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Employing in Venezuela

At a glance

Employment in Venezuela

There are several key areas to be aware of within Venezuela’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department.  Venezuelan labour relationships and employment contracts are mainly governed by the Organic Labor Law (19 June 1997) and its Regulation (25 January 1999). There are specific labour rules that apply to residents and non-residents of Venezuela.

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Payroll & 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.

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Immigration / Work Permits in Venezuela

Foreign employees are required to obtain work visas and work permits to work in Venezuela. Work permits are issued by the Ministry of Labour. On average, it takes 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”).

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Incorporation

There are 7 types of business forms available to foreign companies in Venezuela. Each of these business forms has their own unique characteristics as well as differing scope of business activities, registration requirements and minimum capital requirements.

The following business forms are available to foreign companies:

  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 intend to enter Italy for business purposes. In addition, it looks at the tax and regulatory factors that would impact business decisions.

 

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

Using Shield GEO Employer of Record Services in Venezuela

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.

 
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

Corporate Tax Requirements

Corporations are required to file tax returns for a 12 month fiscal year ending in December 31. However, a corporation’s first fiscal year may contain less than 12 months. All companies that earn more 1,500 tax units in the preceding fiscal year must file estimated tax returns in the sixth month of the fiscal year. The amount of tax declared in the tax return must be atleast 80% of the preceding year’s taxable income. All corporate tax payers are required to make advance tax payments in six equal instalments.

Final tax returns must be filed within 3 months from the close of the company’s fiscal year and payment of tax liability must be made at that time.

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).

Corporate Income Tax Rate

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%

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%.

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