Venezuela

• Venezuela has been a World Trade Organization member since January 1, 1995 and a member of the General Agreement on Tariffs and Trade since August 31, 1990.


• Importers must get approval from the National Superintendent for the Defence of Socio-Economic Rights and show that they are adhering to government-mandated price controls and profit limits, which are arbitrarily applied according to sector but are often strict and difficult for firms to meet. If the business is able to clear these measures, it will then be issued with a Certificate of Fair Prices, which is required to apply for hard currency.


• In 2015 the government moved the management of import transactions under CORPOVEX, a unit of the currency control commission (CENCOEX). This entity is responsible for all import transactions and has caused further difficulties for private sector firms by preferring state-owned entities (SOEs) for import permits and mandating the use of certain suppliers, quality standards and price controls.


• Businesses must register with the CENCOEX and are required to submit extensive documentation when applying for foreign currency, including certificates stating that the imported goods are not produced domestically, and a guarantee of good reputation with the tax authorities. Approval of requests for foreign currency may be made on an arbitrary basis and will favour industries which the government considers strategic, benefitting SOEs over private enterprises. Businesses are required to navigate a complex and frequently adjusted exchange rate regime in order to obtain foreign currency.


• The average tariff rate on imported goods is among the highest in the region. Venezuela has failed to align its tariffs with the common external tariff required as part of its membership of Mercosur, increasing trade barriers relative to its peers in the trade bloc and contributing to its suspension in December 2016.


• Average applied most favoured nation tariffs range as high as 25.8% on clothing, but are also somewhat elevated for other tariff lines including capital goods and agricultural products. Importers are also required to pay a customs service fee of 1% on the value of the goods, and VAT at 16% on the cost, insurance and freight value of the goods, adding to the cost burden of imports.


• Customs procedures can be complicated and arduous, and may require a customs agent to navigate effectively, while inefficient port management also causes delays. The government reserves the right to place quotas on imports, which generally apply to agricultural products, and obtaining permits to import goods under the tariff quota system can be difficult.


• There is a 35% local content requirement imposed on domestically manufactured vehicles, which, though it has been reduced from 50%, will continue to cause considerable difficulties for autos manufacturers due to the absence of a large and cost-effective domestic autos industry which is able to provide autos parts and intermediate inputs.


• The border with Colombia has been closed for intermittent periods since 2015 as a result of a diplomatic row over smuggling. Closures often occur with little warning and therefore cause considerable unpredictable disruption to supply chains with one of Venezuela's major trade partners. Disputes with Guyana have also led to the blocking of trade in certain goods since 2015, further disrupting trade flows.


• Exports are zero rated. Consequently, VAT is not payable on exports, including exports of in-bond processing companies, technical fees to foreign residents, and sales to in-bond processing companies and companies that export their entire production. Sales of natural hydrocarbon by joint ventures regulated by the Hydrocarbon Law to the National Oil Company (PDVSA) and affiliated companies are also taxable at 0%. Though exporters do not collect VAT on export sales, they may recover VAT charges on their purchases of goods and services by means of a refund certificate. This certificate may be used to pay other tax obligations. If such exporters carry out sales in the country, they will be entitled to recover input VAT related to foreign sales.


• A zero rate applies to independent personal services provided by residents in Venezuela that are used solely by and for the benefit of persons abroad without a fixed base in Venezuela.


• Customs duty incentives are available, such as drawbacks on the import of materials used for exporting products. This may take the form of a tax refund certificate issued by the Ministry of Finance. The certificate is a negotiable bond and will be accepted by the Treasury Funds Office for payment of national taxes. Determination of the amount of the refund will take into account the import duties effectively paid at the time the materials used in the manufacture of the exported product were received in Venezuela.

Sources: Fitch Solutions, national sources

Trade Updates

The United States government expanded its sanctions on Venezuela over the course of 2018 and 2019.

Multinational Trade Agreements

Provisionally Active

1. Mercosur: A regional customs union with Brazil, Argentina, Paraguay, Uruguay and Venezuela. The agreement facilitates trade with these neighbouring countries through the removal of tariff and non-tariff barriers. The customs union is still in the process of being fully implemented, however, with some significant exceptions to the common external tariff in individual countries and double-application of import tariffs on goods imported to one member and subsequently moved into another. Mercosur encompasses approximately 75% of South America's GDP and is one of the world's largest economic blocs. However, Venezuela has failed to completely implement the common external tariff, meaning that it is not fully integrated into the Mercosur market. As a result of this and the ongoing political and economic crisis in the country, as of December 2016 Venezuela has been suspended from Mercosur. Businesses are consequently unable to take advantage of the lower tariff and non-tariff barriers to trade with fellow Mercosur members while Venezuela remains suspended.


2. Mercosur and associate members: The free trade agreement between Mercosur and associate members facilitates regional trade. However, Mercosur's associate members – Chile, Colombia, Ecuador, Guyana, Peru and Suriname – do not enjoy full voting rights or complete access to markets.


3. Mercosur-India Preferential Trade Agreement (PTA): The PTA between Mercosur and India came into force on June 1, 2009. India is an important trade partner. India is expected to grow faster than top trade partner Mainland China over the medium term, creating even greater opportunities for Brazilian exporters.

Under Negotiation

1. Mercosur-European Union (EU): Mercosur and the EU are negotiating a trade pact which aims to provide a boost to trade flows with important export markets in the EU and helps to stimulate new trade and investment opportunities. Talks between the two blocs are moving forward and agreement over remaining issues, including maritime transport policy.

Sources: WTO Regional Trade Agreements Database, Fitch Solutions

• Value Added Tax: 16%
• Corporate Income Tax: Variable (15-50%)

Source: National sources

Important Updates to Taxation Information

• In February 2020, the Constituent Assembly approved a law that will allow government to levy tax ranging between 5% to 25% above the pre-existing 16% VAT.


• According to Decree N° 4.080, effective the payment of VAT, Import Tax and the rate for the Determination of the Customs Regime on imports are exempt until June 30, 2020. The Decree entered into force on January 1, 2020.


• According to a presidential decree published in the Venezuelan Official Gazette on December 28, 2018, taxpayers that carry out operations in foreign or crypto currencies in Venezuela must determine and pay tax obligations in foreign or crypto currencies. The decree entered into force as of the date of publication.

Foreign Worker Permits/Visas

Venezuela issues tourist visas. Foreign nationals with tourist visas may not work as employees or engage in business in Venezuela. Business visas allow individuals to conduct commercial affairs or to provide technical assistance. Under the Immigration Law, foreign citizens who intend to render services in Venezuela for more than 90 days must obtain a labour permit and a labour visa (Working Transient Visa; known as the TR-L). The company that intends to employ the foreign citizen requests the labour permit.

If a foreign citizen will not be in Venezuela for more than 90 days, neither a labour permit nor a labour visa is required. The process of obtaining work permits for expatriates is highly bureaucratic and burdensome for businesses. In order to employ a foreign worker, employers must file an application with both the Office of Migration and the Ministry of Labour for a work visa and a work permit respectively (both are mandatory).

Both applications must include a number of documents such as detailed tax records of the company, the employment contract and an authorised Spanish translation of the qualification certificates of the employee. This arduous process increases the difficulties businesses will face in employing expatriates.

Localisation Requirements

Investors should be aware that there are legal restrictions on the employment of foreign workers in Venezuela. Expatriates must not exceed 10% of the workforce of a business employing 10 or more workers, and their remuneration should not surpass 20% of the total remuneration for the workforce.

The Ministry of Labour may waive these restrictions on a case-by-case basis, taking into account any special technical knowledge offered by the foreign worker, and the ability of Venezuelan workers to fill the position. This further contributes to the risks businesses will face in attempting to employ foreign workers.

Other Requirements

Venezuela now implements security protocol measures in order to prevent and protect countries from a possible virus outbreak such as Ebola. Therefore, a medical certificate granted by the health authority of the country is required. In the document it must be specified that the applicant during the 21 days prior to the trip or the application does not present symptoms compatible with Ebola, has not been in contact with Ebola patients, or with body fluids, and has not visited a health facility where these patients have received medical attention.

Sources: National sourses, Fitch Solutions

Sovereign Credit Ratings

Sources: Moody's, Standard & Poor's, Fitch Ratings

Competitiveness and Efficiency Indicators

Sources: World Bank, IMD, Transparency International

 

Fitch Solutions Political and Economic Risk Indices

Hong Kong’s Trade with Venezuela

Export Commodity	Commodity Detail	Value (US$ million)
Commodity 1	Office machines and automatic data processing machines	9.0
Commodity 2	Telecommunications and sound recording and reproducing apparatus and equipment	1.7
Commodity 3	Articles of apparel and clothing accessories	0.6
Commodity 4	Electrical machinery, apparatus and appliances, and electrical parts thereof	0.4
Commodity 5	Fish, crustaceans, molluscs and aquatic invertebrates, and preparations thereof	0.3

Import Commodity	Commodity Detail	Value (US$ million)
Commodity 1	Telecommunications and sound recording and reproducing apparatus and equipment	3.0
Commodity 2	Fish, crustaceans, molluscs and aquatic invertebrates, and preparations thereof	2.8
Commodity 3	Meat and meat preparations	2.0
Commodity 4	Metalliferous ores and metal scrap	0.9
Commodity 5	Plastics in primary forms	0.4