Taxable years may not exceed 12 months, but the first year may be less than 12 months. Taxpayers engaged in commercial, industrial, or service activities may choose a taxable year that does not coincide with the calendar year. A taxpayer that makes such an election may only change it after obtaining prior authorisation from the tax authorities. All other taxpayers are require to conform their taxable year to the calendar year.
Final tax returns must be filed within three months following the end of the tax year or at the date indicated on the corresponding calendar for those designated as a ‘special taxpayer’ by the tax authorities. The system is one of self-assessment.
Payment of tax
The total amount of tax due must be paid at the time of filing the annual return. Estimated tax payments must be paid consecutively in six monthly instalments. Companies engaged in mining, hydrocarbon exploitation, and related activities must make 12 equal monthly estimated tax payments.
As of September 2018, weekly income tax advance payments have been set forth for Special taxpayers. The applicable rates have been established as follows: (i) 2% for financial institutions, banking, insurance, and reinsurance sectors, and (ii) 1% for other special taxpayers. The aforesaid will temporarily replace the filing and payment obligations in connection with the estimated income tax return.
Fines for omitted taxes when assessed as a result of tax audits range from 100% to 300% of the omitted tax. The tax authorities generally assess the average fine (200%) unless aggravating or mitigating circumstances apply.
Fines are reduced to 30% if assessment is accepted within a specific timeframe.
Fines are adjusted according to to the official exchange rate of the currency of highest value as published by the Venezuelan Central Bank at the time of the infringement and will be assessed on the value in place at the moment of payment.
Late payment interest is 1.2 times the average banking lending rate considering the six major banks.
Tax audit process
According to the Master Tax Code, the tax administration is entitled to review the existence of a taxpayer’s liability, whether it has been reported or not. In exercising this power, the tax administration is entitled to obtain and verify information in connection with a determined tax liability. Verifications may be carried out on the basis of available information or on a presumptive basis if concrete information is not available.
Statute of limitations
According to the Master Tax Code, the statute of limitations for tax liabilities is six years starting to run on 1 January of the year following the tax period involved. Regarding taxes that are assessed by periods (e.g. income tax and VAT), it is understood that the taxable event occurs at the end of such period. Exceptionally, the statute of limitations is extended to ten years in any of the following circumstances: (i) the taxpayer fails to declare the taxable event or submit the relevant returns; (ii) the taxpayer does not comply with its obligation to register with the tax administration; (iii) the tax administration was not able to become aware of the taxable event; (iv) the taxpayer has extracted from the country property that is subject to the payment of the tax liability or if the tax liability is related to taxable events occurring abroad; or (v) the taxpayer does not keep its accounting in accordance with the relevant standards.
Topics of focus for tax authorities
Tax audits are generally focused on ‘special taxpayers’. The main subjects of focus of tax audits on corporate taxpayers are related to compliance of formal obligations for direct and indirect taxes and transfer pricing.