FORMS OF BUSINESS ORGANIZATION
The principal forms of business organization in Venezuela are the corporation or joint stock company (compania anonima or sociedad anonima), the limited liability company (sociedad de responsabilidad limitada), and the general partnership (sociedad en comandita). Foreign investors may set up branches in Venezuela. All these forms are liable for corporate income tax.
Joint ventures and consortiums are often used to carry out a specific project or pursue a specific activity. The participants are separately liable, but, in the case of a long-term joint venture, they generally set up a distinct entity for the purpose, such as a corporation.
REGISTRATION
Under Venezuela's commercial code, all commercial entities establishing a business in the country must register with the Mercantile Registry. Foreign entities must register with the Superintendency of Foreign Investments.
EXCHANGE CONTROLS
Foreign exchange controls have been lifted since 17 April 1996. Currently, the exchange rate is freely floating.
LOCAL PARTICIPATION OR MANAGEMENT REQUIREMENTS
Formal participation requirements are not applied to foreign investments. On the other hand, the number of foreign employees, including managers, is limited to 10% of the total on the payroll, and their remuneration must not exceed 20% of that paid to Venezuelan employees. A special permit to exceed these limits may be obtained from the Ministry of Labor if a number of conditions are observed.
INVESTMENT INCENTIVES
Investment tax credits are available until 1 September 1996 for new investments
- In research and development
- To eliminate or avoid environmental pollution
An investment tax credit related to new fixed assets other than land is permitted until 1 July 1999. This incentive is available only for taxpayers engaged in industrial, agribusiness, fishery, and cattle-raising or livestock activities. The credits are for 20% of the value of the new investment. Those not used may be carried forward for up to three more years.
Entrepreneurs engaged in farming, fishing, and forestry have been recently exempted from income tax on profits from primary activities.
Foreign trade zones and free port areas provide custom duties exemptions, among other tax benefits.
Under a tax refund (drawback) regime, a total or partial refund of importation tax paid by Venezuelan or foreign exporters is available, for example, on materials used to produce exported goods. Refunds are effected by means of a tax refund certificate, which can be used to pay national taxes.
Free trade zones have been created to promote manufacturing and other activities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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