According to the provisions in the Income Tax Law, only those dividends arising from profits generated from 1 January 2001 shall be taxed.
This means that dividends arising from profits prior to 1 January 2001 shall not be taxed.
The methodology used by the Law is as follows:
- The accounting profit is compared to the declared fiscal profit
- When the declared fiscal profit is higher than the accounting profit, the declared dividends attributable to those profits shall not be taxed
- When the accounting profits are higher than the declared fiscal profit, the declared dividends attributable to such profits shall be taxed, but only for the portion of the accounting profit exceeding the declared fiscal profit.
The accounting profit must be estimated according to IFRS (General or SME), including IAS-29/Section 31 respectively, and approved in the Shareholders’ General Assembly.
The proportional tax to be applied is based on the following rates:
- The tax rate for subjects engaged in the exploitation of hydrocarbons and related activities is 50%
- The tax rate for subjects obtaining royalties and other analogous participations derived from mining exploitation is 60%
- The tax rate for subjects dedicated to the performance of activities other than the ones mentioned above (1&2) is 34%.
In the case of an existing Agreement to Prevent Double Taxation on Income Tax Matters between Venezuela and another Contracting State, the applicability of each proportional tax rate (mentioned above) must be reviewed.