The Official Gazette of the Bolivarian Republic of Venezuela N° 41,667 of July 4th, 2019 published the Constitutional Law that creates the Wealth Tax (the “Law”), in the following terms:
I. Object: A Wealth Tax (“WT”) was created, which taxes the net worth above 36,000,000 Tax Units (“T.U.”) for natural persons and 100,000,000 T.U. for legal entities.
II. Taxable event: The property or possession of wealth under the brackets of Tax Units set forth in the Law, imputable to the subjects categorized as special taxpayers by the Tax Administration.
III. Taxable rate: the tax rate applicable to the value of the net worth will be 0.25%. The National Executive can modify the tax rate up to 1.50% maximum.
IV. Territorial Criteria: The WT will be imposed according to the following territorial criteria:
a. Regarding the total wealth: the natural persons and legal entities categorized as special taxpayers, as well as entities without legal personality, that are residents in the country.
b. Regarding the assets that are located in Venezuela: the natural persons and legal entities categorized as special taxpayers of foreign or Venezuelan nationality, as well as entities without legal personality, which are not residents in the country.
c. Regarding the total amount of the wealth imputable to a permanent establishment in case of having it: the natural persons and legal entities categorized as special taxpayers of foreign or Venezuelan nationality, as well as entities without legal personality, which are not residents in the country.
V.Taxable Base: The taxable base will be the result of adding the total value of assets and rights determined according to the rules established in the Law, excluding the value of levies and charges that fall upon the assets, as well as the exonerated rights and assets.
The natural persons and legal entities are obligated to pay the WT for the portion of their net worth that exceeds 36,000,000 T.U. for natural persons and 1000,000,000 T.U. for legal entities.
VI. Attributable value: The higher value that results from the distinct valuation criteria according to the asset:
a. Immovable property in the country: the value assigned in the national registry, the market value or the value resulting from updating the acquisition price, according to the rules that the Tax Administration issues.
b. Immovable property abroad: the value resulting from the tax legislation of the country they are located in or the market value at the closing of each taxable period.
c. Other immovable property: The value of the rights over immovable property arising out of contracts of multiple property, timeshare or other similar modalities, will be the greater value between the price of acquisition and the market price at the closing of the taxable period.
d. Shares and Interest:
i. In public offering: according to their Price at the closing of the taxable period.
ii. Not in public offering: the value that results from dividing the amount of capital plus reserves as seen in the last financial statements approved at the closing of the taxable period of Income Tax, divided by the number of titles, shares or interest that represent it.
e. Jewelry, art objects and antiques: the value that results from the updated acquisition price, according to the rules the Tax Administration issues, or the market price at the closing of the taxable period.
f. Property rights: the value assigned to the property according to the following rules:
i. Mortgages, pledges and antichresis will be valued by the amount of the obligation or the guaranteed capital, including the sums that are guaranteed by interests, compensation, penalty clauses or other similar concepts.
ii. The property rights not included in the previous paragraph will be calculated by the capital, price or value that the parties agreed on when constituting them, as long as they are not below the current market price between parties that are not linked to each other, in free market conditions.
g. Residual criteria: the rights and assets that do not have a special valuation rule will be calculated with the greater value resulting between the current market price and the updated acquisition price according to the rules that the Tax Administration issues.
VII. Temporality: the WT will be annually caused on the net worth at the closing of each period. The taxable event shall be considered caused on expiration of the last day of the taxable
VIII. Payment of the Tax: the WT will be paid on the portion of the wealth that exceeds the amounts indicated in the term and under the forms and modalities that the Tax Administration establishes.
a. The Republic and other political-territorial entities.
b. The Central Bank of Venezuela.
c. The functionally decentralized entities.
d. The main dwelling registered as principal before the Tax Administration, up to a value of 64,000,000 T.U.
e. The domestic objects, meaning, the personals and of the household, domestic utensils and other movable property of particular use of the taxpayer, except for the exemptions established in the Law.
f. The social benefits and other benefits arising from labor relationship.
g. The assets and rights of common property.
h. The assets invested in agricultural, livestock, aquaculture, fishing, as long as these are the main activity of the taxpayer and are made on a primary level.
i. The own creation of artists as long as they are property of the author.
X. Non deductibility: the WT cannot be deducted from the Income Tax.
XI. Duty to inform: the obligation to judges, registrars, notaries, financial institutions, insurance companies, reinsurance, brokerage firms, exchange houses, among others, to send information of a general nature to the Tax Administration when required.
XII. Executive collection: The Tax Administration will exercise the action of executive collection of the amounts determined by the Tax Administration, when these have not been paid by the taxpayers or their managers, in accordance with the Tax Code.
The Law entered into force on July 4, 2019. The regulations regarding the existence and amount of the WT will be effective as of January 1, 2020, in accordance with the Tax Code. This bulletin presents a general description of relevant aspects of the Constitutional Law that creates the Wealth Tax and does not constitute a legal opinion aimed at addressing a specific situation. In case of doubts or comments or for more information, contact InterJuris Abogados (www.interjuris.com) +58 (212) 750 1200.