Tax Systems and Concepts: A Comprehensive Guide

Posted on Nov 3, 2024 in Economy

Structure or Elements of Tax

Perpetrator

Is the entity of the tax credit, usually the state, nation, or municipality.

Taxable Person

Is obliged to comply with tax obligations, i.e., taxpayers, managers, or retention agents.

Taxable Event

Is the event that occurs in a law when the person agrees with the state.

Annuity

Is the series of equal and periodic payments that can be taken as entry or exit and need not be annual. It is a series of payments that meets the following conditions:

  • All payments are of equal value.
  • All payments are made at equal intervals of time.
  • All payments are taken at the beginning or end of the series at the same rate.
  • The number of payments must equal the number of periods.

Comprehensiveness

Is when you measure the total amount of enrichment a person has achieved in the year, i.e., it meets in a lump sum all the enrichments obtained by a taxpayer to apply the progressive rates.

Income Territoriality

It is an essential foundation of sovereignty in which each state may prescribe and enforce rules from their territory. Then, an enrichment comes from economic activities in the Bolivarian Republic of Venezuela when one of the reasons it originates occurs within the national territory.

Extraterritoriality Income

Refers to laws that apply outside the territory of the country under certain circumstances and not all legislation, taking into account that the ISLR establishes the extraterritorial application of tax law from January 1st, 2001, where residents and domiciled individuals or companies in Venezuela also paid income received abroad.

Availability

Refers to the time at which the holder of an enrichment can use it from a legal and economic standpoint. It is the time to make use of that enrichment in fact and law.

Types of Availability

  1. Economic Point of View

    The taxpayer has the right to use, enjoy, and dispose of the income in the form that is convenient.

  2. Legally

    An income is considered available when it is not just about the same, the essential legal titles, but also when you can exercise all the attributes of property and particularly the use of their free will under the right holder.

Classification of Availability

  • Disposable income when they are paid: When you receive the money, e.g., wages and salaries, casual earnings, professional fees.
  • Income available when performing the operations that occur: E.g., trade, industry, services, agriculture, mining, and hydrocarbons.
  • Disposable income based on income earned or profit on the proportion that corresponds: E.g., discount operations, sales discount.

Difference Between Exemption and Exoneration

Exemptions

The total or partial exemption from the payment of tax obligations conferred by law.

  • Does not depend on the decision of the national executive.
  • No time limit.
  • Single taxpayers are stipulated in Article 14 LISLR.
  • Not requested by the beneficiary and is stipulated in the law.

Requirements for Appropriate Exemptions

Cases of specified tax exemption are not dependent on the executive or decrees that prescribe, for they are mentioned in its article 14 without subjection to any conditions or prerequisites.

Examples of Exemptions from Income Tax

  1. The establishment of public, BCV, and Venezuela Investment Fund, and the other official autonomous institutes determined by law.
  2. Charities and social welfare, provided that their enrichments were obtained as a means to achieve the above purposes and that they always distribute profits.
  3. The insured and their beneficiaries who receive compensation on account of insurance contracts.
  4. Pensioners and retirees by the pension received in respect of disability, retirement, or retirement.
  5. Grantees, heirs, and legatees.

Exonerations

The total or partial exemption from the payment of tax liability issued by the executive.

  • Are granted a general nature for all that is prescribed by law or fixed by the executive.
  • The maximum term of release shall be five years.
  • The exemptions granted to institutions without profit may be indefinite.
  • Are granted by the executive.

Requirements for Appropriate Exonerations

The law authorizes the Executive to grant exemptions that would specify the charges and understand the law may empower the executive to submit the waiver to certain conditions and requirements.

Unlike Laws

22/10/99 Reform

  • Establishing worldwide income.
  • Negative equity is not adjusted.
  • The balance sheet at this time is called the adjusted balance sheet.
  • There were two methods with regard to inventories (physical units method and the method of balances).
  • Are continuous or discontinuous 180 days for non-residents.
  • Losses were compensated offshore territorial enrichment.

28/12/01 Reform

  • Negative equity if it resets.
  • General adjustment of inventories is performed based on the amount in Bolivars.
  • The balance sheet is called the fiscal balance sheet date.
  • Are continuous for 183 days for non-resident taxpayers.
  • Territorial losses are offset by the territorial enrichment and enrichment lost offshore.
  • There are agreements on transfer pricing anticipated.

Differences Between the Mixed System and the Global System and Schedular or Analytical System

Schedular System

This system taxes income classified into categories or ballots. This system sought to tax capital gains considered lazy more strongly. This system is not used in Venezuela; it had difficulty in application and control rates.

Mixed System

This system classifies taxpayers’ income according to their origin and nature and then applies the proportional tax. In this system, the tax is calculated by the sum of all the enrichment of each contributor, and its product was added to the schedular tax to obtain the taxpayer’s burden each year.

Goes into effect: Since its inception, it was welcomed by the ISLR in Venezuela in 1943 until 1966.

Global System

Unlike other systems, the global system taxes the total amount of the taxpayer’s enrichments added algebraically, without considering the source of such income. You could say that it is a personal tax as it takes into consideration the subject’s ability to pay.

Log in force: This form of taxation was the one that replaced the system of joint taxation. The law was enacted on December 16, 1966, and came into force on January 1, 1967.