In Venezuela, the applicable tax to large financial transactions is governed by the Decree with Rank, Value and Force of Law on Large Financial Transactions Tax ("FTT Law"). Under the FTT, legal and economic entities designated as special taxpayers ("Special Taxpayers") will be subject to tax on either the debits made through the financial system, or the settlement of debts outside the financial system (i.e., offsetting, novation or remittance). Further on, the FTT Law provides that legal and economic entities related to Special Taxpayers or even non related but acting as agents of Special Taxpayers, will be subject to the tax. The FTT Law set forth an 0.75% rate on each debit or taxable event.
With the recent Constituent Decree amending the FTT Law ("FTT Decree"), the National Constituent Assembly amended Article 13 of the FTT Law and set the tax rate in 1%. The National Executive may modify the increased rate within 0% to 2%. The increased rate will enter into force on September 1, 2018.
Any tax on debits made through financial institutions will be reported and paid daily under the 0,75% rate until August 31, 2018, inclusive, and the 1% rate starting September 1, 2018. Notwithstanding, the tax on the settlement of debts outside the financial system will be reported and paid based on the Special Taxpayers Value Added Tax Withholding Calendar ("Special Taxpayer Calendar"). Accordingly, it is possible that taxes arising before August 31, 2018 (under the 0,75% rate) are to be reported and paid after such date, under the Special Taxpayer Calendar and thus the applicable rate of 1%. We believe in such cases the Tax Administration should allow taxpayers to report and pay the FTT according to the 0,75% rate.
The FTT Decree does not provide for any additional adjustments to the FTT Law, thus any additional elements of the tax, such as taxable events, taxable base, taxpayers, exemptions and payment place and rules, will remain unchanged. The nature of the taxpayers business activity will not be determinant.