Resident and non-resident individuals are taxed on salaries and wages and on any other remuneration for personal services, such as meal allowances, pensions, profit sharing, and other similar remunerations, regardless of the place of payment or currency used.
Employees are not taxed on pensions and termination benefits as set forth in the labour law or collective contracts (employer/union) and interest thereon, or income from trusts established to administer employer contributions to the related funds.
Foreign-source income will be taxable for tax-resident individuals unless an exemption or tax treaty applies.
There are no specifications regarding the tax treatment of equity-based compensation. In this regard, general rules on taxation of employment income apply.
All income earned by individuals from business activities carried out as a sole proprietor is to be reported in the annual tax return and is subject to the same tax rate applicable to individuals obtaining other income.
Taxable income and the resulting income tax from the business activities of individuals are usually determined in a manner similar to that of corporations (see the Income determination section in the Corporate tax summary).
Residents are taxed on their capital gains as ordinary income.
Capital gains obtained on the sale of Venezuelan stock, registered with the Venezuelan National Securities and Exchange Commission, through a Venezuelan stock exchange are not taxable as ordinary income; however, a 1% flat withholding tax (WHT) on the sale price is payable. In this case, the losses on the sale of Venezuelan stock are not tax deductible.
Capital losses resulting from the sale of stock by other means, capital reduction, or liquidation of a company are only deductible if they meet one of the following conditions:
- The cost of the capital stock was not in excess of the price quoted on a stock exchange or an amount with a reasonable relationship to the book value of the capital stock.
- The holding period of the investment was for at least two years immediately preceding the date of the sale.
- The stockholder proves that the company selling the shares carried on economic activities for at least two years preceding the date of sale.
A capital gain from the sale of a main residence is tax exempt if reinvested in another residence within one year prior to, or two years after, the sale.
Dividend tax is levied at a flat rate of 34% on the positive difference between book income and fiscal income generated after 2001. To determine this difference, the last in first out (LIFO) method applies. The 34% (domestic) rate can be mitigated under tax treaties to 10%, 5%, or even 0%. The withholdings are to be made at the moment a dividend is declared or credited (to an account of the recipient).
Dividends obtained from companies incorporated or domiciled abroad or incorporated abroad and domiciled in Venezuela are excluded from the dividend tax system. However, these dividends will be taxed at a 34% flat income tax rate. Foreign tax credits on dividends can be offset with the proportional tax.
Income received in the form of interest is taxable when paid. Interest earned from Venezuelan saving deposits or saving funds is tax exempt.
Residents must report the amount of their worldwide rental income received from real estate. They may deduct administrative expenses incurred in connection with the rented property of up to 10% of the rental income for the fiscal year. Additionally, the following expenses are deductible: maintenance, interest on loans for the purchase or construction of rented property, and property taxes.
Items exempt from taxable income include the following:
- Compensation for an injury received by employees or their beneficiaries as result of their work, paid under the law or the labour contract. It may include the profits from the retirement fund as well as the profit received from interests.
- Compensations received by the insured or their beneficiaries as result of the insurance contract.
- Pensions received from retirement, seniority, or invalidation.
- Inheritances or gifts received.
- Contributions made by employers to the safe deposit box of their employees, and the profits received from interests or any other concept on occasion of the safe deposit box.
- Profits received from interests on occasion of fixed deposits, mortgage certificates, savings certificates, investments, or any other kind of savings instrument established under the banking law.