In response to the petitions of merchants, industrialists and private entrepreneurs who have been requesting for more than 3 years the review and follow-up of the taxes collected by the executive at regional and national level. It has been approved in first discussion the proposal of Organic Law for the Coordination and Harmonization of the Tax Powers of the States and Municipalities. This means that its 52 articles regulate and regulate the limits of collections and actions to be carried out by the different authorities in charge of tax collection in their localities. In that sense, in Aldana & Abogados we want to give you a broader perspective of this bill so you can see the implications that this new model has on your business.
What is the Organic Law of Tax Coordination and Harmonization?
This is a law that will allow the creation of a governing body that will be able to establish the orientations, guidelines and advisories in tax matters in each locality of the Venezuelan territory. By means of this project, it is expected to regulate the disciplinary mechanisms to harmonize the tax system of the country, so that there are no outbursts at the time of establishing the amount of municipal, regional and state taxes.
This project benefits traders, businessmen and other actors within the Venezuelan economy because it establishes guidelines that were not previously stipulated in any Venezuelan law. Such is the case of tax payments in bolivars and tied to the exchange rate promulgated by the Venezuelan Central Bank, among others.
What are the benefits of the Organic Law of Tax Coordination and Harmonization?
This regulation does not establish criminal penalties, but it does establish specific mechanisms for tax collection. Therefore, it is expected that with this new bill a more efficient collection can be carried out for the executive and public and private companies within the territory. In this way, the main benefits will be reflected in the quality of public services and the optimal registration of each tax payment made by individuals and companies in the country.
This is expected to foster a new culture of tax compliance that will allow the Venezuelan financial system to function properly. At the same time minimizes business risks associated with noncompliance with tax obligations in the country.
What are the most important aspects of this law?
1- Payments must be made only in Bolivars, but are calculated at the official exchange rate dictated by the Central Bank of Venezuela.
2- Use of the RIF to guarantee that the taxes are correctly identified to the taxpayers. Therefore, it is no longer possible to use any other parallel registry, nor require any other document.
3- A maximum tax rate of 3% is established. This determines that the municipal economic activity tax rate may not exceed 3% of the gross income obtained by the companies.
4- Ratification of the limits of the actors, activities and taxes. This serves to determine, in conjunction with the National Constitution and the Organic Tax Code, the margin of action that each agency has according to its function. Therefore, the limits and prohibitions for the mayors' and governors' offices throughout the national territory are established therein.
Why is this bill relevant in Venezuela?
This bill is relevant, since there is no mechanism to regulate municipalities and mayors' offices in the collection of taxes. Previously, due to legal vacuums, there were disturbances and problems within the economic and commercial development of the country. As a consequence, the collectors requested additional documents from the merchants, which delayed the tax payments and forced the merchants to resort to other instances that were not stipulated in the law.
Thus, this new form of organization allows for uniformity in the collection processes throughout the country, delimiting the methods for municipalities, mayors' offices and governors' offices to carry out tax processes. In this way, the executive prevents the collection of special fees, hindering of payments, channeling of fines according to the framework of the law, among other conflicts that were affecting the inhabitants of the country.
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