The new Law imposes a 0.75% tax on large financial transactions in Venezuela, which were previously not subject to tax. The list of transactions subject to the tax includes items such as purchases of cashier's checks and transfers of checks and securities upon a second endorsement. Taxpayers should carefully review the list of transactions subject to the tax to determine whether they have entered into any transactions to which the 0.75% tax applies.

Venezuela has enacted Decree No. 2.169 (published in Special Official Gazette No.6,210 of December 30, 2015), establishing a new tax of 0.75% on large financial transactions.

Under the Decree, the following events are taxable:

1. Debits to bank accounts, correspondent accounts, trusts or demand deposits of any kind, liquid assets funds, fiduciary, and other financial market funds or any other financial instrument, in banks and other financial institutions

2. Transfers of checks, securities, deposits in custody paid in cash and any other tradable instruments, after their second endorsement

3. Purchases of cashier's checks in cash

4. Lending transactions between banks and other financial institutions for no less than two bank business days

5. Transfers of securities in trust between different holders, even if no disbursements through the accounts occur

6. Payment of debts without financial system mediation, payment or other means

7. Debits to accounts in private organized payment systems not operated by the Central Bank of Venezuela other than the Local Payment System

8. Debits to accounts for cross-border payments

The Decree exempts the following transactions from the 0.75% tax:

1. The first endorsement made on checks, securities, deposits in custody paid in cash, and any other tradable instrument

2. Debits from the purchase, sale and transfer of custody of securities issued or guaranteed by the Republic or the Central Bank of Venezuela, as well as debits or withdrawals associated with the settlement of principal or interest thereof, and securities traded in the agricultural and stock exchanges

3. Fund transfer transactions performed by account holders between their accounts, at banks or financial institutions incorporated and domiciled in the Bolivarian Republic of Venezuela (does not apply to accounts with more than one holder)

4. Debits from accounts for the transfer or issue of a personal or a cashier's check made out to the National Treasury for the payment of taxes

5. Purchases and sales of cash through an account held at the Central Bank of Venezuela by banks and other financial institutions

The following taxpayers are subject to the tax on large financial transactions:

1. Business and corporate entities without legal identity, qualified as special taxpayers, for payments charged to their accounts in banks or financial institutions and payments

2. Business and corporate entities without legal identity, qualified as special taxpayers, for payments made without financial institution mediation, with payment referring to debt clearing, novation (i.e., substitution of a new obligation for an old one) and pardon.

3. Business and corporate entities without legal identity, legally related to a business or corporate entity without legal identity, qualified as special taxpayers, for payments charged to their accounts in banks or without financial institution mediation

4. Individuals, business and corporate entities without legal identity not legally related to a business or corporate entity without legal identity, qualified as special taxpayers, making payments on their own, charged to their accounts in banks of financial institutions or without financial institution mediation

The Tax Administration may appoint withholding or collecting agents of the tax on large financial transactions to those who, either by themselves or proxies, partake in actions or transactions to withhold or collect the tax.

For bank accounts opened for payroll salary, pension and similar remuneration payment generated by a current or previous labor relationship, the Decree does not allow debtors and payers to transfer the tax amount generated from the payment of the salary, pension or other remuneration to workers, retirees and pensioners.

The taxable events occur and, consequently, a tax obligation arises upon debit to an account or debt payment, when appropriate.

The 0.75% tax will apply to debits to bank accounts or debt payments when:

1. The reasons generating the debit or debt payment occur or take place within the national territory, including the provision of services contracted, supplied or paid abroad, even if the service provider is not located in the Bolivarian Republic of Venezuela

2. The payments are for activities performed abroad related to the import of goods or services, and payments obtained from technical assistance or technologic services used in the national territory

3. The service-generating activity is developed in the national territory, regardless of the place where the service is used

The taxable basis will be the total amount of each debit to an account or levied transaction. For cashier's checks, the taxable basis will be the check amount.

The tax on large financial transactions is determined on a one-day taxation basis, and may not be deducted from income tax. The Decree grants the executive branch the authority to reduce the tax rate, in accordance with the Master Tax Code.

The Decree is effective February 1, 2016.

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