Venezuela’s Tax on Large Financial Transactions Law

The Tax on Large Financial Transactions Law was published in the Special Edition of the Official Gazette of the Bolivarian Republic of Venezuela No. 6,210, dated December 30, 2015 (TLFTL). The decree was issued by the president under the powers granted under the Enabling Law.¹

Main aspects

Taxpayers

The following persons qualify as taxpayers under the Tax on Large Financial Transactions (TLFT):

• The legal persons and economic entities without legal personality qualified as special taxpayers by the National Integrated Service of Tax and Customs Administration (SENIAT by its acronym in Spanish) (“Special Taxpayers”) for the payments made from their accounts in banks or financial institutions or for payments not involving financial institutions.
• The legal persons and economic entities without legal personality legally bound to legal persons or economic entities without legal personality qualified as Special Taxpayers, for the payments made from their accounts in banks or financial institutions or for payments not involving financial institutions.
• Natural persons, legal persons and economic entities without legal personality who are not legally bound to legal persons or economic entities without legal personality qualified as Special Taxpayers, but make payments on behalf of such persons or entities from their own accounts in banks or financial institutions or for payments not involving financial institutions.

Taxable event

The following are taxable events under the TLFTL:

• Debits to bank accounts, correspondent accounts, escrow accounts or any other type of call deposit accounts, money market funds, trusts and other financial funds or financial instruments in banks and other financial institutions.
• The assignment of cheques, securities, escrow paid in cash and any other negotiable financial instrument, as of the second endorsement.
• The acquisition of cashier’s cheques in cash.
• Loan operations performed by the banks and other financial institutions between them that take place in periods of not less than two banking days.
• The transfer of securities held in custody between different holders, even if the transfer does not entail disbursements from a bank account.
• The repayment of debts not involving financial institutions.
• Debits to accounts that are part of a  private corporate organized payment system, not controlled by the Venezuelan Central Bank or any another National Payments System.

Taxable base and rate of the TLFT

The TLFT rate is 0.75% of the total amount of the bank debits or other taxable transactions.

Tax period

The TLFT shall be determined on a daily basis.

Payment obligation

Taxpayers are obliged to pay the TLFT when a payment occurs or with the cancellation of any account or repayment of a debt.

Return and payment

The TLFT generated from debits in bank accounts or any other financial institution should be declared and paid on a daily basis. The TLFT generated from transactions not involving banks or other financial institutions should be declared and paid in accordance with the timetable applicable to Special Taxpayers for the payment of the value-added tax withholdings.

The Tax Administration shall publish on its website a ruling defining the conditions for declaring and paying the TLFT. We understand that such ruling will establish the rules for banks and financial institutions to liquidate and pay the TLFT generated from debits to accounts on behalf of taxpayers.

Non-deductibility of the TLFT

The TLFT is not deductible for purposes of Venezuelan income tax.

Payments derived from an employment relationship

The taxpayers cannot deduct the cost related to paying the TLFT from the payments made to employee accounts to pay salaries, retirement funds, pensions or any other similar remuneration derived from a current or preexisting employment relationship.

Private corporate organized payment system

The Venezuelan Central Bank and the overseers of the private corporate organized payment system, including the National Payment System, shall refrain from processing transfers and charges to accounts in which the liquidation and payment of the TLFT are not made simultaneously or prior to the relevant transaction.

TLFT withholding or collection agents

The Tax Administration may appoint those who participate in taxable financial transactions as TLFT withholding or collection agents.

Exemptions

The following are some of the transactions that are exempt from the TLFT:

• The first endorsement of cheques, securities, escrow paid in cash and any other negotiable financial instruments.
• The transfer of funds by the holder between his accounts in banks or financial institutions incorporated and domiciled in the Bolivarian Republic of Venezuela. This exemption does not apply to accounts with more than one holder.
• The debits or withdrawals from accounts of the Bankers’ Clearing House, credit card clearing accounts, national correspondent accounts and other banking clearing accounts.

Entry into force

The TLFTL will enter into force as of February 1st, 2016.

Footnote

¹ Law that Authorizes the President of the Republic to enact Decrees with Rank, Value and Status of Law in the delegated Subject Areas (Special Edition of Official Gazette No.6,112, dated November 19, 2013).