In detail

Pursuant to Article 1 of the LPP, the purpose of the law is the creation of transparent and inclusive mechanisms aimed at protecting social security pensions from the economic impact of the sanctions imposed on Venezuela. In this sense, the LPP defines social security pensions as the monetary benefits of old age, disability, incapability and survival, provided for in the Decree with Rank, Value and Force of Law of Partial Reform of the Social Security Law, published in Official Gazette No. 39,912 of 30 April 2012 (SSL).²

Through the LPP, specific rules are established to delimit the scope of the special contribution for the protection of pensions ("Contribution"), in the following ways:

• Taxpayers and destination of proceeds

Taxpayers will be legal entities, including irregular or de facto companies, of a private nature, domiciled or not in Venezuela, that conduct economic activities in the national territory, excluding entrepreneurships duly registered in the RNE. The LPP stipulates that the purpose of the Contribution is to support the special protection of social security pensions. On the other hand, the LPP stipulates that the Contribution is different and independent from the contribution that employers must make to the Venezuelan Social Security Institute in accordance with the SSL.

• Rate

The rate of the Contribution will be fixed annually by the president of the republic, considering the type of economic activity carried out by the taxpayer, with a maximum limit of up to 15% of the total payments made by the taxpayer to its workers for salary and non-wage bonuses. In this first opportunity, the Decree set the rate at 9% for all taxpayers. Likewise, it is stipulated that the basis for calculating the payments may not be less than the indexed integral minimum income established by the National Executive.

• Exonerations

The Contribution may be totally or partially exonerated by the National Executive for certain categories of special taxpayers, and strategic sectors for foreign investment and national development. Pursuant to the Decree, entrepreneurships duly registered before the RNE are exonerated from the payment of the Contribution for a maximum period of one year, counted from the date of publication of the Decree in the Official Gazette.

• Collection and deductibility

The collection and tax control of formal and material duties derived from the Contribution are under the responsibility of the National Integrated Service for the Administration of Customs Duties and Tax (SENIAT). The Contribution must be filed and paid on a monthly basis, and the procedure for such purpose will be established by means of a general administrative ruling issued by SENIAT.

The Contribution provided for in the LPP will be tax deductible for purposes of the income tax.

• Rules for the filing and payment of the Contribution

The rules for the filing and payment of the Contribution were established in Administrative Ruling N° SNAT/2024/000042³ issued by the SENIAT ("Administrative Ruling"). The Administrative Ruling establishes that the Contribution must be filed and paid according to the last digit of the taxpayers' Tax Information Registry ("Tax ID"), as follows:

If the payment of salaries or a non-salary bonus is made in a currency other than the legal tender of Venezuela, the conversion into bolivars shall be made according to the official exchange rate issued by the Central Bank of Venezuela (CBV) in effect at the time of payment of the labor remuneration.

Those obliged to pay the Contribution must report, on a quarterly basis, the number of active workers on their payrolls.

• Sanctions and late payment interest

SENIAT is the competent body for conducting tax audits for the Contribution in accordance with the terms and mechanisms set forth in the Organic Tax Code (OTC).⁴

The LPP establishes a "special" penalty for taxpayers who do not file the Contribution in a timely manner, which consists of a fine equivalent to 1,000 times the official exchange rate of the highest value currency published by the CBV. On the other hand, the omission or delay in the payment, or the commission of any criminal tax offense regarding the Contribution, will be sanctioned in accordance with the provisions established in the OTC.

Finally, the LPP establishes that the failure to pay the Contribution will generate late payment interest as of the date of the omission of the tax obligation, without the need of a previous notice from the tax administration.

• Final remarks

The issue of the taxable base of the Contribution provided for in the LPP requires further review and analysis, considering, among other aspects, the provisions of Article 107 of the Organic Labor Law, the binding case law of the Constitutional Chamber of the Supreme Court of Justice (repeatedly upheld in several decisions by the Political-Administrative Chamber of the Supreme Court of Justice) regarding the tax base of employees for income tax purposes, and other relevant rules provided for in the labor and social security legislation. There are also other aspects of the LPP (e.g., entry into force date) that require further review. In this sense, it is advisable that taxpayers review these issues with their legal advisers.

We remain at your disposal if you require further detail or explanations on the general aspects of the Decree that were highlighted in this alert and for any related queries.

Spanish version

1 Law for the Protection of Social Security Pensions in the Face of the Imperialist Blockade, published on Extraordinary Official Gazette No. 6.806 of 8 May 2024.

2 Decree with Rank, Value and Force of Law of Partial Reform of the Social Security Law, published in Official Gazette No. 39.912 of 30 April 2012.

3 Administrative Ruling N° SNAT/2024/000042 issued by the SENIAT on 9 May 2024 and published in Official Gazette No. 42.881 on 17 May 2024.

4 Organic Tax Code, published in Extraordinary Official Gazette No. 6.507, on 29 January 2020.