The National Executive established, through Presidential Decree No. 3,719 (the "Decree")1, that taxpayers carrying out operations in foreign currency or in cryptocurrencies in Venezuela, authorized under the Exchange Agreements that regulate this matter, shall pay in foreign currency or in cryptocurrencies the national (federal) taxes applicable to such operations. The Decree entered into force on December 28, 2018.
Taxes generated by (i) transactions in securities traded on the Stock Exchange and (ii) the export of goods and services, carried out by public bodies and entities, are excluded from the obligation to pay national taxes in foreign currency or cryptocurrencies; The National Integrated Service of Customs and Tax Administration (SENIAT) shall issue the rules on reporting and collection of national taxes in foreign currency or cryptocurrencies; and the Office of the Superintendent of the Banking Sector Institutions (SUDEBAN) shall issue the adaptation rules for the banking sector institutions, which has not yet occurred.
The Decree will apply to individual and legal entities that carry out the operations authorized under the Exchange Agreements, represented essentially by Exchange Agreement No. 1 of September 7, 2018 ("Agreement No. 1").2 The Decree, however, does not clarify whether "authorized operations" refer to those regulated and developed in Exchange Agreement No. 1, or any other economic operations that may require access to currencies under the mechanisms established in Agreement No. 1. We believe that the interpretation should be restrictive. Therefore, the authorized activities subject to the Decree and the payment of national taxes in foreign currency or crypto currencies would be exclusively:
- Activities of the public sector regarding oil and non-oil sectors (Agreement No. 1, articles 39, 42, 43, 44, 46 and 48).
- Trade, in local currency, of securities denominated in foreign currency issued by the private sector (Agreement No. 1, articles 25 and 26) (except securities traded in the Stock Exchange, which, as stated, are excluded from the Decree).
- Private sector export activities (Agreement No. 1, articles 57 and 58).
- Activities linked to the tourism sector:
- Tourist accommodation services (Agreement No. 1, articles 73 and 74).
- Tourist transport services (Agreement No. 1, article 75).
- Travel and tourism agencies (Agreement No. 1, article 76).
- Payments for goods purchased for sale to passengers, through duty free shops (Agreement No. 1, article 77).
The obligation to pay in foreign currency or cryptocurrencies include the payment of the tax, its accessories (e.g., interest and surcharges) and penalties. The refund of national taxes for the operations regulated under the Decree, however, will be made in local currency at the exchange rate in effect on the date of payment of the tax or the registration of the customs declaration. That means the taxpayer must bear the exchange loss for the devaluation between the payment of the tax and the refund, if any.
The Decree raises many questions, which probably will be answered when SENIAT and SUDEBAN issue the rules for implementing the Decree. Among them (i) what are the national taxes covered? Those administered by SENIAT (in which case other national taxes, fees and contributions would be excluded) or some, such as customs duties, federal tax stamp, federal fees, income tax, VAT and tax on financial transactions? and (ii) in cases of taxes determined by periods, such as income tax, VAT and tax on large financial transactions, the Decree should only apply to the fiscal years or periods that began after its entry into force on December 28, 2018, as provided in the Organic Tax Code.