IT payment exemption – Primary exploitation of activities indicated in the Decree
Decree No. 2.287 of March 28, 2016, issued by the President of the Republic, was published in Official Gazette No. 40.873 of March 28, 2016. Said Decree exempted from payment of Income Tax (IT) the net income of Venezuelan source resulting from the primary exploitation of agricultural, forest, livestock, poultry, fishing, aquatic, and fish breeding activities, obtained by natural persons, legal persons, and unincorporated entities residing in the country.
Among other provisions, the Decree establishes the following:
1. The exemption from payment of IT of the net income of Venezuelan source derived from the primary exploitation of agricultural, forest, livestock, poultry, fishing, aquatic, and fish breeding activities of the persons registered as beneficiaries according to the Decree.
2. Primary exploitation is understood as the simple production of fruits, products or goods that are obtained from nature, always provided that they are not subject to any transformation or industrialization process. The Decree also indicates the processes that will be considered to be included in the primary agricultural activity.
3. The exploitation will be deemed as primary exploitation only within the parameters established in the Decree.
4. In order to enjoy the benefit established in the Decree, the beneficiaries of this exemption must update the data of the Registro Único de Información Fiscal (Fiscal Information Registry - RIF), in accordance with the rules issued by the Tax Administration.
5. The beneficiaries of the exemption must meet the following conditions:
a) To apply 100% of the amount of the tax that the beneficiary would have had to pay to direct investments for the relevant activity in the area of scientific and technological research, improvement of the productive capacity indexes or in capital goods, which investment must be made during the fiscal year following that in which the exempt net income was generated. In order to calculate the amount to be directly invested, the annual net aggregate income obtained in the relevant fiscal year must be taken into account.
If the beneficiary of the exemption carries out several of the activities to which the Decree refers, said investment must be distributed in proportion to the income derived from each exempted activity individually considered.
The beneficiaries must file with the competent entities indicated in the Decree a sworn statement showing the amounts applied to investments, within a period of 15 business days following the date when the aforesaid investment was made.
b) To file with the competent entities indicated in the Decree an annual sworn statement (before March 31) showing in detail the investments made and the amount of the exempt tax invested in each ended fiscal year, as well as the investments to be made and the amount of the tax to be invested in the following fiscal year.
c) To perform all of the obligations and formal duties and requirements that the beneficiaries have to perform under the Income Tax Law (ITL), its regulatory rules, and the Decree. Failure to perform any of the duties, obligations, and conditions will result in the loss of the exemption and the net income derived from the activities referred to in the Decree will be taxed.
6. If the beneficiary carries out activities levied with IT and exempted from IT in the terms established in the Decree, the common costs and deductions applicable to the income generated by said activities will be proportionally distributed. The loss resulting from the exempt activity may not be imputed to the income generated by the activity levied with IT in any fiscal year.
7. Within a period of 30 days following the publication of the Decree in the Official Gazette, the beneficiary of the exemption regime must file with the competent entities indicated in the Decree a sworn statement indicating in detail the investments made and the amount invested during fiscal year 2015, as well as the Plan of investments of the amount of the exempt tax for fiscal year 2016.
The Decree became effective on January 1, 2016 and will remain in effect until December 31, 2018.
In order to access the Decree, please click here.
“NOTE: THIS INFORMATION SHOULD NOT BE CONSTRUED AS LEGAL ADVICE ON ANY SPECIFIC MATTER AND ITS CONTENT ARE INTENDED AS A MANAGEMENT ALERT AS TO CURRENT DEVELOPMENTS IN VENEZUELA, ANY SPECIFIC LEGAL QUESTIONS REGARDING THE POSSIBLE APPLICATION OF NEW OR PROPOSED LEGISLATION TO PARTICULAR SITUATIONS SHOULD BE ADDRESSED TO TRAVIESO EVANS ARRIA RENGEL & PAZ.”