Transfer Pricing in Venezuela

Concept and Regulation in Venezuela

Transfer pricing in Venezuela has as a regulatory precedent the reform introduced in October 1999 to the Income Tax Law.

Certain reforms have contributed to establishing the regulatory Transfer Pricing framework since then, which has been aligned to a certain extent with the Organization for Economic Cooperation and Development (OECD) on this matter.

The first amendment introduced the OECD Guidelines into the legal framework in 2001. Subsequently, in 2007, the article related to losses from exchange rate differentials was amended, adding another article establishing the treatment for financing related party transactions. 

Currently, the Transfer Pricing regime is regulated by Articles 109 to 168 of the Law, as well as in Administrative Ruling N°2003-2424, established by the Tax Authority and the Organic Tax Code regarding the infractions and penalties for non-compliance with the Transfer Pricing regulations.

Arm’s Length Principle

The Arm’s Length Principle is essential for Transfer Pricing, based on the prices or values agreed upon among related parties at market value.

The Venezuelan Transfer Pricing legislation includes it in Article 109 of the Income Tax Law when it states that taxpayers performing related party transactions must determine their income or costs and deductions agreeing on said operations based on prices established by independent parties in comparable transactions.

Definition of Related Parties in Venezuela

According to Article 114 of the Law, the following are considered related parties:

  • Any company directly or indirectly participating in the management, control, or capital of the other company.
  • Both companies have the same persons directly or indirectly participating in the management, control, or capital thereof.

Likewise, according to Article 115 of the Law, the Transfer Pricing rules shall also apply when transactions are performed through an intermediary person who is not considered a related party of the taxpayer resident in Venezuela but assists the latter in carrying out transactions with its related party abroad.

Transfer Pricing Methodology in Venezuela

According to Article 134 of the Law, there are five valuation methods established to analyze whether the prices agreed upon for related party transactions are at market value:

  • Comparable Uncontrolled Price Method.
  • Resale Price Method.
  • Cost Plus Method.
  • Profit Split Method.
  • Transactional Net Margin Method.

The taxpayer should choose the Comparable Uncontrolled Price Method as the first option under Article 140 of the Law.

Comparability Analysis in Venezuela

In order to analyze whether two transactions are comparable, Article 121 of the Law states that the following elements must be considered:

  • The characteristics of the transactions.
  • The functions, assets, and risks of each party involved in the transactions.
  • The contractual terms.
  • Economic circumstances.
  • Business strategies.

Informative Affidavit of Transfer Pricing in Venezuela

Article 166 of the Law establishes the formal Transfer Pricing duties that taxpayers subject to the Law must comply with.

The aforementioned article indicates that the Tax Administration must be informed of related party transactions performed in a given fiscal year through an Informative Affidavit.

Likewise, Administrative Ruling No. 2003-2424 issued by the SENIAT (Servicio Nacional Integrado de Administración Aduanera y Tributaria – National Integrated Service for Customs and Tax Administration) states that the transactions to be declared will only be those performed by taxpayers resident in Venezuela with a related company abroad through an Information Statement of Transactions Carried Out with Related Parties Abroad (Form TP-99) and its annexes.

The filing deadline must be in June of the year following the ending fiscal year, and for those taxpayers whose fiscal year end is different from the calendar year, it will be due within six months following the end of the fiscal year.

In addition, in order to fill out this affidavit, the SENIAT has published an instruction on its website to prepare the affidavit.

uling No. 2003-2424 issued by the Servicio Nacional Integrado de Administración Aduanera y Tributaria or National Integrated Customs and Tax Administration Service (SENIAT) states that the transactions to be declared will only be those performed by the taxpayer resident in Venezuela with a related company abroad and will be made through Informative Declaration of Operations Carried Out with Related Parties Abroad (Form TP-99) and its annexes.

Regarding the filing deadline, it is stated that it must be made in June of the year following the end of the fiscal year, and for those taxpayers whose fiscal year end is different from the calendar year, it will be due within six months following the end of the fiscal year.

In addition, and in order to assist in the filling out of this affidavit, the SENIAT has published on its web page an instruction for the preparation of the affidavit.

Transfer Pricing Documentation in Venezuela

Taxpayers subject to Transfer Pricing rules must keep and maintain the documentation regarding the analysis and calculation of the Transfer Pricing indicated in the Informative Affidavit.

According to Article 167 of the Law, the taxpayer must preserve the documentation related to the Transfer Pricing calculation for the period provided in the Law, whose maximum limitation will be ten years. Likewise, it must be prepared in Spanish or translated, if applicable.

Transfer Pricing Non-compliance Sanctions in Venezuela

Violations related to non-compliance with formal duties regarding Transfer Pricing are stipulated in the Organic Tax Code.

Thus, numeral 1 of Article 103 of the Code establishes that non or late filing exceeding one year of an affidavit will be fined one hundred and fifty (150) times the official exchange rate of the highest value currency published by the Venezuelan Central Bank.

It should be noted that, in addition to the fine indicated above, the premises will be closed for ten continuous days.

In turn, according to paragraph 3 of the Code above, in case of incomplete filing or with a delay of less than or equal to one year, it will be fined equivalent to one hundred times the official exchange rate of the highest value currency, published by the Central Bank of Venezuela.

Likewise, numeral 12 of Article 104 states that the failure to preserve the calculation Transfer Pricing documentation will be sanctioned with the closing of the premise or establishment for ten continuous days and fined equivalent to 1000 times the official exchange rate of the highest value currency published by the Central Bank of Venezuela.

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Offices in Venezuela
  • Edificio Seguros de Venezuela, Avenida Francisco de Miranda. Urbanización Campo Alegre Municipio Chacao, Estado Miranda. Caracas – Venezuela
  •  contacto@tpcgroup-int.com
  • +58 414 2378812
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