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 (the Law).

Certain reforms have helped to establish the regulatory framework for Transfer Pricing from that time to the present, which to a certain extent has been aligned with the Organization for Economic Cooperation and Development (OECD) on this matter.

In 2001, the first amendment was made, in which the OECD guidelines were introduced into the legal framework. Subsequently, in 2007, the article related to losses from exchange rate differentials was modified and an article was added that establishes the treatment for financing operations between related parties. 

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 to be applied for non-compliance with the Transfer Pricing regulations.

 

Principle of Full Competence

The Arm’s Length principle is a basic principle of Transfer Pricing, since it is based on the principle that the prices or values agreed between related parties are at market value.

The Venezuelan transfer pricing legislation includes this principle in Article 109 of the Income Tax Law, when it states that taxpayers who carry out transactions with related parties are obliged to determine their income or costs and deductions agreeing on said operations based on prices that would have been established upon by independent parties in comparable transactions.

 
Pursuant to Article 114 of the Law, the following are considered related parties:
 
  • Any company that participates, directly or indirectly, in the management, control or capital of another company.
  • When both companies have the same persons participating directly or indirectly in the management, control or capital of the companies.
 
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

In accordance with Article 134 of the Law, in order to analyze whether the prices agreed for transactions with related parties are at market value, five valuation methods are established:

  • Uncontrolled Comparable Price Method.
  • Resale Price Method.
  • Added Cost Method.
  • Profit Splitting Method.
  • Transactional Net Margin Method.

The taxpayer should choose the Uncontrolled Comparable Price Method as the first option according to 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 taken into consideration:

  • The characteristics of the operations.
  • The functions, assets and risks of each party involved in the operations.
  • 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 transactions with related parties performed in a given fiscal year, by means of an informative affidavit.

Likewise, Administrative Ruling 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 documentation related to the calculation of transfer pricing must be retained by the taxpayer for the period provided in the Law, whose maximum statute of limitations will be 10 years. Likewise, it must be prepared in the Spanish language or translated, if applicable.

 

Sanctions for Transfer Pricing Non-Compliance in Venezuela

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

Thus, numeral 1 of Article 103 of the Code establishes that the non-filing or late filing exceeding one year of an affidavit will be sanctioned with a fine of 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 aforementioned Code, in case of incomplete filing or with a delay of less than or equal to one year of the affidavit, it will be sanctioned with a fine 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 keep the documentation regarding the calculation of Transfer Pricing will be punished with the closing of the office or establishment for 10 continuous days and a fine equivalent to 1000 times the official exchange rate of the highest value currency, published by the Central Bank of Venezuela.

Read More
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
Latest News
Go to Venezuela News

Contact us

To communicate with us you need to fill out the following form

Google reCaptcha: Invalid site key.