxpayers
Decree 1.436 established that the operations and provision of services by cooperatives are subject to VAT liability and, as a consequence, cooperatives qualify as VAT ordinary taxpayers subject to the regular VAT invoicing and filing duties. Under the Abrogated Law, cooperatives were not subject to VAT liability.
Powers of the Executive Branch to Modify the VAT Rate
Decree 1.436 delegated on the Executive Branch of the government the power to: (i) modify, within the limits provided by Decree 1.436, the general VAT rate and the luxury tax rate (i.e., between 8 percent and 16.5 percent for the general VAT rate; and between 15 percent and 20 percent for the luxury tax rate); and (ii) set different tax rates for certain goods and services, within the mentioned limits. The Abrogated Law had reserved the aforementioned powers to the legislature.
Decree 1.436 established mandatory electronic invoicing as a general rule. Nevertheless, the National Integrated Service of Customs and Tax Administration ("Revenue Service") will accept the issuance of physical invoices if there are technological limitations. The Revenue Service will issue the corresponding rules regarding the requirements, formalities and specifications of electronic invoicing. Notwithstanding the above, the current rules regarding physical invoicing will continue to apply, except for the suppliers of mass services, until the Revenue Service issues the aforementioned electronic invoicing regulations. Additionally, according to Decree 1.436, the exports of goods and services have to comply with the regular formalities and requirements regarding invoicing.
Limitations Regarding the Deduction of Input VAT
1. Time Limit
According to a new rule of Article 33 of Decree 1.436, a taxpayer cannot claim the deduction of input VAT supported by an invoice, debit note or customs declaration that is more than 12 months old. However, once the taxpayer claims the deduction of the input VAT within the 12-month limit and the input VAT exceeds the output VAT of the relevant month, the taxpayer, under Article 38 of Decree 1.436, will be entitled to carry forward the excess indefinitely to offset future output VAT. In this respect, Article 38 provides that the taxpayer may carry forward indefinitely any excess input VAT of a given month to offset any future output VAT.
2. Input VAT Arising from Certain Business
Decree 1.436 included two new cases under which the input VAT is not deductible:
- Input VAT not directly and exclusively related to the professional or commercial activity of the taxpayer. Decree 1.436 established that the input VAT arising from the following operations is not deemed to be related to the professional or commercial activity of the taxpayer:
- Goods that are simultaneously destined to professional or economic activities and to the private needs of the taxpayer, its relatives or dependent personnel; and,
- Goods or services not registered in the accounting books of the taxpayer.
- Input VAT borne from food and beverage services, alcoholic beverages and public entertainment.
The most relevant changes regarding luxury tax are the following:
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VAT, Customs Duties and Customs Fees Exoneration of Certain Assets and the Provision of Certain Services Destined for the Project "Integral Transformation of the Venezuelan Shanty Areas in the Frame of the Great Mission New Shanty Towns – Tricolor Shanty Towns”
Presidential Decree No. 1.652 ("Decree 1.652") (Official Gazette No. 40.617 of 10 March 2015) established the following exonerations:
(i) VAT, customs duties and customs fees exoneration on the import of certain assets made by the entities of the National Public Power exclusively destined for the execution of the Project "Integral Transformation of The Venezuelan Shanty Areas in the Frame of the Great Mission New Shanty Towns – Tricolor Shanty Towns” (the "Project"). The exonerated goods are: pliers, cutters, hammers, chisels, compactors, drilling machines and saws, among others, in accordance with the quantities and descriptions set forth in Decree 1.652.
(ii) VAT exoneration, for the execution of the Project, on the import of certain assets, such as bricks, concrete blocks, water pumps, steel bars, white concrete, gray concrete, telephone exchanges, prefabricated wooden components, prefabricated plastic components, faucets and sanitary fittings, breakers, construction machines, window frames and door frames, among others, according to the descriptions and quantities set forth in Decree 1.652.
(iii) VAT exoneration on the provision of independent services performed or used in Venezuela, hired by the entities of the National Public Power, exclusively destined for the execution of the Project. In this regard, the exonerated services are the following:
- Preliminary architecture/engineering drafts, budget estimates and metric calculations;
- Engineering/architecture projects, diagrams, specialty coordination, inspections to the execution of the work in order to maintain the standards and ideas provided in the original designs, preparation of plans and information required for the continuation of the work;
- Sanitation projects;
- Electric and fire fighting projects;
- Mechanical projects;
- Structural projects;
- Sea, land or air transportation of construction material, equipment, machinery, supplies, and all other goods;
- International management for the analysis of the technical specifications and requirements of supplies, assistance in the search and selection of suppliers of goods for the construction projects, analysis and selection of the professional service providers for the construction, as well as assistance in the implementation of methodologies for the identification of technical optimizations regarding construction projects;
- National/international assistance in the sea, air and land transportation procedures of the goods purchased abroad and procurement of construction services;
- Technical assistance of each supplier for the installation of materials and equipment purchased abroad; and
- In general, all studies, designs, projects, construction, update, technological update, installation, maintenance, repair, recovery, reconstruction and freights executed upon the Project.
Decree 1.652 entered into force on 10 March 2015 and the exoneration will be in force until 10 May 2016.
VAT Exoneration on the Import of Vehicles Destined for the Project "Substitution of Rustic Vehicles in the Trunk and Peripheral Routes of the Boliviarian Municipality of Libertador, Capital District"
Presidential Decree No. 1.671 (Ext. Official Gazette No. 6.180 of 24 March 2015) exonerated from VAT liability the importation of 200 vehicles made by the entities of the National Public Power exclusively destined for the execution of the Project "Substitution of Rustic Vehicles in the Trunk and Peripheral Routes of the Boliviarian Municipality of Libertador, Capital District," in accordance with the characteristics set forth in the mentioned Decree 1.671. The Decree entered into force on 24 March 2015 and the exoneration will apply until 24 March 2016.
VAT Exoneration on the Import of Certain Goods Destined for the Project "Acquisition of supply material of common use for the personnel of the Bolivarian National Army"
Presidential Decree No. 1.880 (Ext. Official Gazette No. 6.188 of July 23, 2015) exonerated from VAT liability the importation of certain goods made by the entities of the National Public Power exclusively destined for the execution of the Project "Acquisition of Supply Material of Common Use for the Personnel of the Bolivarian National Army," in accordance with the characteristics set forth in the mentioned Decree. The exoneration will be in force from 15 July 2015 to 15 July 2017.
VAT, Customs Duties and Customs Fee Exoneration on the Import of Certain Goods Destined for the Project "Construction, Rehabilitation and Maintenance of Nationwide Highways, Roads, Bridges, and Tunnels"
Presidential Decree No. 1.953 (Official Gazette No. 40.731 of 25 August 2015) exonerated from VAT liability, customs duties and customs fee the importation of certain goods made by the entities of the National Public Power exclusively destined for the execution of the Project "Construction, Rehabilitation and Maintenance of Nationwide Highways, Roads, Bridges and Tunnels Nationwide." The exonerated goods are: paint, tubes, modular bridges, blower pipes, drill bits, electrical fuses, among others, in accordance with the quantities and descriptions set forth in the mentioned Decree. The Decree entered into force on 25 August 2015 and the exoneration will apply until 25 August 2020.
VAT Exoneration to the Provision of Services Destined for the "Contracting for the Construction of the Penitentiary Community of Carabobo (Stage V)"
Presidential Decree No. 1.721 (Official Gazette No. 40.644 of 21 April 2015) exonerated from VAT liability the provision of independent services executed or enjoyed in the country, for valuable consideration, including those provided outside Venezuela, hired by the entities of the National Public Power exclusively destined for "The Contracting for the Construction of the Penitentiary Community of Carabobo (Stage V), the Construction and Restoration of Integral Civil Works for Emergencies in Care Institutions and Penitentiaries," in accordance with the characteristics set forth in the mentioned Decree. The Decree entered into force on 21 April 2015 and the exoneration will apply until 21 April 2016.
VAT Exoneration to Domestic Sales of Goods Carried out by the Offices and Entities of the National (Federal) Public Administration Aimed Exclusively to the Strengthening, Staffing, and Equipping of the Police Forces
Presidential Decree No. 2.007 (''Decree 2.007'') (Ext. Official Gazette No. 6.196 of 11 September 2015) granted a VAT exoneration to the domestic sales of movable assets for the domestic industry, carried out by the offices and entities of the National Public Administration at national level, if the goods are aimed exclusively to the strengthening, staffing and equipping of the police forces within the framework of the Motherland Plan, Second Socialist plan of Economical and Social Development of the Nation 2013-2019 and the Great Mission "A toda Vida Venezuela." The exonerated goods are: Tanfoglio Handguns, model force 99R, caliber 9mm; CAVIM ammunition boxes, caliber 9mm; ballistic registration of weapons; marking of weapons; Norinco bulletproof vests, level A, model LTM002; and daily uniforms, among others, pursuant to the descriptions and quantities provided in Decree 2.007.
The sellers are required to document the sale of the abovementioned goods according to the guidelines issued by the Revenue Service regarding the formal requirements applicable to invoices and other documents. The exoneration will be subject to the periodical evaluation established in Article 65 of the VAT Law.
Decree 2.007 came into force on 11 September 2015 and the exoneration will apply until 11 September 2017. Decree 2.007 abrogated Decree No. 858 of 25 March 2014 (Official Gazette No. 40.379 of 25 March 2014) related to the VAT exoneration on the import of movables and tangible assets made by the offices and entities of the National Public Administration.
Exoneration of VAT, Import Tax, and Custom Service Fees on the Final Importation of Goods Destined Exclusively to the Execution of "Project of Customs and Tax Technological Update: Phase I, modernization and RX equipment update of national customs, done by the National Integrated Service of Customs and Tax Administration Service" made by the Public and Legal Entities of the National Public Administration
Presidential Decree No. 2.008 ("Decree 2008") (Ext. Official Gazette No. 6.196 of 11 September 2015) provides the exoneration on final importations of goods from VAT, import tax and custom service fees liability when made by public and legal entities of the National Public Administration and only if destined exclusively to the "Project of Customs and Tax Technological Update: Phase I, modernization and RX equipment update of National Customs made by the National Integrated Service of Customs and Tax Administration Service." Decree 2008 describes and indicates the quantities of the exonerated goods. The goods include workstations for processing images, non-intrusive inspection equipment, servers, cameras, scanners, monitors, decoders, computers, software, and operating systems, among others.
To benefit from the exoneration described above, the beneficiaries must present to the relevant Customs Office a descriptive list of the goods to be imported and the invoice issued to the Revenue Service. These operations will be subject to a biannual evaluation in accordance with Article 65 of the VAT Law. Additionally, the beneficiaries that breach the Organic Tax Code, VAT Law, and/or Organic Customs Law and their Regulations will lose the exoneration benefit.
Decree 2008 entered into force on 11 September 2015 and the benefit will remain in place until 11 September 2018.
- VAT Withholding Agents
Administrative Order No. SNAT/2015/0049 Appointing VAT Withholding Agents
Administrative Order No. SNAT/2015/0049 ("Order 49") issued by the Revenue Service (Official Gazette No. 40.720 of 10 August 2015) added new withholding exclusions and modified the term for the delivery of withholding certificates to the suppliers. Order 49 abrogated Administrative Order No. SNAT/2013/0030 ("Abrogated Order") and entered into force on 1 September 2015.
Order 49 included the following withholding exclusions:
- When the supplier is a VAT collection agent and the transactions relate to the sale of alcoholic beverages, matches, cigarettes, tobacco or its by-products;
- When the exempt/exonerated sales or provision of services represent a percentage higher than 50 percent of the total amount of the sales transactions or services performed by the supplier during the prior fiscal year; and
- When the transactions and the VAT levied thereon are payable in foreign currency in accordance with Article 146 of the Organic Tax Code.
Furthermore, Order 49 limited the exclusion already created under the Abrogated Order regarding suppliers registered with National Registry of Exporters. In this regard, under Order 49, such suppliers must have filed a VAT recovery request within the last six months in order for the exclusion to apply.
New term for the delivery of withholding certificates
According to Order 49, withholding agents must issue and deliver the corresponding withholding certificates to their suppliers within the second business day following the next VAT tax period (i.e., a month). The Abrogated Order, however, established three business days to comply with the referred to obligation.
- VAT Collection Agents
The Venezuelan National Tax Administration Designated the Manufacturers, Artisan Producers and Importers of Alcoholic Beverages as VAT Collection Agents
Administrative Order No. SNAT/2015/0018 ("Order 18") (Official Gazette No. 40.656 of 8 May 2015) of the Revenue Service appointed the manufacturers, artisan producers and importers of alcoholic beverages ("Collection Agents") as VAT collection agents. Order 18 entered into force on 8 May 2015.
According to Order 18, the Collection Agents are responsible for the collection of 100 percent of VAT (hereinafter "Collected VAT") applicable to the different steps to the distribution of alcoholic beverages until the final consumer. The Collection Agents must calculate the Collected VAT using the difference between the Sales Price to the Public (SPP) and the total price that a client pays to the Collection Agents and charge such amount to its clients. According to Administrative Order No. SNAT/2015/0017 of the Revenue Service (Official Gazette No. 40.656 of 8 May 2015), the SPP includes all costs associated with the production or import of alcoholic beverages, as well as the profit margins of the entire distribution chain until the final consumer. However, the National Superintendence for the Protection of Socio-economic Rights has not yet established the merchandising margins for alcoholic beverages and alcoholic products. The Collection Agents depend on such decisions in order to comply with Order 18.
Collection Agents must collect VAT upon issuing the dispatch guide or the sales invoice. The Collection Agents must pay the Collected VAT to the National Treasury within the legal term established for the monthly VAT return. Under the regular term, Collection Agents must file VAT during the first 15 calendar days of each month. If the Revenue Service appointed the Collection Agent as a special taxpayer, then the legal term of this Collection Agent will be subject to the Special Taxpayer's Calendar (published by the Revenue Service every year). The Special Taxpayer's Calendar might be longer or shorter than the aforementioned regular term. The Collection Agents must register the collected VAT on the sales journal, as well as the tax basis used to calculate the collected VAT. The Collection Agents must file the collected VAT on a monthly basis, through the Revenue Service's website (www.seniat.gob.ve), and must pay the collected VAT through an authorized bank or through the electronic payment option in the mentioned website.
The sale of the Collection Agent to its client is subject to the regular VAT treatment. In this regard, the Collection Agent must invoice its client the corresponding price and the VAT applicable thereof. The VAT constitutes output VAT for the Collection Agent and input VAT for its client. On the other hand, the Collected VAT is not output VAT for the Collection Agent, who must pay the Collected VAT to the National Treasury without any deductions. For the clients, the Collected VAT is not input VAT; it is an element of the alcoholic beverages' cost for income tax purposes. For example, if the Collection Agent sells a product for VEB100.00, the client must pay, in addition to the price, VAT of VEB12.00 (i.e., VEB100 x 12 percent = VEB12.00), which will constitute output VAT for the Collection Agent and input VAT for the client, as in a sale subject to regular VAT. If the SPP is VEB300.00, the Collection Agent must also charge the client the Collected VAT of VEB24.00 (i.e., VEB200 x 12 percent = VEB24.00. In turn, VEB200.00 is the difference in between the SPP of VEB300.00 and the Collection Agent's sales price of VEB100.00). The Collected VAT of VEB 24.00 will be a cost for the client for income tax purposes. In this regard, the Collection Agent's invoice will be as follows:
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- Invoicing Rules
The Revenue Service extended the term for the enforcement of the new invoicing rules for suppliers of mass services until 1 January 2016
The Revenue Service, through Administrative Order No. SNAT/2015/0020 (Official Gazette No. 40.686 of 18 June 2015), extended to 1 January 2016 the entry into force of Administrative Order No. SNAT/2014/0032 (Official Gazette No. 40.488 of 2 September 2014) regarding the special electronic invoicing rules for suppliers of mass services. Administrative Order No. SNAT/2014/0032 originally entered into force on 1 January 2015 and established six months for the suppliers of mass services to adapt to the new rules. As a consequence of the foregoing, the six-month adaptation period will now run from 1 January 2016 to 31 July 2016.
- Labeling of the Sales Price
New formalities regarding the labeling of the sales price to the public in the labels or prints on the bottles of alcoholic beverages
The Revenue Service, through Administrative Guidelines No. SNAT/2015/0017 (the "Guidelines") (Official Gazette No. 40.656 of 8 May 2015) established the formalities regarding the labeling of the Sales Price to the Public (SPP or Precio de Venta al Público-PVP in Spanish) on the labels or bottles of alcoholic beverages. The Guidelines entered into force on 8 May 2015.
According to the Guidelines, the SPP includes all costs associated with the production or import of alcoholic beverages, as well as the profit margins of the entire marketing chain until the end user. The price that the final consumer must pay includes the SPP and the corresponding taxes (for example, VAT and taxes on alcohol). The exceptions to the aforementioned rule are alcoholic beverages destined to be sold in special customs territories (for example, Nueva Esparta Free Port), because in such cases, the final consumer will only pay the SPP.
The Guidelines established that the producers and importers of alcoholic beverages must place the SPP in a visible location of the tax label, bottle, packages or wrappers of the alcoholic beverages, national or imported, by means of indelible ink prints, engraved and/or self-adhesive labels, or any other kind that impedes its removal. The Guidelines also established a term of 90 calendar days (i.e., until 6 August 2015) for the producers and importers to modify the labels or bottles in order to comply with the Guidelines. The Revenue Service extended the mentioned term until 6 January 2016 (Administrative Guidelines No. SNAT/2015/0017 of 24 February 2015, Official Gazette No. 40.656 of 8 May 2015).
In the case of any modification of the prices of the alcoholic beverages, the manufacturers, the local craft producers and importers shall inform the Revenue Service of such change, at least 15 business days before the assessment of the alcohol tax on the SPP.
The SPP on the tax label or bottle must contain the letters "PVP + IMP," followed by the total price expressed in numbers. If the importer opts for the self-adhesive labels, these labels must exclusively contain the SPP and shall not include any other information regarding the label.
Alcohol manufacturers, local craft producers and importers must place the SPP on the label before the removal of the alcoholic beverages from their premises or the customs office, as the case may be. Additionally, the Revenue Service officer in charge of verifying the bands must compare the SPP printed or marked on the label with the SPP used for assessing the alcohol tax, which it shall record in the respective report.
The National Integrated Service of Customs and Tax Administration extended until 6 January 2016 the term for complying with the formalities regarding the labeling of the consumer retail price on the bottles of alcoholic beverages
Originally, the compliance date with Administrative Order No. SNAT/2015/0017 (Official Gazette No. 40.656 of 8 May 2015) was supposed to be 6 August 2015 (see prior subparagraph). However, the Revenue Service issued Administrative Order No. SNAT/2015/0056 (Official Gazette No. 40.746 of 15 September 2015) to postpone the compliance date until 6 January 2016. Administrative Order No. SNAT/2015/0056 entered into effect on 15 September 2015 and established two new rules:
- As of 15 September 2015 and until 6 January 2015, the producers and importers of alcoholic beverages must also give the price list to alcohol beverages retailers while the labels are adjusted due to the new formalities (previously, producers and importers only had to inform the Revenue Service of the price list).
- The Revenue Service established that the price list must contain the following information:
- Type of beverage;
- The consumer retail price and the amount of the national taxes (VAT and alcohol taxes); and
- The final price.