Taxpayers should review the changes made to the Income Tax Law to ensure they have complied.

Venezuela published Decree No. 2,163 (Official Gazette No. 6,210 Extraordinary, dated December 30, 2015), modifying several provisions of the Income Tax Law.

Specifically, the Decree modifies the rules related to the timing of income recognition, establishing as a general rule that income shall be taxed when transactions are performed, except income derived under a labor relationship and windfall profits, which are taxed on a cash basis.

The Decree also:

— Repeals Chapter I of Title IV of the Income Tax Law related to income tax credits from specific activities and investments

— Establishes a proportional tax rate of 40% on net income derived from banking, financial, insurance and reinsurance activities, obtained by legal persons or entities domiciled in Venezuela

— Exempts special taxpayers appointed by the Tax and Customs Administration from the tax inflation adjustment system

The estimated income tax return to be filed after December 31, 2015, should consider the net overall taxable income of the immediately preceding year, excluding the effect of the inflation adjustment for those taxpayers that are exempt.

The Decree is effective December 31, 2015.

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