INDIVIDUAL TAXATION

Residents are taxed on their worldwide income. Residents are those individuals who spend more than 183 days continuous or discontinuous in Venezuela throughout a given calendar year or the previous year.

Married couples are required to file a joint income tax return but the wife may choose to report employment or professional income separately.

INCOME TAX

The taxation of residents in Venezuela is in tax units (unidades tributarias, TU), which is an adjustment index, whose monetary value changes depending in the annual inflation. In 2010, 1 TU is equal to VEF65 (US$15.12, considering the exchange rate of US$1 = VEF4.30).

Venezuelan residents whose annual net income is greater than 1,500 TU (US$22,680) are subject to income tax. Income tax is levied at progressive rates.

Residents are entitled to some allowances. The tax law gives the taxpayer the option to itemize deductions or to use a standard lump sum deduction of 774 TU (US$ 11,703). Deductions need to be supported with invoices. If the taxpayer opts for the standard lump sum deduction, no proof is required.

• Interest on loans to acquire residence, up to 1,000 TU (US$15,120) or rent payments for housing, up to 800 TU (US$12,096)
• Tuition paid to Venezuelan educational institutions for the taxpayer’s education or for the education of his descendants not older than 25 years of age
• Life, surgery, hospitalization, and maternity insurance premiums
• Medical, dental and hospitalization payments

Individual resident taxpayers are entitled to several tax credits. Residents can deduct a personal tax allowance of 10 TU (US$151). Likewise, they are also entitled to a tax allowance equivalent to 10 TU (US$151) for their non-separated spouse, for each immediate parent living in the country and who is dependent from the taxpayer, and for each child under age or is currently studying and is 25 years or younger, or in those cases where the child is disabled and cannot work.

Residents will be allowed to credit foreign income tax paid against Venezuelan tax imposed on their foreign-sourced income.

Individual resident taxpayers who have not separated their marital property must make a joint return of their income, save in those cases where they choose to file separately income from wages and salaries from professional fees.
 
In the event that the individuals choose to file separately the tax return, they will not be entitled to the 10 TU (US$151) for their non-separated spouses and must divide the credits attributable to their dependents, as well as the deductions corresponding to education and insurance premium expenses.

RENTAL INCOME
Rental income earned by resident individuals is taxed at progressive rates. The taxable income is computed by deducting actually incurred costs from the gross income. Allowable deductions are administrative expenses (maximum of 10% of gross income), repairs and maintenance, insurance, real estate tax, and municipal tax. Cost-of-purchase depreciation (capital allowance) is not deductible.

Rental income exceeding VEF5,417  (US$1,260) is subject to withholding tax levied at 3%. This may be credited against the final income tax liability.

CAPITAL GAINS
Capital gains realized from selling property are treated as ordinary income and taxed at progressive income tax rates. The taxable gain is computed by deducting the costs (acquisition costs, improvement costs, and registration duties) from the gross selling price.

Capital gains realized from a resident’s main dwelling are not subject to tax provided that the property is duly registered, the transaction is reported, and receipts are invested in a new residence that is also duly registered.

VALUE ADDED TAX (VAT)

In Venezuela, the value added tax on renting property will only be paid when the lease is intended for non-residential purposes. The collection must be made by the landlord.

PROPERTY TAX

Land Registry or Real Estate Tax (Impuestos a los Inmuebles Urbanos)

Real estate tax is a local tax levied on the real estate property. Each municipality sets its own calculation measures for the tax base and the tax rate. The property owner is responsible for paying the real estate taxes.

Historically, the value of the property, its productivity or the effective income derived from it was considered as the tax base. The actual tax base applicable depends on the municipality.