Generally, the LFTT Law maintains the same taxable events that apply to special taxpayers under the reformed law (which will remain in force until 27 March 2022). This implies that special taxpayers will continue to pay the LFTT at the same rate of 2% for payments made in local currency from their accounts in banks or financial institutions, as well as for the repayment of debt made outside the financial system. However, under the new LFTT Law, when those same transactions are made by such taxpayers (i.e., special taxpayers in foreign currency or in cryptocurrencies or cryptoassets and not issued by the Bolivarian Republic of Venezuela), the applicable tax rate will be 3%.
The LFTT Law also establishes that any individual or legal entity will be subject to the LFTT on payments made in foreign currency, cryptoassets or foreign cryptocurrencies: (i) to any individual, by using the national banking system, without intermediation of a foreign banking correspondent; and/or (ii) to any special taxpayer, without intermediation of financial institutions. In both cases, provided the payments are made in foreign currency, cryptoassets or foreign cryptocurrencies, the transaction will be subject to a 3% LFTT rate.4
Essentially, the LFTT Law appoints new LFFT taxpayers (whether or not special taxpayers) and increases the tax rate (from 2% to 3%) for certain payments made in foreign currency, cryptocurrencies or cryptoassets other than those issued by the Bolivarian Republic of Venezuela.
The LFTT Law adds another assumption of exemption on foreign exchange transactions carried out by duly authorized foreign exchange operators. Meanwhile, the sole paragraph of Article 8 establishes that certain exemptions will apply only if the connected transactions are executed in legal tender or in cryptoassets or foreign cryptocurrencies issued by the Bolivarian Republic of Venezuela.5
Finally, the LFTT Law sets forth that the National Service of Customs and Tax Administration (SENIAT) will issue general guidelines on the place, form and conditions for filing and paying the LFTT; and that the National Executive may totally or partially exonerate certain taxpayers or economic sectors from the LFTT. In this sense, the National Executive has issued the Exoneration Decree referred to below, as well as Complimentary Guidelines No. SNAT/2022/000013 of 3 March 20226 on the designation of special taxpayers as collecting agents, which will be addressed in a separate legal alert.
For a comparative reference on the provisions reformed by the LFTT Law, click here.
In addition to the assumptions of exemptions established in the LFTT Law, the National Executive exonerated certain transactions for the term of one year through the Exoneration Decree. The Exoneration Decree became effective immediately with its publication in the Official Gazette on 25 February 2022.
Specifically, the exoneration set forth in the Exoneration Decree applies to: (i) debits arising from the purchase, sale and transfer of the custody of securities issued or guaranteed by the Republic or the Central Bank of Venezuela (CBV); (ii) debits or withdrawals (interest included) connected to the settlement of the capital; and (iii) securities traded through stock exchanges, made in currency other than legal tender or in cryptocurrencies or cryptoassets not issued by the Bolivarian Republic of Venezuela.
In other words, the Exoneration Decree extends the exemption established in Article 8, paragraph 6 of the LFTT Law (with the exception of securities traded in the agricultural stock exchange) to cases in which such transactions are carried out in foreign currency, cryptoassets or foreign cryptocurrencies.
The beneficiaries of the exoneration set forth in the Exoneration Decree will lose the benefit if they fail to comply with any formal duties established in the LFTT Law or the Organic Tax Code.7
Do note that the Exoneration Decree established several "non-taxable events," as follows, which refer to transactions — other than the trading of securities — that would initially be taxable under the LFTT Law:
- Foreign exchange transactions carried out by individuals and legal entities
- Payments made in bolivars with national and international debit or credit cards from foreign bank accounts through authorized payment devices, except those made by special taxpayers
- Payments in currency other than bolivars or in cryptocurrencies or cryptoassets other than those issued by the Bolivarian Republic of Venezuela, made to individuals, legal entities and economic entities without legal personality that are not qualified as special taxpayers
- Remittances sent from abroad through authorized banking institutions
While the above non-taxable events are established in the Exoneration Decree and not directly in the LFTT Law, it seems valid to interpret that such cases will be excluded from LFTT in practice. In any event, the analysis and evaluation of the operations subject (or not) to the tax, or exempt or exonerated, must be carried out on a case-by-case basis, considering the payment method, the condition of special taxpayer (or not) of the beneficiaries of the payments and the use (or not) of the national banking system.
We remain at your disposal if you require further clarification about the general aspects highlighted in this report.
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1 Law of Partial Reform to the Decree with Rank, Value and Force of Law of the Tax on Large Financial Transactions Official Gazette No. 6.687 Ext. of February 25, 2022.
2 The LFTT Law was issued by the National Constituent Assembly, entity that has been questioned for usurping the functions attributed to the National Assembly in legislative matters. However, we estimate that the LFTT Law will apply in practice, as all previous legislative reforms approved by the National Constituent Assembly have with the endorsement of the Supreme Court of Justice.
3 Presidential Decree No. 4,647, Official Gazette No. 6,689 Ext. of February 25, 2022.
4 Pursuant to Article 13 of the LFTT Law, the National Executive may establish a tax rate between 2% and 8% for payments in foreign currency within the national banking system; and between 2% and 20% for payments in foreign currency to special taxpayers through financial institutions. However, with the entering in force of the LFTT Law, both brackets have been settled in a tax rate 3%.
5 According to the law, this condition applies to the exemptions set forth in paragraphs 5 to 11 of Article 8, which include: (i) the first endorsements on checks and securities paid in cash and negotiable instruments; (ii) the transfer of the custody of securities guaranteed by the Republic or the BCV; (iii) transfers of funds between accounts of the same holder in Venezuelan banks or financial institutions; (iv) debits in current accounts of diplomatic and consular missions and foreign officials; (iv) debits for transfer or issuance of checks for the payment of taxes; and (v) the purchase and sale of cash in the single account held by the CBV, Venezuelan banks or financial institutions.
6 Complimentary Guidelines No. SNAT/2022/000013. Official Gazette No. 42.339 of 17 March 2022.
7 See Baker McKenzie's: The new 2020 Venezuelan Organic Tax Code introduced important changes regarding sanctions, exonerations and procedures