PDVSA, its subsidiaries and mixed companies (domiciled or not in Venezuela)1are subject income tax liability at a 50% rate, which applies to income derived from hydrocarbon exploitation activities and any other activity, even if not related to hydrocarbons. In comparison, the ordinary corporate rate is 34%. Presidential Decree No. 4.106,2 exonerated from income tax liability the territorial and extraterritorial income obtained by PDVSA, its affiliates and mixed companies deriving from hydrocarbon production activities and other activities. The exoneration also benefits PDVSA's subsidiaries whose purpose is the purchase, sale or exchange of movable or immovable property, refining, marketing, procurement, services or support activities inherent to PDVSA, in Venezuela or abroad.

The exoneration entered into force on January 28, 2020 and will apply for one year for the fiscal year coincident with calendar year 2020.

The Income Tax Law will apply for determining taxable and exonerated income, costs and expenses. Taxpayers must prorate common costs and expenses applicable to taxable and exonerated income.

The beneficiaries of the exoneration must: (i) file an annual taxable and exonerated income tax return under the Income Tax Law, its Regulation and any other applicable statute; and (ii) comply with the material and formal obligations established in those statutes. The beneficiaries will lose the exoneration in case of non-compliance.


1 Since 2001 in Venezuela hydrocarbons exploration and exploitation activities are reserved to PDVSA, its subsidiary companies and mixed companies in which the Venezuelan State has a decisive participation (Hydrocarbons Law, Official Gazette No. 37.323 of November 13, 2001).


2 Official Gazette No. 41,809 of January 28, 2020. The Venezuelan Government granted a similar exemption in 2018 only for hydrocarbon activities. V. Presidential Decree No. 3.569, Official Gazette No. 41,452 of August 2, 2018 and Baker McKenzie, New Venezuela income tax exoneration for hydrocarbon production activities made by Petróleos de Venezuela (PDVSA), its subsidiaries and mixed companies during fiscal year 2018, here.
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