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De Sola Pate & Brown

Torre Domus, 16th Fl.
Av. Abraham Lincoln
Sabana Grande

Mailing address from outside Venezuela:
P. O. BOX 0200I0
MIAMI, FL 33I02-00I0

Mailing address from inside Venezuela:

Main Contact: John Pate
T: +58-212 793 9898
F: +58 212 793 9403
E: jpate@desolapate.com
W: www.desolapate.com

Do tax authorities assess taxes, duties, or other impositions in connection with any of the following events and, if so, at what rates and under what circumstances?

Sales Tax

Sales of aircraft and lease rentals

The Venezuelan VAT law provides that the VAT may vary between 8% and 16.5%. The level of the tax is to be established annually by the National Assembly in the budget law, which is usually passed in the final months of the preceding year. As of 2012 and going into 2013 the VAT is set at 12%.

In the case of the sale of aircraft to users or operators in the country, in principle such sales are subject to the VAT. However, aircraft sold from outside of Venezuela are only subject to the VAT when they are definitively nationalized or imported and title passes to the domestic purchaser. As a general proposition, though, if aircraft are purchased on an installment basis the purchaser will obtain a temporary import permit, which defers the payment of the VAT until final payment is made and title passes. At the same time, the Civil Aeronautics Law provides, as an inducement for airlines and other commercial aircraft operators to modernize their fleets, the possibility of exoneration from the payment of the VAT. In contrast, though, in the case of recreational or sport aircraft, not only are they subject to the normal VAT, but also to a luxury VAT of an additional 10%. On the other hand, there is no VAT levied on the export of a Venezuelan-owned aircraft.

Regarding leases of aircraft, whether from outside the country or domestically, such leases are subject to VAT. If the lessor is a non-domiciled entity, the domestic lessee is obligated to pay the VAT on behalf of the lessor.


The use of aviation services is subject to VAT both for passengers and freight. In the case of international transport the VAT law deems half of the value of the air service to be rendered in the country, for which reason international travel is subject to just one half of the standard VAT.

Finance (mortgage tax, promissory note tax, conditional sale tax, tax on loan payments, tax on interest)

Mortgage tax: The matter of chattel mortgages on aircraft and major aviation components is somewhat complex and costly in Venezuela, for which reasons such mortgages are rarely constituted. First, it is necessary to obtain the approval of the corresponding governmental agency to constitute the mortgage (as a matter of administrative practice at the present time this responsibility has been delegated to the National Institute of Civil Aeronautics—INAC by its acronym in Spanish—even though the principal law, which is the special law on chattel mortgages, provides that domestic banks and insurance companies, among other local entities, do not need prior authorization). Secondly, in order to be deemed to be valid as a mortgage, and thus to be enforceable in accordance with the chattel mortgage law, all mortgages have to be registered with the corresponding civil law registry of which, in the case of aircraft and major aviation components, there is just one such registry—located in the capital city of Caracas—that is designated as the depositary of such mortgages (in addition, it may be noted that presently all aviation mortgages must, and can only, be notarized before one particular notary office, also in the city of Caracas). And, lastly, once the mortgage has been registered in the civil registry it also has to be registered in the civil aeronautics registry of INAC, as required by the civil aeronautics law. Moreover, each of these steps incurs one or more taxes. While the notarization of the mortgage document is subject just to minor tax stamps, in contrast the registration of a chattel mortgage on an aircraft at the civil registry is subject to a registration fee of from .2% to .4% of the total value of the mortgage, plus a stamp tax that is equivalent to five “tax units” (a variable value that is reset early each year by the National Assembly to reflect, in principle, the rate of inflation in the previous year; in 2012 the tax unit was valued at Bs.90, approximately US$20 at the official exchange rate). However, the main cost is at INAC, which charges the equivalent of 2% of the value of the mortgage transaction in order to approve the mortgage and then 62 tax units to register the mortgage. Accordingly, for the reasons described, plus other bureaucratic obstacles, chattel mortgages on aircraft are not frequently used as security in the case of Venezuela.

Promissory note: As a general rule there is no tax on the issuance of a promissory note, which also does not have to be registered to be valid.

Conditional sale tax: There is no tax on a conditional sale agreement, which does not have to be registered to be valid. However, it should be notarized, thereby making it a public document, and there is a minor stamp tax that is payable for the notarization.

Taxes on loan payments and on interest: As a general proposition, interest on loans in relation to aviation activities is subject to income tax (but not to the VAT if the loans are provided by banks or other financial institutions). Interest earned by lenders that are domestic financial institutions, as well as non-financial institutions, is subject to income tax at the standard corporate rates, which are set at 15% on the first 2,000 tax units, 22% on the next 1,000 tax units, and 34% on all amounts above 3,000 tax units. However, if the loan is made by a non-domiciled financial institution the tax rate is limited to 4.95%. In addition, it may be noted that Venezuela has entered into some 26 double tax treaties that, in most cases, would cause the tax on interest to be reduced in Venezuela.

Tax on lease payments: Lease payments in the case of operating leases, as opposed to financial leases by a financial leasing company, are subject to income tax at the same corporate rates as in the case of interest payments, except to the extent that such taxes may be reduced by double tax treaties. In the case of financial leases, when it is presumed that the intention is to effect the sale of the item, only the interest portion of the financial package is subject to income tax.

Withholding taxes

There are several situations in which tax withholding is applicable. Thus, aircraft lease payments, when the lessor is a corporate entity, domiciled in the country or not, are subject to a 5% withholding. Interest paid on loans to nondomiciled financial entities is subject to a withholding of 4.95%. Air freight fees paid to domestic entities are subject to a withholding of 3%.

Import taxes

As a general proposition, the definitive importation, i.e. the nationalization, of private sector aircraft and aircraft components would be subject to both import duties (the customs tariff) and VAT. In the case of customs duties, these would vary depending on the type of aircraft. However, the current Civil Aeronautics Law, which was last modified in March 2009, provides for a five-year tax holiday on imported aircraft, engines, accessories and spare parts from this date, as well as other tax incentives for the aviation industry. At the same time, it may be noted that as a general proposition Venezuelan airlines tend to operate with older, leased aircraft that are usually brought into the country under temporary import permits, which have the effect of deferring the payment of the customs duty and VAT until such time as the aircraft is definitively nationalized, that is when title passes to the Venezuelan purchaser. On the other hand, in the event that the leased aircraft is returned to the lessor abroad upon the termination of the lease contract, then the import duty and VAT are not deemed to have been payable. In principle, these permits are granted only for a period of six months, renewable once for a further six months. In practice, though, these permits are rolled over for years, so that the import taxes only become payable if the local airline takes title in the name of the local entity (as opposed to that of an offshore affiliate, as also often occurs).

Export taxes

In the case of the sale outside of Venezuela of a Venezuelan owned aircraft or components such exportation is effectively exempt from the payment of VAT (technically export sales are subject to VAT but for the present the tax rate is zero). However, such sales are subject to Venezuelan income tax on any gain that might be generated on the sale.

Registration taxes

There is a registration tax that is charged on the registration of civilian aircraft with the National Institute of Civil Aeronautics (INAC). This tax varies depending on the size of the aircraft and ranges from ten to 50 tax units. These same tax levels apply for the issuance of airworthiness certificates and to register transfers of ownership.

Luxury taxes

As noted above, there is a luxury tax of 10%, in addition to the normal VAT, on any type of aircraft, including helicopters, that are intended for recreational or sporting use.

FOR FURTHER INFORMATION: Please contact us and we would be pleased to assist.

DISCLAIMER: The above information should not be relied upon by the reader for legal advice as it is intended merely to serve as preliminary guide to the laws and regulations governing the taxation of aviation and aircraft in the Venezuela. The information intends to provide summary-level information about certain tax issues affecting general aviation and aircraft finance. Since these materials are general in nature, readers are encouraged to obtain legal and tax advice from their own professional legal and tax counsel based on specific facts and circumstances regarding their acquisition and/or use of aviation and aircraft.