Law for Special Economic Zones

Law for Special Economic Zones

The Law on Special Economic Zones was published in Special Official Gazette N° 6.710 on July 20th, 2022. Please find below the most relevant aspects of the law:

-When does the Law enter into force? The Law entered into force on the same date of its publication in the Official Gazette, on July 20th, 2022.

-What are Special Economic Zones? Special Economic Zones are geographical delineations where a special socioeconomic regime is applied, with the intent of developing the strategic economic activities contained in this Law and the National Economic and Social Development Plan.

-What is the purpose of Special Economic Zones? Among others, the objectives of the Special Economic Zones are (article 6): (a) the development of a new national productive model; (b) the promotion of productive economic activities, of both foreign and domestic origin, within the country; (c) the diversification and increase of exports; (d) participating in innovation, supply chains, and international markets; (e) promoting the nation’s industrial development; (f) promoting the selective substitution of imports; (g) contributing to the diversification of the country’s economy; (h) guaranteeing technological transfer; (i) ensuring that comparative advantages are duly exploited; among others.

-What is the process for the creation of a Special Economic Zone? Special Economic Zones are created via Presidential Decree, issued by the Ministerial Council (art. 7). This Decree must be sent within eight (8) continuous days, to the National Assembly which must approve or reject the Decree within ten (10) workdays of receiving the draft, according to the content of article 10. If the National Assembly does not respond within the allotted time frame, it will be considered approved.

-Activities and industries of the Special Economic Zones. The Special Economic Zones have been created for the purpose of developing the following economic activities and industries (article 12):

Industrial, such as the production of goods, manufacturing, strategic agroindustry, export and reexport, aeronautics and energy within any of their categories.

Technology, such as the establishment of tech centers for the development and production of systems, replacement parts, components and pieces of telecom and information systems, software applications, the recycling of solid tech waste, investigation and scientific development on the matter of aerospace, as well as the development of military technology.

Financial services, such as the establishment of banking and financial services under a preferential fiscal regime.

Non-financial services, like the installation and production of logistics sectors for the implementation and export of tourism, recreational and entertainment services.

Agricultural production, such as primary production activities for the agricultural, livestock, fishing, and aquaculture sectors, with export purposes and achieving the nation’s food sovereignty.

-What are the Districts for the Development of Special Economic Zones? The President of the Republic may create Districts for the Development of the Special Economic Zones, by way of their inclusion in the Decree that created the SEZ (article 13). The Engine Districts have the purpose of developing productive synergies within the SEZ, by way of complements and as a dynamic axis of integration and regional development (article 14).

-The National Superintendence for Special Economic Zones. The Law creates the National Superintendence for Special Economic Zones which is tasked with administrating, supervising and controlling the Special Economic Zones. The Superintendence will have its own budget and legal personhood (article 16).

-The Center for International Productive Investments. The International Center for Productive Investments will be created with the goal of promoting and securing potential partners for the development of economic activities in the Special Economic Zones, like the establishment of the necessary conditions, technical requirements, and procedures for the presentation, study, and evaluation of possible projects.

Likewise, the Center will be tasked with evaluating the potential of each partner for the development of economic activities in the Special Economic Zones, in coordination with the National Superintendence, among other functions assigned by this Decree and future legal instruments (article 26).

-What are the Zones for the Promotion of Exports? These Zones have been created in order to promote the export of goods, particularly manufactured goods, and services, including tourism services. Among these Zones, we find:

Zones for the Selective Substitution of Imports, created in order to promote the substitution of imported goods and services through the local production of said goods and services. The goods and services produced in these zones will be exclusively of High Venezuelan Added Value. No Zones of this type may be created in order to commercialize imported final goods or national goods that aren’t of High Venezuelan Added Value.

Zones for Technological Development, aimed towards the creation of supply chains and intensive investments with a high-tech component, particularly those of top-of-the-line tech. The goods and services that will be produced in these zones will be exclusively of High Venezuelan Added Value. No Zones of this type may be created in order to commercialize imported final goods or national goods that aren’t of High Venezuelan Added Value.

-What is Venezuelan Added Value? The Law defines “Venezuelan Added Value” as the difference between the aggregated market value of all the imported materials used in that good and its sale price. High Venezuelan Added Value occurs when said difference is at least 60% or more of that which is already produced locally.

-Fiscal and customs incentives. Under the Law (article 28), entities, public and private, mixed and communal, national or foreign, that operate within the SEZ, may benefit from Import Tax Draw Back, and Tax Draw Back when it comes to other national taxes.

The maximum limit for said benefits and incentives will be established by the Ministry with competence in the matter of economics, finance, and foreign trade, by way of a Resolution.

-One Stop Shop. All paperwork required by the relevant authorities in order to operate within the Special Economic Zones shall be filed through an integrated system consisting of a One Stop Shop with the purpose of simplifying, unifying, and automating procedures (article 29).

-Multimodal Transport System. With regard to the potential of the Special Economic Zones, a multimodal transport system will be installed. This includes land, aquatic, riverside, lacustrine or areal, as well as railways with preferential goods loading and unloading areas (article 32).

-Preferential fiscal regime for banking and other financial institutions. Banking and financial institutions that are duly authorized and set up within the Special Economic Zones will benefit from a preferential fiscal regime according to the relevant norms that are emitted to that effect by the Ministry with competence in matters of economics, finance, and foreign trade (article 35).

-Education incentives. The National Superintendence for Special Economic Zones, in coordination with the Ministries with competence in education, science, tech, innovation, tourism and communes, will create investigation centers which will promote the development of an integral model for human talent capacitation for participation in the prioritized economic activities and industry sectors of the Special Economic Zones (article 33).

-Exchange system. The Special Economic Zones will benefit from a free exchange system. Likewise, the Zones will feature loan and financing programs offered by specialized banking institutions for the purpose of the development of the economy, according to the norms that the Central Bank of Venezuela and the Ministry with competence in matters of economics, finance, and foreign trade to that end.

-What happens with the Special Economic Zones created prior to this Law? The existing Special Economic Zones must be evaluated by the Executive Power in order to determine their viability and suppress or adapt them, depending on the case, through successive decrees which will bring them in line with the organization and administrative regime laid out in this Law, within a timeframe no greater than 180 days.