The Venezuelan Government exonerated from income tax liability those legal entities (domiciled or not in Venezuela), who obtain Venezuelan source income derived from the project destined to recover the capacity, extraction, milling, dispatch and transformation of iron,[1] according to the Economic and Technical Cooperation Agreement between Venezuela and China (the "Agreement").[2]  


Originally, the exoneration came into force on April 29, 2019, but applies retroactively to activities carried out since October 1, 2018.  The exoneration is valid for three years until April 29, 2021.  Although Decree 3.835 was not officially published in the Official Gazette by January 1, 2018, the Political-Administrative Chamber of the former Supreme Court of Justice (today the Supreme Court of Justice) has admitted the retroactive application of tax exonerations.[3]

2. Conditions for the exoneration benefit 

Taxpayers must meet these requirements to claim the exoneration:

a. Submit a certificate issued by the Ministry of People's Power of Industries and National Production certifying that the project is covered by the Agreement.  Although Decree 3.835 does not specify the agency in charge of receiving the certificate, it is presumed that it should be the national tax administration, that is, the National Integrated Service of Customs and Tax Administration (SENIAT). 

b. File an annual taxable and exonerated income tax return under the Income Tax Law, its Regulation and any other applicable statute and comply with the material and formal obligations established in those statutes.

The beneficiaries will lose the exoneration in case of non-compliance.

3. Determination of exonerated income  

The Income Tax Law will apply for determining taxable and exonerated income, costs and expenses. The common costs and expenses applicable to taxable and exonerated income must be prorated. This last mention of foreign source income only applies to taxpayers domiciled in Venezuela or with a permanent establishment in the country, due to the worldwide income system established in the Income Tax Law.

4. Operating losses 

Beneficiaries cannot offset the losses derived from exonerated activities against taxable income.

[1] Presidential Decree No. 3.835, Official Gazette No. 6.454 Ext. of April 29, 2019.
[2] Economic and Technical Cooperation Agreement between the Republic of Venezuela and the People's Republic of China, Official Gazette No. 40.205 of July 11, 2013.
[3] V. Political-Administrative Chamber of the Supreme Court, decision of August 5, 1980, Papeles Venezolanos, C.A. v. National Treasury, 109 Gaceta Forense, Vol. I, 3rd. Stage, year 1980 (July to September), pp. 301 a 313.
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