Venezuelan Beach
Tax regimes vary greatly throughout Latin America. While some countries are investor friendly, others are not so open. There are several benefits (i.e. retirement programmes, tax discounts) but also some tax obligations. In this section we provide an analysis of the different tax structure in each country where January First Real Estate lists properties. This information may be very important for you to choose you retirement destination or where to invest. Keep in mind that there are related visa and residence issues which are discussed in Visa/Residence Requirements. Real estate assets are, without doubts, one of the most secure and profitable ways of investment. There are two main reasons for this: One, properties always tend to increase their value in the long term. They generate an income for their exploitation (rental/yields). And two, international real estate is set to be the biggest and best investment market of the next several years.
Taxes and Costs in Venezuela
Effective tax on Rental Income
Monthly income
US$1,500: 22.2%
US$6,000: 20.9%
US$12,000: 23.2%
Earnings arising from properties located in Venezuela are subject to income tax. The regime is territorial, i.e., revenues obtained from real property located in the country are taxable, whether they are received by a resident or a nonresident taxpayer.
Income Tax (Impuesto Sobre la Renta)
Non-residents earning income from leasing real estate properties are taxed at 34%. The taxable income is computed by deducting actually incurred costs from the gross income. Allowable deductions are administrative expenses (maximum of 10%), repairs and maintenance, insurance, real estate tax, and municipal tax. Cost-of-purchase depreciation (capital allowance) is not deductible.
Payments could be subject to withholding at 34%.
Municipal Tax (Impuestos a los Inmuebles Urbanos) or Land Registry or Real Estate Tax
This is payable to the municipality where the real estate is located. The taxpayer is the proprietor. 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.
Capital Gains Tax
Capital gains earned by non-residents are taxed at a flat rate of 34%. The taxable gain is computed by deducting the costs (acquisition costs, improvement costs, and registration duties) from the gross selling price.
Value Added Tax
Sale or transfer of ownership of real property is not subject to VAT.
Living There
The taxation of residents in Venezuela is in tax units (Unitaria tributaria), which is an adjustment index. The tax bands are all in tax units, whose monetary value changes depending on the changes in the consumer price index. The tax unit or TU (unitaria tributaria) from 29 January 2006 is VEB33,600 (US$15.67).
Residents are those individuals who spend more than 183 days in Venezuela throughout a given calendar year. Residents are allowed personal deductions and allowances.
Venezuelan residents whose annual net income is greater than 1,500 TU (US$23,505) are subject to income tax. Resident individuals are taxed on a worldwide income basis starting 1st January 2001. The income tax rates for resident individuals are as follows:
Income Tax
Taxable Income in Tax Units (US$) / Marginal Tax Rate
Up to 1,000 (US$15,670) / 6%
1,001 – 1,500 (US$23,505) / 9% on band over US$15,670
1,501 – 2,000 (US$31,340) / 12% on band over US$23,505
2,001 – 2,500 (US$39,175) / 16% on band over US$31,340
2,501 – 3,000 (US$47,010) / 20% on band over US$39,175
3,001 – 4,000 (US$62,680) / 24% on band over US$47,010
4,001 – 6,000 (US$94,020) / 29% on band over US$62,680
Over 6,000 (US$94,020) / 34% on all income over US$94,020
Allowances
The following may be deducted from taxable income:
Interest on loans to acquire residence, up to 1,000 TU (US$15,670)
Rent payments for housing, up to 800 TU (US$12,536)
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
The tax law gives the taxpayer the option to itemize deductions or to use a standard lump sum deduction of 774 TU (US$12,129). Deductions need to be supported with invoices, which must be attached to the final income tax return. If the taxpayer opts for the standard lump sum deduction, no proof is required.
Tax Credits
Individual resident taxpayers are entitled to a personal tax allowance of 10 TU (US$157). Likewise, they are also entitled to a tax allowance equivalent to 10 TU (US$157) for their non-separated spouse, for each immediate parent residing 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. However, individual resident taxpayers who have not separated their marital property must make a joint declaration 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 declare and file separately, they will not be entitled to the 10 TU (US$157) 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.
Foreign Tax Credit
Residents will be allowed to credit foreign income tax paid against Venezuelan tax imposed on their foreign-sourced income.
Realtors’ and Lawyers’ Fees in Venezuela and Other Property Purchase Costs
Transaction Costs
Fee / % / Who Pays?
Lawyer’s Fees / 1.50% – 3.00% / buyer
Servicios Autonomos / 0.10% / buyer
Income Tax / 0.50% / buyer
Agent’s Fees / 5.00% / seller
Municipal Solvency Certificate / 3.93% – 5.24% / seller
Certificate of Encumbrances / 2.1% – 2.6% / seller
Costs paid by buyer: 2.1% – 3.6%
Costs paid by seller: 11.03% – 12.84 %
Roundtrip transaction Costs: 13.13% – 16.4%
Colorful Venezuela
Property Purchase Process in Venezuela
Any foreigner can buy a property in Venezuela with just a valid passport, a tourist visa and a Registro de Información Fiscal (RIF) . The RIF is a fiscal identification for all persons, and can be obtained for free by request at any Tax Administration office or the Servicio Nacional Integrado de Aministración or through a lawyer. Foreigners may also buy indirectly, through local companies or through foreign companies. When you have chosen a property, inform your real estate agent and apply formally with a written document (Informe de la documentación). Require the real estate agent to be present to assist in the negotiation and closing of the deal, including the mode of payment. The real estate agent should mediate in all negotiations between you, and the seller of the property. It is best to negotiate with a seller through an “opción a compra” or “option to buy”, which legally “locks” both seller and buyer. The seller has to sell and you have to buy. It also “locks” the price. An “option a compra” usually requires a deposit of between 10% to 30% of the agreed selling price.
Buyers pay in advance all registration fees and legal expenses and the seller is obligated to deliver the property free of lien. A buyer is expected to pay in cash in advance in local currency from 1% – 3%, to handle everything up to and including closing.
After the final document has been signed, it is notarized by the notary public, and the buyer is now the legal owner, and the title or deed is handed over by the seller. The Certificate of Encumbrances is not required by law but is usually practiced and requested by purchaser. Fundamental Guidelines when buying a property in Venezuela by the Real Estate Chamber of Venezuela (Comisión de Intermediación y Asesoría Inmobiliaria de la Camara Inmobiliaria de Venezuela):
Financial Commission – If the deal is paid through credit, the buyer should see that the commission to the bank or other financial institution is cancelled.
Insurance – In the case of property acquisition through mortgage, there is a need for insurance against fire and earthquake. Insurance agencies normally charge a year in advance.
Lawyers’ fees – When the purchase of property is through organizations such as the Organization of Savings and Loan (Entidad de Ahorro y Préstamo), it should be noted that its fees on financial commission already includes the fee for “documento de venta”. When the purchase is through a Banco Hipotecario or “real estate mortgage bank”, insurance company, or any financial society, the amount of writing the compra-venta varies depending on the price of the real estate.
Registry fees – According to the Law of Public Registry, registry fees are based on the value of the real estate and is paid on a Planilla de Liquidación. The registry fees include stamps, photocopies, transfers and all these additional fees are paid in cash and are not given receipts.
Miscellaneous fees – Need to cancel other fees related to the compra-venta if it is in the contrato de opción as agreed by both parties. Read carefully everything before signing.
The whole process of registering a property in Venezuela can be completed in around 33 days.
Inheritance
There are gift and inheritance taxes (Impuesto sobre sucesiones, donaciones y demás ramos conexos) in Venezuela. The tax rates vary depending on the value of the inheritance and the relationship between the benefactor and the beneficiary.
The taxable inheritance is computed by deducting the following from the market value of the gross estate:
Any debts owed by the deceased, including taxes (as duly substantiated by proper documents)
Death, funeral, and related expenses
Attorney’s fees incurred during the process of allocating the inheritance and assessing the tax liabilities; these fees are calculated on the value of the inheritance:
Attorney’s fees
Taxable Income, VEB (US$) / Fees
Up to 20,000 (US$9) / nil
20,000 – 50,000 (US$23) / 6% on band over US$9
50,000 – 200,000 (US$93) / 4% on band over US$23
200,000 – 500,000 (US$233) / 3% on band over US$93
Over 500,000 (US$233) / 2% on all inheritance over US$233
Valencia
The inheritance tax is levied on the gross share of each recipient. The recipients are classified into different categories, depending on their relation with the deceased:
• Category I: spouse, direct ascendants, direct descendants, adopted child
• Category II: siblings, nephews, nieces
• Category III: uncles, aunts, first cousin
• Category IV: any other person
The taxation of residents in Venezuela is in tax units (Unitaria tributaria), which is an adjustment index. The tax bands are all in tax units, whose monetary value changes depending on the changes in the consumer price index.
Inheritance Tax
Tax Rate for Different Categories
Taxable Inheritance in Tax Units (US$) / I / II / III / IV
I / II / III / IV
First 15 (US$235) / 1.0% / 2.5% / 6.0% / 10.0%
Next 50 (US$784) / 2.5% / 5.0% / 12.5% / 15.0%
Next 100 (US$1,567) / 5.0% / 10.0% / 20.0% / 25.0%
Next 250 (US$3,918) / 7.5% / 15.0% / 25.0% / 30.0%
Next 500 (US$7,835) / 10.0% / 20.0% / 30.0% / 35.0%
Next 1,000 (US$15,670) / 15.0% / 25.0% / 35.0% / 40.0%
Next 4,000 (US$62,680) / 20.0% / 30.0% / 40.0% / 45.0%
Over 5,915 (US$92,688) / 25.0% / 40.0% / 50.0% / 50.0%
Rebates at a maximum of VEB100,000 (US$47) are available for recipients whose combined value of taxable inheritance and net wealth does not exceed VEB500,000 (US$233) . A tax rebate of 20% is given to the deceased’s spouse and children under 21 years old, if the sum of their taxable inheritance and net wealth does not exceed VEB500,000 (US$233)
