Five-Year Tax Exemption Introduced On Petroleos De Venezuela Bonds

by Mike Godfrey, TaxNews.com, Washington

25 January 2010

The Venezuelan government has granted exemption from paying income tax on interest for five years to Petroleos de Venezuela SA (PDVSA) bondholders issued last year and due 2014, 2015, and 2016.

The tax exemption could be for the benefit of contractors who were paid in PDVSA bonds for overdue debts, Russell Dallen, head bond trader at Caracas Capital Markets at BBO Financial Services Inc, told Bloomberg, but ostensibly the government said it is "implementing democratic policies in respect of the national oil sector, to ensure that small, medium and big savers and investors, all benefit equally in this process."

Bondholders must present documents to local tax authorities to obtain the exemption. For control purposes, the beneficiaries of the exemption must submit an annual declaration of total taxed and exempted income. To enjoy the benefit of the exemption, taxpayers must meet the obligations and requirements stipulated in Decree No. 7184, the Law on Income Tax, its Regulations and other applicable rules. The exemption becomes effective on January 20, 2010 following its publication in the Official Gazette of the Bolivarian Republic of Venezuela.

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