STEP MIAMI Planning strategies for Venezuelan Families Ronald Evans (Venezuela) Miami, March 2012 Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a partner means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an office means an office of any such law firm.
Holding Structures for Venezuela Introduction Anti Tax Haven legislation. Choice of jurisdiction Double Taxation Agreements (general) Investment protection agreements Consideration of Venezuela s estate and gift tax and of 2007, the possible enactment of a Tax on Gross Equity European Holding structures applicable to Venezuela 1 2005 Baker & McKenzie 2
Anti Tax Haven Rules Rules are meant to help application of worldwide basis of taxation. Discourage tax planning to avoid or defer payment of taxes by utilizing vehicles in tax havens Regime is being applied as of January 1, 2001 Taxpayers will have to compute income derived from investments in such jurisdictions on an accrual basis, regardless of actual distribution of profits. Any transaction carried out with a low tax jurisdiction will be considered not to have been made at arm s length 2005 Baker & McKenzie 3
Determination of jurisdictions considered tax havens A first list was issued by the Tax Administration through an Administrative Resolution published in Official Gazette No. 37.168 of March 28, 2001. On January 15, 2003 a second list was published eliminating several jurisdictions; Under Article 1 of the Order, jurisdictions will qualify as low tax jurisdictions whenever income taxation is nil (zero tax) or where tax rates are below 20 percent. 2005 Baker & McKenzie 4
Venezuelan Tax Administration will consider, for each country, the relevant tax laws applicable to individuals or legal entities, as well as the nature of the entity with which the corresponding transaction has been made; Article 2 lists specific jurisdictions. Netherlands Antilles (Curacao) is off the list. A Tax Treaty between Venezuela and the Netherlands was concluded on April 30, 2004. Several territorial jurisdictions were also excluded (i.e. Costa Rica). The second list also provides that all jurisdictions having a double taxation agreement with Venezuela containing an exchange of information clause will be automatically considered off the list (new Article 3). 2005 Baker & McKenzie 5
Tax Haven Lists This allows planning opportunities with jurisdictions such as Barbados and Portugal (Madeira) The tax treaty exception exclusion will not apply to the extent a treaty jurisdiction does not collaborate with Venezuela s exchange of information requests. A third list was published in the Official Gazette No. 37.924 dated April 26, 2004. The only relevant change is that the Islands of Nevis and St. Kits have been deleted from the list. 2005 Baker & McKenzie 6
Tax planning ideas around DTCs Holding structures with reduced tax cost for repatriation of profits (i.e. Netherlands, Belgium, Sweden, Denmark, etc) Reduction in withholding rates for dividends, royalties and interest 2005 Baker & McKenzie 7
Venezuelan Settlor Offshore Trust - New Zealand, UK- Switzerland, Singapore, etc. HoldCo - Netherlands CV, Singapore company, etc. Foreign Assets/ Bank accounts 2005 Baker & McKenzie 8
Sample Holding Structure Investment CIT Withholding Tax 100% US LLC Dividends 0% (Spanish Law) 5% <x< 25% ETVE (SPAIN) 0% (participation exemption) Dividends or Capital Gains Venezuela No withholding taxes (Treaty) 3 2005 Baker & McKenzie 9
Administrative Issues Claiming of treaty benefits Venezuelan Income Tax Law provides that treaty residents claiming benefits under Venezuelan treaties must prove residency Certificate of residence must be obtained from competent authority in the State of residence This Certificate may be required at any time by the Tax Administration Very important for Venezuelan resident corporations acting as withholding agents 2005 Baker & McKenzie 10
Exchange of tax information and mutual agreements procedures Little practical experience Venezuelan Tax Administration has yet to organize a proper department with experienced personnel to handle tax treaty controversies and their administration 2005 Baker & McKenzie 11
Investment Protection Agreements Country Argentina Barbados Belarus Belgium-Luxembourg Canada Chile Signed November 16, 1993 July 15, 1994 December 8, 2007 March 17, 1998 July 1, 1996 April 2, 1993 Entered into force July 1, 1995 October 31, 1995 August 13, 2008 April 29, 2004 January 28, 1998 May 25, 1995 2005 Baker & McKenzie 12
Investment Protection Agreements Country Costa Rica Cuba Czech Republic Denmark Ecuador France Signed March 17, 1997 December 11, 1996 April 27, 1995 November 28, 1994 November 18, 1993 July 2, 2001 Entered into force May 2, 2001 April 15, 2004 July 23, 1996 September 19, 1996 February 1, 1995 April 30, 2004 2005 Baker & McKenzie 13
Investment protection agreements Country Germany Iran Lithuania Netherlands Paraguay Peru Signed May 14, 1996 March 11, 2005 April 24, 1995 Octuber 22, 1991 September 5, 1996 January 12, 1996 Entered into force October 16, 1998 June 7, 2006 August 1, 1996 November 1, 2003 TERMINATED November 14, 1997 September 18, 1997 2005 Baker & McKenzie 14
Investment Protection Agreements Country Portugal Russia Spain Sweden Switzerland United Kingdom Signed June 17, 1994 November 7, 2008 November 2, 1995 November 25, 1996 November 18, 1993 March 15, 1995 Entered into force October 7, 1995 September 10, 1997 January 5, 1998 November 30, 1993 August 1, 1996 2005 Baker & McKenzie 15
Investment Protection Agreements Country Uruguay Vietnam Signed May 20, 1997 November 20, 2008 Entered into force January 18, 2002 2005 Baker & McKenzie 16
What reporting requirements are there when a taxpayer holds investment assets offshore? 2005 Baker & McKenzie 17
How does your jurisdiction view trusts and distributions made from trusts? 2005 Baker & McKenzie 18
What steps is your jurisdiction taking to route out tax evasion or attack tax avoidance schemes? 2005 Baker & McKenzie 19
What changes do you see occurring in the near future in the way your jurisdiction treats taxpayers who have offshore assets? 2005 Baker & McKenzie 20