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Venezuelan Income Tax Admin: New Control and Auditing System


The Integrated National Service of Custom and Tax Administration are required to inform taxpayers of their responsibility to comply with the tax duties in Venezuela. Recently, the Tax Administration carried out tax audit revisions related to VAT compliance. Non compliance is met with a penalty and close of the permanent establishment where business activity is carried out. Taxand Venezuela examines the application of the new control and auditing system and impact on taxpayers.

An auditing process for transfer pricing, as well as procedures to verify the correct income tax return and payment by individuals are conducted to ensure compliance.

It is important to highlight the ways in which taxpayers can defend themselves against the arguments stated by Tax Administration when determining tax differences, establishing sanctions and calculating overdue interests.

The objective of the tax control policy established by SENIAT is to maximise voluntary taxpayer compliance. Voluntary review varies and is linked to the taxpayers awareness of the Tax Administration's capacity for detecting tax evasion and avoidance, applying controls established in the law and carrying out thorough investigations and audits aimed to the close of business permanent establishments.

In this sense, Tax Administration is able to execute auditing and verification procedures in order to confirm the compliance of income tax law and its norms by taxpayers, when the respective prerequisites described in the Master Tax Code are fulfilled.

The verification procedure means the evidence of real facts that do not require investigation and the confirmation of tax duties compliance by taxpayers. The audit process is designed to examine and to determine through a detailed revision of tax and accounting supporting documents the legality and veracity of the transactions involved.

With the implementation of these procedures, the Tax Administration has the possibility to determine possible tax differences, especially in transfer pricing matters. Through the adjustments it may be determined which would be the arm's length price of transactions or the margins obtained if such transactions were carried out not between related parties but unrelated parties.

Regarding income tax matters, the Tax Administration also has carried out adjustments on taxpayer returns in order to confirm if the private information filled about deductions and tax credits are correct. And in the case of Value Added Tax matters, it is verified if all tax duties compliance is fulfilled such as the use of machines to print invoices.

It is important to highlight that there are some options in the Master Tax Code that could help taxpayers in the litigation with the Tax Administration. There is the possibility to go before the authorities in order to give notice of an appeal requesting the reviewing by the government agency that authorises the procedure of reassessment. With this appeal, the determination of tax differences, penalties or overdue interest as well as other supposed argument that could diminish taxpayer's interest can be objected.

If this government agency confirms the tax position taken by the Tax Administration, the taxpayer can go to a Court of Appeal in order to object the decision of the government agency.

In the case, the Court of Appeal sentence is also unfavourable, taxpayer could go to the Supreme Court of Justice, the principal Court in Venezuela, which will be the last public authority where taxpayer could file an appeal to claim against the decisions taken by the Tax Administration.


Taxand's Take

It is clear that individual or corporate taxpayers filling tax returns in Venezuela can become subject to a review of their current tax situation by the Tax Administration.

We recommend multinationals work with local specialists to prepare appeal documents they can file before public authorities, to litigate against any irregular decisions from the tax authorities.

Your Taxand contacts for further queries are:
Manuel Candal
T. +58 212 750 00 95

Ellen Susana Morales
T. +58 212 750 00 95

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