Venezuela: Law Authorizes Tax on Foreign Currency Transactions

"What has been happening up to now is that the rich and the big traders pocket the dollars and do not give the Venezuelan State a single cent of those dollars with which they make transactions," said the president of the legislative body, Jorge Rodríguez, during the session broadcast by the state channel Venezolana de Televisión.

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The reform establishes that the tax rate will be between 2 percent and 20 percent for transactions in currencies other than legal tender.

According to Article 4 of the law, the following will pay tax: "natural legal persons and economic entities without legal personality for payments made in currencies other than the legal tender in the country or cryptocurrencies other than those issued by the Bolivarian Republic of Venezuela within the national banking system without the intermediation of foreign banking correspondent in accordance with the policies, exceptional authorizations and parameters established by the Central Bank of Venezuela."

Likewise, legal entities and economic entities without legal personality qualified as special taxpayers will be taxpayers of this tax for their payments with charges to their accounts in banks or financial institutions.

Rodriguez stated that the law would allow the recovery of the Venezuelan economy affected by foreign sanctions.

"The real reason for this law is none other than within the framework of everything that has been done to recover the country's economy amid the worst blockade and above all the country's macro-economy and there is the reality, the facts, what are they? The exchange rate, the percentage of inflation, the percentage of growth of the Gross Domestic Product (GDP)", he commented.

The use of the dollar in Venezuela began in 2019 when a prolonged electrical blackout evidenced the absence of cash means of payment. From that moment on, the Government started to eliminate the laws that sanctioned the use of foreign currency in the country.

This allowed payments in dollars to take hold for all types of transactions and even the banking system began to operate with some bank accounts in this currency.