Venezuela's Tax on Foreign Currency Transactions Starts Monday

Last Thursday, March 17, Venezuela’s National Integrated Service for the Administration of Customs (SENIAT) publicized a new law that will soon charge transaction fees on foreign currencies or cryptocurrencies other than Venezuela’s petro currency. This decision will designate Special Taxable Persons as withholding agents for the Tax on Large Financial Transactions (IGTF).

At the core of the reform is the ruling that foreign currency transactions will be subject to a tax equal to or greater than that charged for transactions paid in Venezuelan bolívars, thus providing increased incentive for the use of the national currency.

According to the new regulations, which will come into force on March 28, businesses that receive the tax must adjust their fiscal mechanisms “for the purpose of reflecting the tax rate and the tax on large financial transactions corresponding to the transactions on the invoice.” The law applies only for transactions paid in foreign currencies and cryptocurrencies, or crypto-assets other than those issued by the country (i.e. using the petro).

For those who issue invoices, “the tax rate and the amount of the tax on large financial transactions for operations must be reflected in the invoice,” for those operations paid in currencies that are not legal tender within Venezuela.

Article 2 of the regulation states that the tax must be paid when the taxed transaction occurs. Collection agents must declare the transaction through the SENIAT website, and render the tax received biweekly at the National Funds Receiving Offices in accordance with the payment schedule for Value Added Tax (VAT) Withholding for Special Taxpayers.

More details will be provided in technical instructions issued for this purpose by SENIAT. In a case where errors occur, the recipients must return to the taxpayers any excess amounts received, and subsequently request the return of the amount to SENIAT, in accordance with the procedure established in the Organic Tax Code.

Venezuela’s National Assembly passed a reform to the law to tax large financial transactions (including those in US dollars), aimed at encouraging the use of the bolívars again, and to create a demand for bolívars to push down the price of the US dollar. Economists agree that the government has to show great care when implementing these types of measures, because Venezuela’s economic recovery is still in a very early stage. Others see the measure as a promising strategy to continue pushing down the price of foreign currencies, thus keeping inflation under control.

Tax-free operations
It should be noted that, when paying for goods and services using bank cards, even in the case of dollar deposits, this will not generate a new tax payment with the new legal regulations, since the disbursement is in national currency.

Nor will the law have any impact on sales or purchases of foreign currency, for the use of international credit or debit cards, or when receiving remittances. Similarly, those who use foreign cash in shops or markets are exempt from the tax, since these types of transactions do not fall into the “big business” or special contributors category.

Featured image: Person holding a wad of US dollar bills. File photo.

(Últimas Noticias) with Orinoco Tribune content

Translation: Orinoco Tribune

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