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The Ultimate Guide To
Employment in Venezuela

Venezuela Facts

Population size: 31,518,855
Currency: Venezuelan Bolivar (VEF)
Capital city: Caracas
Languages spoken: Spanish
Ease of Doing Business: 187

Employing in Venezuela: What You Need to Know

In Venezuela, labour relationships and employment contracts are governed by the following regulations.

  • Organic Labor Law (19 June 1997) and its Regulation (25 January 1999)
  • Work Safety, Hygiene and Conditions Law (26 July 2005)
  • Social Security System Law (30 December 2002)

Labour law applies to Venezuelans as well as foreigners irrespective of which part of Venezuela their labour relations were rendered or contracted. The law also applies to employees of foreign companies which provide services in Venezuela (even on a temporary basis).

Key Factors to Consider When Employing in Venezuela

Some key points to note on the Venezuelan labour market: 

- Organic Labor Law (19 June 1997) and its Regulation (25 January 1999) is the governing regulation that underpins the Venezuelan labour market

- Employment contracts can be either verbal or written

- Venezuelan labour law restricts outsourcing of employees, while it permits the use of contractors under certain conditions

  1. Contracts:

    Labour agreements can be either verbal or written. Written employment contracts are required for fixed term and fixed work agreements and when Venezuelan nationals are employed to provide services abroad. Article 59 of the Labour law stipulates that the following information be included in written agreements. Namely, employee’s name, nationality, age, marital status, address, details of the job and services to be provided; date of commencement; and indication of duration, among other requirements.

    Venezuelan labour law provides for the following types of individual employment agreements.

    • Employment agreements for an indefinite term
    • Employment agreements for specific work
    • Employment agreements for a specific term

    Collective agreements are common in industries such as oil, chemical, pharmaceutical, and construction. Moreover, collective agreements are used when the employer is a company with a large number of employees.

Employee Entitlements

Information Explanation
Statutory Working Hours ?

As of February, 2015 minimum wage is VEF 5,622.47 per month while minimum wage per day is VEF 187.41. Minimum wage must be paid in cash. Fixed amount of missed salary should not be less than the minimum wage. The minimum wage changes shall apply to an equivalent fraction for time worked as a part time worker based on Article 172 of the Labour law.

Benefits Caps for benefits Feb 1st 2015 onwards
Meal allowance 3 times the minimum wage A meal benefit should be paid for workers earning less than VEF16,867.42
Day care 5 times the minimum wage Employees who earn a monthly salary less than or equivalent to VEF 28, 112.38 are entitled to day care benefit. Employers should pay 40% of the minimum wage per month which is equivalent VEF 2,248.99
Social Security 5 times minimum wage VEF 28,112.38
Employment regime 10 times the minimum wage VEF 56,224.76

 

Maximum work hours per week is 40 hours per week for day time work, 35 hours per week for night time work and 37.5 hours per week for mixed shifts (effective as of 7 May 2013).

Daily shift may not exceed 8 hours while night shift may not exceed 7 hours. However, there may be exceptional cases where the employees are required to work 11 hours a day.

Overtime should not exceed 10 hours per week and 100 hours per year per worker. However, exceptions do apply.

A 50% surcharge should be paid on the basic daily wage for work performed on holidays and days off.

Unemployment compensation:

Unemployment compensation covers all employees insured under the Venezuelan Social Security Institute who lose their jobs but are willing and able to work. Employers and employees must contribute a monthly amount capped at a maximum ceiling of VEF 74,216.80 per month (10 monthly minimum wages). Employer must contribute 2% of the employee’s salary while the employee must contribute 0.5% on a monthly basis.

Housing policy:

Employers and employees are required to make monthly contributions to the Housing Policy Fund during the first five business days of every month. The contributions should be based on all income received by the employee (discretionary or irregular) including vacation bonus and profit sharing benefits and has no ceiling on the base salary on which the contribution is calculated.

Employer Employee Total
2% 1% 3%

Training and education:

The employer should deposit 2% of the total wages, salaries and other benefits within first five days of each quarter.  Employers are also required to withhold 0.5% of annual profit sharing payments.  Such contributions should be made within the first five days of each quarter to the National Institute of Socialist Capacitating and Education (INCES).

Profit sharing:

Mandatory profit sharing is up to 15% of net profits on an annual basis to be paid in the form of year end bonuses equal to atleast 15 days and up to 4 months of pay.

Medical Leave ?

Employees must provide their employers with a medical certificate within 48 hours of obtaining sick leave. Once the employee provides this to their employer, it must be authorized by the social security system. Employer must pay the employee’s salary for the first three days of certified sick leave as per Article 141, Social Security Regulations. From the fourth day into the sick leave the employee will receive payment of their sick leave from the social security system (2/3 of employee’s salary up to a maximum of 5 times the minimum wage). The social security system provides an online service which permits employers to pay employees directly and then deduct the bill from the social security bill.

Annual Leave Accrual Entitlement ?

15 days in the first year of employment. One additional day for each additional year of service thereafter capped at 30 days.

Maternity Leave in Venezuela ?

Six weeks before child birth and 20 weeks after child birth as per Article 336 of the Labour law. During this period the employee receives 66.66% of their monthly salary via the social security system. However, the amount paid to the employee cannot exceed 5 times the minimum salary of the employee.  Employers also have the option to pay the employee and deduct it from the social security bill payment. The mother/employee cannot be dismissed until two years after the child birth (Article 335, Labour law).

Paternity rights:

A father is entitled to 14 days of continuous paid paternity leave from the social security system (from the date of the child’s birth). The father/employee cannot be dismissed until 2 years after the child’s birth. Employee is entitled to receive his salary from the social security system. Employers can make the payment and deduct it from the social security bill.

 

Employment Termination

Information Explanation
Termination of Employment ?

Prior authorization is not required except for employees protected by a bar against dismissal.  Termination of employees protected by a bar against dismissal must be authorized by the Labour Inspector’s office. Special restrictions apply for collective or mass disposals.

Employees protected from dismissal:

  • Parents of a child born during the period of employment are protected from dismissal for a maximum of 2 years from when the child is born 
  • Health and safety committee representatives
  • Trade union members
  • Employees negotiating collective agreements
  • Employees involved in collective disputes

Labour law specifies the following as justified causes for termination of employment:

  • Misconduct
  • Unjustified absences
  • Gross negligence
  • Intentional damage to company property
  • Other substantial reasons/causes

Employees are entitled to a severance payment if they are dismissed.  Furthermore, if they are dismissed without a cause, they are also entitled to a receive advance notice of dismissal and an indemnification.

Probation

Information Explanation
Probation Period ?

Usually 30 days

Pension

Information Explanation
Pension Requirements ?

Seniority payment:

Employer must deposit as a guarantee of social benefits, the equivalent of 15 days’ of quarterly salary which is calculated based on the last accrued salary. In addition after the first year of service, the employer will deposit to each employee 2 days’ of salary each year capped at 30 days’ of salary.

When the employment relationship ends, social benefits will be calculated based on 30 days for each year of service (or a fraction of a year which ever is greater than 6 months. Social security benefit payment will be made within 5 days of termination of employment relationship.

Social security:

Contributions from employers can be 10%, 11%, or 12% of employee’s salary. Employee contribution is 4%. Social security contributions should be remitted on a monthly basis. Social security contributions are withheld based on the monthly salary capped at VEF 37, 108.4 per month (5 minimum monthly salaries).

  Employer Employee Total
Minimum risk 11% 4% 13%
Intermediate risk 12% 4% 14%
Maximum risk 13% 4% 15%

Foreigners who work and reside in Venezuela must subscribe into the Venezuelan social security system.

GEO Solutions or DIY Employment in Venezuela?

Companies entering Venezuela must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities.  A GEO or Venezuela Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Venezuelan entity established that can run payroll.

A DIY approach can typically take 6-9 months until there is a properly incorporated office ready to run payroll and can cost up to 6 figures if registered capital is required. Shield GEO can deploy foreign workers in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.


Outsourcing Employment Through a GEO Employer of Record Service

Using Shield GEO Employer of Record Services in Venezuela

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Venezuela. For companies which intend to employ their staff directly through their incorporated Venezuelan entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Venezuela.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Venezuela.

The Shield GEO solution is an attractive alternative where

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in Venezuela

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Venezuela

– the company needs help with tax, employment, immigration and payroll compliance in Venezuela

Shield GEO can contract directly with the company to employ and payroll their staff in Venezuela. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits.  Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.

Payroll

Payroll Venezuela
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

Currency ? Venezuelan Bolivar (VEF)
 
Grossed income Tax Rate (%)
0-1,000 6%
1,001-1,500 9%
1,501-2,000 12%
2,001-3,000 16%
3,001-4,000 20%
4,001-5,000 24%
5,001-6,000 29%
6,001-Beyond 6,001 34%

*Taxable income is indicated in tax units.  Value of a tax unit in 2015 is VEF 150.

*Special tax payers are defined as those who earned more than 7,000 tax units in the capital region or more than 7,500 tax units in other regions in 2015. These rates may vary from one year to another. Special tax payers are subject to rigorous audit processes.

Tax Returns Supplied

Yes

Employers Social Security and statutory contributions

Contributions from employers can be 10%, 11%, or 12% of employee’s salary. Social security contributions should be remitted on a monthly basis. Social security contributions are withheld based on the monthly salary capped at VEF 37, 108.4 per month (5 minimum monthly salaries).

Employees Social Security and statutory contributions

Employee contribution is 4%. Social security contributions should be remitted on a monthly basis. Social security contributions are withheld based on the monthly salary capped at VEF 37, 108.4 per month (5 minimum monthly salaries).

Payroll and Tax in Venezuela

There are specific rules in Venezuela depending on whether your company employs residents or non-residents. The key concerns for a company that needs to comply with tax laws in Venezuela are net taxable income, social security contribution, value added tax (VAT), corporate income tax and real property tax. Moreover, international treaties to avoid double taxation, international social security agreements and special tax regimes for specific industries or sectors can make an indirect impact on a company’s tax environment. Venezuela maintains double taxation treaties with Austria, Barbados, Belarus, Belgium, Brazil, Canada, China, Cuba, the Czech Republic, Denmark, France, Germany, Indonesia, Iran, Italy, Korea, Kuwait, Malaysia, the Netherlands, Norway, Portugal, Qatar, Russia, Spain, Sweden, Switzerland, Trinidad and Tobago, the United Arab Emirates, the United Kingdom, the United States, and Vietnam.

Your Payroll Options in Venezuela

Information Explanation
Remote Payroll ?

A remote payroll in Venezuela is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Venezuela. A resident company is incorporated in Venezuela. Even if a company is not incorporated in Venezuela, it will be considered a resident company if it carries on business operations in Venezuela and its central management and control rests within Venezuela.

Thus a non-resident company is permitted to process payroll for Venezuela residents who are on its payroll. Another option for a non-resident company to payroll its employees in Venezuela would be to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.

Local Payroll Administration ?

In some cases, a company will register their business in Venezuela under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll ?

Larger companies with a commitment to Venezuela may wish to run their own local payroll for all employees, foreign and local.  In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff.  There will be a need for in country human resources personnel who have the background needed to manage a Thai payroll, and can fulfill all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations.  The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Thai employment laws.

Fully Outsourced Payroll & Employment ?

Companies can outsource the employment and payroll of their staff in Venezuela to a GEO, like Shield GEO. This is possible for both foreign workers and Venezuela nationals. This is the easiest, fastest and safest way to payroll staff in Venezuela.

Shield GEO manages all aspects of payroll for workers in Venezuela, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

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Tax Figures

Information Explanation
Corporate Income Tax ?

A resident company domiciled or incorporated in Venezuela must pay corporate tax. Foreign enterprises that conduct business in Venezuela through a permanent establishment (PE) are subject to income tax on foreign and Venezuelan income attributable to the PE.

Corporate tax rates are progressive up to 34%

Income Tax Rate ?
Grossed income Tax Rate (%)
0-1,000 6%
1,001-1,500 9%
1,501-2,000 12%
2,001-3,000 16%
3,001-4,000 20%
4,001-5,000 24%
5,001-6,000 29%
6,001-Beyond 6,001 34%

*Taxable income is indicated in tax units.  Value of a tax unit in 2015 is VEF 150.

*Special tax payers are defined as those who earned more than 7,000 tax units in the capital region or more than 7,500 tax units in other regions in 2015. These rates may vary from one year to another. Special tax payers are subject to rigorous audit processes.

Payroll Tax ?

Corporations with more than 5 employees must contribute 2% of payroll to the National Institute of Educational Corporation.

Sales Tax ?

VAT is based on the invoice price of domestic and imported goods and services. The base rate is 12%. However, an additional rate of 15% applies for luxury goods. Tax payers must obtain a number from the Tax Registry and must update their information once in 3 years. Non-resident enterprises must obtain a tax ID number if it does not have a permanent establishment (PE) in Venezuela. VAT returns must be filed and paid within 15 calendar days following the end of the tax period.

Withholding Tax ?

Dividends:

Dividends paid to a resident or a non-resident are tax exempt, except if the dividend distributions exceed the company’s net taxable income. In such cases a 34% WHT rate applies.

Interest:

Interests paid to non-resident legal entities are taxed at the normal corporate income tax rates (15% to 34%) calculated on 95% of the gross payment based on certain capital requirements. Interest paid to a non-resident individual is subject to 34% WHT. Interest paid to non-resident banks or financial institutions are subject to a WHT of 4.95%.

Royalty fees:

Royalties paid to a non-resident company or a resident individual are subject to WHT at a maximum rate of 34% calculated on 30% of the gross payment.

Branch remittance tax:

Branch remittance taxes are charged on branch profits of permanent establishments of foreign enterprises at a rate of 34%. Such taxes are deferred if such amounts are re-invested in Venezuela for at least 5 years.

Technical service fees:

Technical service fees paid to a non-resident company or a resident individual is subject to a WHT rate of 34% applied to 30% of the gross payment.

 

Other Tax ?

Real Property tax

Real property tax is levied by the local municipalities and varies based on the location of the company.

Transfer tax

There is no transfer tax.

Other taxes

Municipalities levy an annual tax on economic activities of companies that are privileged to do business in a particular district. Such taxes vary between 0.5% and 10% depending on the type of business and the district.

Resident and non-resident enterprises that earn more than VEF 15 million must make an annual contribution for science and technology which varies between 0.5% and 2% of gross income.

Capital duty

Additional contributions to capital are levied at 1%.

Time to prepare and Pay Taxes ?

792 hours

Time required to start a Business ?

230 days

Immigration and Work Permits in Venezuela

Foreign employees must obtain work visas and work permits to work in Venezuela. Work permits are issued by the Ministry of Labour. It can take up to 3-4 months to obtain a work permit. Work visas are governed by the Identification, Migration and Foreign Administrative Service (“SAIME”) (“Servicio Administrativo Identificación, Migración y Extranjería”).

Use your Own Company?

A request for a work permit (TR-L) must be submitted to “Dirección General Sectorial de Identificación y Control de Extranjeros (DIEX) / Ministry of the Popular Power for Interior and Justice” by the employer based in Venezuela.

Work permits are issued for a period of 1 year with multiple entries. The Ministry of the Interior and Justice may extend it, upon request, for another year, if the Labour Ministry of Venezuela previously ratifies the work authorization.

There are three stages involved in obtaining a work permit.

Stage 1

During the first stage, the Ministry of Labour analyses the purpose for which the company based in Venezuela wishes to hire a foreign employee along with the duties to be performed in Venezuela.

Next, the employer makes an employment offer witnessed by a Notary Public which will be investigated by the Ministry of Labour to determine whether the duties performed by the foreign employee complies with the restrictions of hiring foreign employees set forth in Article 27 of the Venezuelan Organic Labor and Workers’ Law (the “OLWL”). OLWL stipulates that atleast 90% of the employees should be Venezuelans, other than in exceptional circumstances.

Once the Ministry of Labour determines that all the requirements are met it will issue a work permit.

Stage 2

The work permit and the supporting documents will be analysed by Identification, Migration and Foreign Administrative Service (“SAIME”) (“Servicio Administrativo Identificación, Migración y Extranjería”). At this stage the Venezuelan Consulate will be authorised to issue the TR-L (work visa).

Stage 3

The employee must appear before the Venezuelan Consulate of his or her country of origin or residence. The Consulate may request for medical tests and examinations as well as certified police records as well.

* Once the Consular office receives the authorization number from DIEX (with 6 months validity), the following documents should be submitted by the applicant.

  • A passport with which is valid for at least 6 months
  • One recent photograph (2 X 2) on a white background
  • One color photograph on a white background in JPG Format (70KB Maximum size in disk, 400 MP maximum width and 600 MP maximum length
  • A cover letter from the employer
  • A copy of the employment contract
  • Academic transcripts, degree certificates (attested copies)
  • Copy of work permit issued by the Venezuelan authorities
  • Marriage certificate, birth certificates of children under 18 years of age
  • Proof of educational and professional certificates
  • Police clearance certificate (valid for at least 6 months)
  • Medical certificate authorized by a doctor
  • Confirmed return air ticket
  • Proof of financial solvency during the stay in Venezuela

Cost: USD 100

Processing time: 3 – 4 months

Use the ShieldGeo solution?

Once you get in touch with us, one of our consultants will take all the work off your hands, coordinate with our local partners to get all the required permits organised, provide the processing time, costs, document-checklist and keep you informed through the process. 

Need help employing in Venezuela? Get in touch!

Types of visas in Venezuela

Category Description of Visa
Entrepreneur/Industrialist Visitor Visa

This visa is granted for a period of 2 years allowing multiple entries for a maximum stay of 4 months on each visit. The maximum stay for a 4 month period may not be extended.
Issued to persons who can prove that they
• Own or manage an enterprise or industry established in the country in which they are residents.
• Have a branch office in Venezuela
• Will carry out business activities of their enterprise/industry in Venezuela
Documents required:
• Recent photograph taken within the last 6 months and should be in digital format
o Symmetric with a minimum of 600 X 600 pixels and a maximum of 1,200 X 1,200 pixels.
o Jpeg format
o Size should be 40-240KB
o Colour photograph
Photograph should be forwarded to Consulate General with the subject “VISA PHOTO NAME SURNAME” and with the following file name Name-Surname_VISA.jpg (John-Smith_VISA.jpg).
Applicants from San Francisco must submit 2 passport size photographs in a white background.
• Non US citizens should submit a copy of their green card, or a copy of their work visa and I-94.
• A company letter on a business letter head which includes:
o Position
o Purpose of the trip
o Name and address of the person/company to be contacted in Venezuela
o Length of stay in Venezuela
o Company who will sponsor the employee during his/her stay in Venezuela
• A certified copy of the company’s Articles of Association or the employer’s certificate of good standing
• Return air ticket
Cost: USD 60 (a money order or a company check payable to “Consulate of Venezuela”

Business Visitor Visa

This visa is issued for non-migrant business personnel, executives, business representatives.
Business visitor visa is issued for a period of 1 year for multiple entries. Each visit should not exceed 180 days and will not be extended.
Documents required:
• A valid passport (6 months of validity)
• Copies of the passport pages which include personal information, expiration date and photograph
• One recent digital photograph (specifications same as above). The Consulate General in San Francisco and Chicago requires the photographs in printed format.
• A certificate of incorporation of the business
• A letter of employment from the business indicating
o The purpose of the trip
o Name and address of a contact person in Venezuela
o Length of stay in Venezuelan territory
• A letter of invitation from a business in Venezuela (if required)
• Copy of the flight itinery
• A statement indicating if the business owner holds a majority of its shares
• If the applicant is a Non-US citizen, a copy of the green card or a document proving residency
• Criminal record (only based on special request from the Consulate)

*The Consulate may also request for an interview with the applicant.
Cost: USD 100
Processing time: 3 – 4 months

Investor Visa

Issued to non-immigrant traders, executives, representatives of enterprises or industries and micro entrepreneurs who wish to conduct business in Venezuela. This visa is granted for 1 year allowing multiple entries. Maximum length of each stay is 180 days and this period cannot be extended.

Documents required:
• 2 passport size photographs
• Company letter in a business letterhead indicating
o The purpose of the trip
o Name and address of a contact person in Venezuela
o Length of stay in Venezuelan territory
• Flight ticket
• For non US citizens a copy of the green card or the visa to the USA
• Documents proving the ownership of the enterprise
Cost: $60

Setting up a company in Venezuela

When setting up a company you may want to consider these factors:

  1. Business factors 

    Although there are no specific regulations restricting foreign participation in Venezuelan business activities, there are specific definitions to distinguish foreign ownership from local ownership. In order to classify a corporation, both the percentage of equity held by the foreign investor and the degree of control that the foreign investor is entitled to are used as key parameters.

    • Foreign ownership (more than 49% of foreign equity)
    • Mixed ownership (more than 19.9% but less than or equal to 49% foreign equity)
    • National (less than 20% foreign equity)

    Foreign investors can hold 100% ownership and may remain as foreign owned companies indefinitely other than companies operating in sectors reserved for national operations and areas reserved by special laws to national companies such as oil & gas.

    There are seven types of business forms available for foreign companies in Venezuela. Each of these business forms has unique advantages and disadvantages, as well as differing scope of approved business activities, registration requirements and minimum capital requirements.

  2. Location

    Location is also another factor which plays an important role especially in determining taxation requirements such as identifying special tax payers in Venezuela.

  3. Foreign exchange controls

    There are 3 mechanisms to buy or sell foreign currency in Venezuela.

    • Foreign Trade Center (CENCOEX) – foreign currency is exchanged at a fixed rate (available only to certain individuals and legal entities performing business activities in the health and food industries
    • Complementary System for administration of foreign currency (SICAD)- variable exchange rates determined by the Central Bank for individuals and legal entities that perform certain economic activities in specified strategic areas and for travel and electronic operations with foreign entities
    • Exchange Marginal System (SIMADI) – Exchange rates fluctuate freely based on demand and supply of currencies and available via brokerage firms, banking institutions and currency establishments.

When setting up a company in Venezuela you may want to consider the following factors.

When setting up a company in Venezuela you have the following options.

1. Share Capital Corporation (CompaÒia Anonima ñ C.A.)

2. Limited Liability Co. (LLC) (Sociedad de Responsabilidad Limitada or S.R.L)

3. General Partnership (Sociedad en nombre colectivo)

4. Limited Liability Partnership (LLP) (CompaÒia en Comandita Simple)

5. Limited Partnership by shares (CompaÒia en Comandita por Acciones)

6. Branch of a Foreign Corporation

7. Joint Venture or Consortium

This article provides a general guideline for foreign businesses that seek to enter Venezuela for business purposes. In particular, it looks at common pathways to establish a business presence in Venezuela, generally through a Partnership, Corporation or a Branch Office. In addition, various economic, tax, and regulatory factors are provided throughout as a source of useful information to assist those who seek to establish a business presence in Venezuela. The guide also looks at some immigration requirements such as obtaining appropriate visa status.

 

Corporations

In Venezuela there are two main types of corporations:

1. Share Capital Corporation (CompaÒia Anonima ñ C.A.)

2. Limited Liability Co. (LLC) (Sociedad de Responsabilidad Limitada or S.R.L)

Corporation (Sociedad Anónima or Compañía Anónima)

Shareholders’ liabilities are limited to the amount of their capital contributions. The name of the corporation must include Sociedad Anónima or Compañía Anónima, or the corresponding initials “S.A.” or “C.A.” Atleast 2 shareholders must sign the Articles of Incorporation and should be submitted to the Commercial Registry along with the bank deposit slips evidencing payment. In the case of foreign investors, documents indicating transfer of foreign exchange or the importation of goods into Venezuela should be provided.

Although there are no explicit regulations indicating governing preferential rights, companies with 2 or more shareholders include provisions governing preferential rights in the Articles of Association. Atleast 2 shareholders are required for incorporation although there is no limitation on the maximum limit.

Company profits are distributed based on a resolution adopted at the Shareholders’ meeting. Atleast 5% of the company’s after tax profits must be set side annually to constitute a legal reserve until it reaches 10% of the company’s capital stock.

Investment capital requirements

  • No minimum capital requirement
  • Initial capital should be fully subscribed and atleast 20% must be paid in upon incorporation

Management

  • Board of directors are appointed at the Shareholders’ meeting
  • Board of directors and management should reflect the percentage of local ownership. Therefore foreigners are often given non-executive titles
  • Minority shareholders who have more than 20% stock ownership in a company are represented in the Board of Directors

Limited Liability Company (Sociedad de Responsabilidad Limitada)

The share capital is divided into participation denominated quotas. Such quotas cannot represent shares or marketable securities. The incorporation of Limited Liability Companies is subject to the same rules as corporations. The company name should include Sociedad de Responsabilidad Limitada or the corresponding initials “S.R.L.”

Investment capital requirements

  • Capital cannot be less than VEF 20 and not more than VEF 2,000
  • Capital must be totally subscribed
  • Atleast 50% of such capital must be paid if the payment is made in cash. If otherwise such capital should be fully paid
  • Capital is divided into equal quotas which are fractions not less than VEF 1
  • Quota holders are jointly and severally liable as stipulated in the Articles of Incorporation
  • Each quota represents one voting right

Incorporation process

Steps involved in setting up a company in Venezuela.

1. Reserve and obtain approval for the company name

Business owners must purchase the name search form from (busqueda de la denominación) at the Registro Mercantil.

Venezuelan company registration and incorporation fees are linked to a measurement known as the Tax Unit (UT). In February 2015, the Venezuelan government increased this to VEF 50 150.

While the name search costs 0.5UT, the name reservation costs 2UT and takes approximately 4 days to complete this process. After reserving the company name, the business owners must pay the reservation fees to a bank and return the bank deposit slip within 3 days to obtain approval.

2. Finalise the company’s constitutive documents and social statutes.

A lawyer must finalise the company incorporation documents and assess them according to Articles 211 to 215 of the Code of Commerce. It takes upto 5 days to complete this process and costs between VEF 50,000 – 100,000.

3. Open a bank account

All firms are required to open a bank account as per the rules stipulated by the Mercantile Registry.  Although there is no minimum deposit, businesses usually deposit 20% of their startup capital to the new bank account.

4. Register at the Local Mercantile Registry (Registro Mercantil)

Fill out a registration (derechos registrales) form to the Local Mercantile Registry within 30 days from registering the business name.

Fee schedule for company registration and incorporation:

  • 1% of the capital
  • VEF 900 (6 UT fixed fee)
  • VEF 750 (5 UT fiscal rights)
  • VEF 75    0.05 UT per page)
  • VEF 30 (per page stamp tax for original document , registry copy and company copy)

5. Publish the company Articles of Association in a local news paper (Gaceta Forense del Registro Mercantil). This could cost approximately VEF 250 and should be completed within 3 days after the registration at the Local Mercantile Registry is completed.

6. Register company books

All companies must purchase the respective books and register the corporate books.

  • Shareholders’ book
  • Shareholders’ meeting minutes book
  • Board of Directors’ minutes book
  • Accounting books (Inventory book, Daily book and Ledger)

The costs are as follows

  • VEF 140 per each book
  • VEF 4.5 (0.03 UT) fixed fee
  • VET 45 (0.001 UT per page per registration. Each book has 100 pages)

7. Register at the local Servicio Nacional Integrado de Administración Aduanera y Tributaria (SENIAT) with Registro Unico de Información Fiscal (RIF) to get a fiscal number. An electronic form downloaded from SENIAT (seniat.gov.ve) must be filled and submitted along with the supporting documentation. Moreover, the company’s directors, shareholders, and legal representatives must be registered with the RIF prior to obtaining the RIF.

8. Obtain tax clearance certificate (Instituto Municipal de Aseo Urbano)

9. Register with the Ministry of Labour

The employees and the company itself must register with the Ministry of Labour (www.mintra.gob.ve).  The company must also register with the Statistics Register and the Department of Hygiene and Safety.

10. Undergo a labour inspection by the Labor Inspectorate

11. Register for social security

The application downloaded from http://registro.ivss.gov.ve/home.htm must be filled and handed over in person at the Social Security Registry.  Registration for social security can take up to 6 months

12. Register at the National Institute of Socialist Cooperation & Education if the company has 5 or more employees

13. Obtain fire approval and undergo an inspection

Once an inspector has been assigned, it takes 15 – 20 days to receive a response post inspection.

14. Obtain a zoning permit

By submitting a mercantile registration, external building maps, and a photo of the premises a zoning permit can be obtained within 15 days. It costs VEF 1500 (10 UT) and VEF 3 (0.02 UT).

15. Business owners must register at the National Bank for Housing and Habitat – Banco Nacional de Vivienda y Habitat (BANAVIH) (banavih.gov.ve). oNce the registration is completed employers must verify their list of employees on a monthly basis and pay a monthly contribution.

http://www.pkf.com/media/726540/pkf-doing-business-in-venezuela.pdf

Registration requirements for companies with publicly traded securities

The Securities National Superintendence (Superintendencia Nacional de Valores ñ SUNAVAL) regulates the offering of securities in Venezuela Stock Exchange (Bolsa de Valores de Caracas ñ BVC).  All companies registered in the BVC must file periodic reports with the CNV and publish their financial statements with in a local newspaper. The financial statements of such companies must be audited on an annual basis by independent public accountants.

Restrictions to foreign investors in publicly traded securities

In order to classify a company as foreign, mixed or national the percentage of equity held by the foreign investor and the degree of control exercised by the foreign investor are considered.

  • Foreign (more than 49% of foreign equity)
  • Mixed (49% or less but more than             19.9% of foreign equity)
  • National (less than 20% of foreign equity)

Foreign investors are required to register their investment with Foreign Investment Superintendence (SIEX). Such registration facilitates the repatriation of capital and dividend remittance.

Accounting/auditing requirements for a share capital corporation (compañía anónima) 

  • Shareholders should appoint a legal auditor
  • The auditor should be a licensed accountant, economist or business administrator
  • Management must submit a summary balance sheet to the auditors once in every 6 months
  • A copy of the annual financial statements and the auditor’s report must be filed with the Mercantile Registry within 10 days of the shareholders’ meeting

General audit requirements

  • Corporations and Partnerships such as publicly traded corporations, entities registered with the Register of Securities, banks, and foreign companies must appoint auditors to annually audit their financial reports.
  • Companies that meet any of the following criteria must file audited financial statements.
    • Companies registered with foreign investment

Such companies must file audited annual financial statements with the Superintendence of foreign investment (SIEX) within 120 days after the year end

  • Banks and Insurance companies

All banks and financial institutions must submit their audited financial statements 15 days prior to the annual shareholders’ meeting. Audited financial statements should be submitted to the appropriate regulatory agency within 90 days after the year end.

  • Companies listed on the stock exchange

Such companies should file audited financial statements with the Stock Exchange and the National Values Commission (‘Comisión Nacional de Valores’) within 90 days after year-end

  • Companies approved as Registered Vendors of the PDVSA

Audited financial statements should be submitted before March 31 each year

*Audit reports must be signed by an independent public accountant who is certified by the Federation of Public Accountants.  Audit firms registered in Venezuela are required to operate under the name of a Venezuelan legal entity and should contain in its name the names of the Venezuelan partners.

Partnership

There are 2 types of partnerships defined by the Venezuelan commercial law. They are Partnerships and Limited Partnerships.

There are 2 types of partners in Limited Partnerships (Sociedad en Comandita Simple). Those who are;

  • Jointly liable as well as limited liability
  • Liability limited to a certain amount of capital

Management of Limited Partnerships is carried out by General Partners. If a limited partner undertakes management activities or acts as a general representative of the company his liability will be deemed as unlimited. In General Partnerships (Sociedad en Nombre Colectivo), the Partners have joint liability and have unlimited liability for third party obligations. General Partnerships are governed by the same rules as those for corporations and limited liability companies.

Fees for registering a Partnership

1% of the capital stock or capital allocated to the branch including administrative fees payable to the Registry Office.

Investment capital requirements

No minimum capital

Management

Carried out by the partners

*Stock Limited Partnerships (Sociedad en Comandita por Acciones)

The ownership of limited partners is divided into shares. Rules applicable to limited partners are same as those applicable to corporations and the rules applicable to general partners are similar to those applicable to general partnerships.

Branch of a foreign corporation

Branches are incorporated in a similar manner to corporations. Venezuelan Commercial law treats branches as local corporations.

Registration of a branch can take approximately 1 month from the date all the documents are delivered and the capital is transferred to a Venezuelan bank account.  Branches are incorporated in a similar manner to corporations. Registration fee is equivalent to 1% of the capital stock allocated to the branch plus administrative fees payable to the Registry Office which approximates USD 500.

Venezuelan Commercial law treats branches as local corporations. However, branches are not treated as different or autonomous entities, so the parent companies retain full liability for the branch’s operations. Although, an amount of capital must be allocated to the branch by the parent company, the branch’s liability is determined by the liability of the parent company’s capital.

Joint Venture or Consortium

Is an association of two or more legal entities and is categorised as an “association in fact” (de facto association).

Venezuelan Income Tax Law provides specific guidelines applicable to Joint Ventures since the Joint Venture should determine their net taxable income/loss. However, any taxes payable should be paid by the members of the Joint Venture instead.

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Venezuela, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Venezuela they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities.  A GEO Employer of Record solution is an attractive alternative where

  • the company is looking to setup an office quickly
  • the company wants to work within a defined budget
  • the company wants to limit its initial commitment in Venezuela
  • the company needs help with tax, employment, immigration and payroll compliance in Venezuela

The complexity of employment regulations in Venezuela makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Venezuela allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Venezuela.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Venezuela. Read more about outsourced employment through Shield GEO.

 

  • Venezuela Employer of Record Overview

Venezuela Employer of Record Overview

  • Venezuela Employer of Record Overview

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