On March 11, 2020, the World Health Organization declared the 2019 coronavirus outbreak (COVID-19) as a global pandemic. Several governments worldwide have responded with isolation measures, quarantine and compulsory vacations. Venezuela has not been the exception.
By Decree No. 4,160 of March 13, 2020, the Venezuelan Government ("Government") declared the State of Alarm in the national territory because of COVID-19 ("Alarm Decree").1 Based on the Alarm Decree, activities were suspended throughout the country and quarantine was established, with certain exceptions. The challenges of operating companies are increasing, both from an economic and legal viewpoint. The analysis of force majeure, as a cause associated with the timely fulfillment of legal and contractual obligations, has become relevant.2
One of the essential aspects of the operations of companies in Venezuela in the face of the spread of COVID-19 and the Alarm Decree is tax compliance. Tax laws impose not only the obligation to determine and quantify the tax obligation, but also to comply with formal and procedural obligations to timely file returns and pay taxes, both as a taxpayer and as withholding agent. In principle, if there is no extension, taxpayers remain obligated to file tax returns and pay such taxes within the statutory term.3
To date, the Government and the National Tax Administration, through the Integrated National Service of Customs and Tax Administration ("Service"), have not determined the suspension or extension of the term to file tax returns and pay national taxes. The Service has issued communications through social media announcing the continuity of the tax collection functions and urge ordinary and special taxpayers to go to its facilities to comply with tax obligations. Different has been the case of some municipalities (i.e., Mayor of Valencia, Mayor of Chacao, Mayor of Girardot -Maracay-), which have issued the extension the terms to file returns and pay the municipal tax on economic activities.4
The Alarm Decree does not explicitly regulate how taxpayers must comply with their tax obligations during its validity; or as long as the exceptional situation generated by COVID-19 is maintained. However, its sixth final provision establishes a rule regarding administrative procedures (including, by extension, tax procedures). According to the rule, if the procedures are suspended or interrupted due to the measures of suspension of activities or the restrictions to circulation dictated (e.g., by way of the Alarm Decree), such suspension or interruption will not be attributable to the interested party, nor may the Public Administration invoke it as a justification for the delay in fulfilling its own obligations. Once the suspension or interruption has ceased, the administration shall immediately resume such procedures. In our opinion, although the sixth final provision of the Alarm Decree conceives the possibility that administrative / tax procedures are understood to be suspended by the Alarm Decree, said rule does not clearly establish what should be understood by "administrative procedures" or if said concept covers or can be extended to the "terms" for tax compliance. We believe, in fact, that the rule does not constitute sufficient legal basis to sustain that the course of the statutory terms for tax compliance are suspended.5
Article 10 of the Code 2020, however, establishes specific rules for counting legal and regulatory deadlines. According to these rules, terms that expire on a "non-business day" for the Tax Administration, automatically extend until the first following business day. According to these rules, the days in which there is no banking activity are non-business days for tax compliance purposes. Therefore, it can be concluded that when there is no banking activity, the days will be considered non-business days and, therefore, the terms and deadlines for filing tax returns and paying taxes have not elapsed.
On March 15, 2020, the Office of the Superintendent of Institutions of the Banking Sector, based on the Alarm Decree, issued Circular No. SIB-DSB-CJ-OD-02415 ("Circular 2415"), by means of which it suspended from March 16, 2020 and for an indefinite time, all activities that involve the direct attention of institutions in the banking sector to customers, users and the general public through its network of agencies, tellers, offices and administrative offices throughout the country. In our opinion, the joint application of article 10 of TOC 2020 and Circular 2415 allows us to conclude that the terms and deadlines for filing tax returns and paying taxes are not currently running and automatically extend to the first following business day, that is, until banking activities officially resume. As an example, the deadline for filing the income tax return for some taxpayers expires on March 31, 2020, will extend until the day banking activities to the public resume.6
Regardless of the foregoing legal considerations, the possibility of filing returns and paying taxes will depend on practical factors that affect each taxpayer, such as: access to bank accounts in public banks; access to the Service's Webpage; the possibility of making electronic payments; access to the accounting and support information for preparing the return; etc. If the taxpayer overcomes the obstacles and can declare on time, the recommendation would be to comply.
If it establishes no extension, the Tax Administration could try to impose sanctions for late filing and payment of taxes. With national taxes, the penalties would vary (i) if the taxpayer pays voluntarily (still late) or after an inspection or requirement by the Service has begun; (ii) depending on whether the taxpayer is ordinary or special; and (iii) the applicable Code. The Code 2020 has more severe sanctions than the Code 2014. With municipal taxes, the municipal ordinances would determine the sanctions and, as established by the ordinances, the Code 2014 or 2020 will be apply, depending on the fiscal year. Under article 165(4) of the Organic Law of the Municipal Public Power, the sanctions established in municipal ordinances may not be higher than those established in the Code.
Finally, in case of being subject to penalties, taxpayers may eventually invoke the tax extenuating circumstances of article 85(3) and (4) of the Code 2020. The circumstances will also exempt taxpayers from late payment interest.7 These circumstances are: (i) the fortuitous case and force majeure, and (ii) the excusable error of fact and/or law theory. Under the state of alarm and the Alarm Decree, there are sufficient grounds to invoke force majeure in fulfilling contractual obligations and obligations vis-à-vis the administration. Both the situation of confusion generated by COVID-19, and the precariousness of the tax regulations of the Alarm Decree and the different possible interpretations of the sixth final provision, Code 2020 and Circular 2415, could give grounds to submit the error of fact and law theory also.