The Future of Transfer Pricing in Venezuela: Toward Fiscal Liberalization and Modernization

By: The Editorial Team at GM Tax Advisors

In a constantly evolving global economic landscape, Venezuela finds itself at a turning point. Recently, the Venezuelan Tax Law Association (AVDT) hosted a keynote presentation by expert José Galíndez, during which the challenges and new opportunities facing the Venezuelan tax system were analyzed.

Below, we present a summary of the key points discussed at this forum. However, we invite you to watch the full video embedded at the end of this post, which provides an in-depth look at all the technical details, case studies, and Q&A sessions with other industry specialists.

1. Foreign Investment and the Hydrocarbons Sector

One of the main drivers of economic recovery will be the reform of the Organic Law on Hydrocarbons. This liberalization will allow private companies to market crude oil, which will generate a massive flow of intra-group transactions that must be closely monitored from a tax perspective.

The challenge: These transactions must be valued under the arm’s length principle, ensuring that prices and margins are consistent with the international market to avoid tax adjustments that compromise profitability.

2. Alignment with OECD Standards and the BEPS Project

Venezuela adopted transfer pricing rules in 1999, but its legislation has fallen behind global developments. In the video, Galíndez emphasizes the urgency for the country to align itself with the OECD’s Inclusive Framework on the BEPS Project by adopting tools such as:

• Action 13: Implement the three-tier documentation approach (Master File, Local File, and Country-by-Country Report).

• Substance over Form: Prioritize economic reality and the actual allocation of risks over what is merely set forth on paper.

3. Legal Certainty Through Advance Pricing Agreements (APAs)

To foster a stable investment climate, it is vital that SENIAT promote Advance Pricing Agreements (APAs). These agreements allow taxpayers and the tax authority to agree in advance on the valuation methodology, thereby eliminating uncertainty and avoiding litigation that can drag on for years.

4. Toward a Digital Tax Administration

The future of tax enforcement must be digital. Following the example of countries such as Mexico and Costa Rica, modernization in Venezuela should include:

• Electronic Invoicing: A key tool for traceability.

• Cooperative Compliance: An approach where the tax administration uses technology (AI and Big Data) to facilitate voluntary compliance, viewing the taxpayer as an ally in the country’s development.

Watch the full presentation here:

https://www.youtube.com/watch?v=9WydDTSuW8I

Note: All technical details, comparative charts, and specific insights into the extractive and service industries are provided in the following video. We recommend watching it to gain a comprehensive understanding of the subject.