Last Thursday, August 10, 2023, the Organic Law on Coordination and Harmonization of the Tax Powers of States and Municipalities was enacted (Official Gazette Special No. 6755 of August 10, 2023). Please find below some relevant aspects:
Purpose. The purpose of the Law is the coordination and harmonization of the tax powers of the States and Municipalities, establishing the principles, parameters, limitations, taxes and applicable rates (article 1).
Supplementary application. The provisions of the Law take precedence over the existing ones, the provisions of the Organic Tax Code will be considered supplementary to the contents of the Harmonization Law (article 6).
Limits to the tax powers. The Harmonization Law emphasizes that taxes may not be confiscatory in nature or allow multiple interjurisdictional taxation. Likewise, taxes affecting imports are prohibited, as well as those that serve as barriers to exports or the transit of goods (article 10).
Non-discrimination and freedom of movement. The Harmonization Law prohibits states and municipalities from taxing goods originating from states or municipalities other than their own and the products of their own jurisdiction (article 11).
Payment in local currency. All taxes, as well as their penalties, must be paid in bolivars (article 13).
Account unit. The states and municipalities may only use, as a dynamic account unit for the calculation of taxes, accessories and penalties, the exchange rate of the highest value currency published by the Central Bank of Venezuela, without prejudice to the exclusivity of payment in bolivars (article 14). Limitations on penalties. Penalties established for tax infringements or noncompliance may not exceed the limits established in the Organic Tax Code (article 15).
Simplification of requirements. Authorities may not require taxpayers to obtain the necessary solvency for the execution of a procedure when it is the responsibility of the authority to issue the solvency (article 18). They may not require the fulfillment of a procedure that has been previously verified for a previous procedure whose completion is a prerequisite for the procedure in question (article 19). Likewise, the states and municipalities must coordinate the procedures whose coordination is possible, avoiding unnecessary repetitions (article 26).
Obligations of states and municipalities. The states and municipalities shall (article 30):
Homogenize tax rules and procedures.
Eliminate unnecessary formalities.
Inform taxpayers of the criteria on which the values that serve as taxable base for the calculation of taxes are established.
Adopt the necessary measures to eliminate multiple taxation and double taxation.
To provide information on the collection of its revenues, taxpayers and others of similar nature to the Ministry with competence in matters of economy and finance.
Simplify the tax system, especially with respect to the authorization for the registration, determination, declaration, liquidation and payment of taxes.
Limits to the Tax on Economic Activities (TEA). The rate for the tax on economic activities of industry, commerce, services or of a similar nature may not exceed 3% of the gross income obtained. The minimum annual taxable amount for this tax may not exceed the equivalent of two hundred and forty (240) times the exchange rate of the highest value currency published by the Venezuelan Central Bank.
The tax rate may be up to 6.5% of the gross income obtained in exceptional cases such as the exploitation of mines and quarries, oil industry services and construction, advertising and others listed in Article 31 of the Law.
Validity of licenses. The licenses or authorizations for the exercise of economic, industrial, commercial, service and similar activities subject to this Law shall be valid for a minimum of 3 calendar years, counted from the date of issuance. The renewal of licenses is automatic (Article 33).
Taxes on vehicles. According to Article 39, the taxpayers of this tax are the owners of the vehicles on which the tax is levied and are obliged to pay the tax in the municipality where they have their domicile, residence or permanent establishment. The tax is payable annually and its rate depends on the vehicle at hand.
Tax on any means of payment. The tax on the issuance of payment orders, checks, transfers and any other means of payment made by entities of the national, state, district and municipal public sector, located in the jurisdiction of each state and the Capital District, which are made as advances, partial payments or total payments in favor of contractors derived from the contract for the execution of works, rendering of services or acquisition of goods and services, may not exceed one thousand bolivars for every one thousand bolivars (1x1000) (Art. 41).
Benefits for entrepreneurs. The sum of all municipal taxes applicable to entrepreneurships may not exceed one percent (1%) of the annual gross income obtained by the taxpayers.
The municipalities and states must prepare a simplified tax regime for entrepreneurships resulting in a single tax rate to be fixed considering the activity in which the taxpayer is engaged (article 43).
Harmonization of fees. The states and municipalities may only charge the fees established in the Harmonization Law, among which are those for integral management of waste and solid waste, general inspection, inspection for the sale of species and alcoholic beverages, for the granting of licenses, permits and solvency, and other similar fees (article 47).
Electronic tax stamp. The states must implement the electronic tax stamp, to be issued by the state tax authorities through an automated system (article 52).
The amount required for stamps, stamps and stamped paper may not exceed the equivalent in bolivars of ten (10) times the value of the official exchange rate published by the Central Bank of Venezuela (article 53).
Adaptation of state laws and municipal ordinances. The states and municipalities will have ninety (90) continuous days following its publication in the Official Gazette of the Bolivarian Republic of Venezuela to adapt the existing regulations (Sole Transitory Provision).
Entry into force. The Harmonization Law will enter into effect on November 12, 2023, after a period of ninety (90) days following the publication of its text in the Official Gazette.