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13020 Venezuela - Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital


   
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TREATIES AND OTHER INTERNATIONAL ACTS SERIES 13020

 

 

DOUBLE TAXATION

Taxes on Income

 

 

 

Convention, with Protocol,
Between the
UNITED STATES OF AMERICA
and VENEZUELA

 


Signed at Caracas January 25, 1999

 

 

 



 

 


NOTE BY THE DEPARTMENT OF STATE

Pursuant to Public Law 89—497, approved July 8, 1966
(80 Stat. 271; 1 U.S.C. 113)—

“. . .the Treaties and Other International Acts Series issued
under the authority of the Secretary of State shall be competent
evidence . . . of the treaties, international agreements other than
treaties, and proclamations by the President of such treaties and
international agreements other than treaties, as the case may be,
therein contained, in all the courts of law and equity and of maritime
jurisdiction, and in all the tribunals and public offices of the
United States, and of the several States, without any further proof
or authentication thereof.”


 

 

 

 


VENEZUELA

Double Taxation: Taxes on Income

Convention, with protocol, signed at Caracas January 25, 1999;
Transmitted by the President of the United States of America
to the Senate June 29, 1999 (Treaty Doc. 106-3,
106th Congress, 1st Session);
Reported favorably by the Senate Committee on Foreign Relations
November 3, 1999 (Senate Executive Report No. 106-6,
106th Congress, 1st Session);
Advice and consent to ratification by the Senate
November 5, 1999;
Ratified by the President December 29, 1999;
Ratified by Venezuela December 30, 1999;
Entered into force December 30, 1999.

CONVENTION
BETWEEN
THE GOVERNMENT OF THE UNITED STATES OF AMERICA
AND
THE GOVERNMENT OF THE REPUBLIC OF VENEZUELA
FOR THE AVOIDANCE OF DOUBLE TAXATION
AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES
ON INCOME AND CAPITAL
The Government of the United States of America and the Government of the Republic
of Venezuela, desiring to conclude a convention for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income and capital, have agreed as
follows:
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ARTICLE 1
General Scope
1. This Convention shall apply to persons who are residents of one or both of the
Contracting States, except as otherwise provided in the Convention.
2. The Convention shall not restrict in any manner any exclusion, exemption,
deduction, credit, or other allowance now or hereafter accorded:
a) by the laws of either Contracting State; or
b) by any other agreement between the Contracting States.
3. Notwithstanding the provisions of subparagraph 2 b):
a) the provisions of Article 26 (Mutual Agreement Procedure) of this
Convention exclusively shall apply to any dispute concerning whether a measure is
within the scope of this Convention, and the procedures under this Convention
exclusively shall apply to that dispute; and
b) unless the competent authorities determine that a taxation measure is not
within the scope of this Convention, the non-discrimination obligations of this
Convention exclusively shall apply with respect to that measure, except for such
national treatment or most-favored-nation obligations as may apply to trade in goods
under the General Agreement on Tariffs and Trade. No national treatment or most-
favored-nation obligation under any other agreement shall apply with respect to that
measure.
c) For the purpose of this paragraph, a "measure" is a law, regulation, rule,
procedure, decision, administrative action, or any similar provision or action.
4. Notwithstanding any provision of the Convention except paragraph 5 of this Article,
a Contracting State may tax its residents (as determined under Article 4 (Residence)), and by
reason of citizenship may tax its citizens, as if the Convention had not come into effect.
5. The provisions of paragraph 4 shall not affect:
a) the benefits conferred by a Contracting State under paragraph 2 of Article 9
(Associated Enterprises), and under Articles 24 (Relief from Double Taxation), 25
(Non-Discrimination), and 26 (Mutual Agreement Procedure); and
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b) the benefits conferred by a Contracting State under Articles 20 (Government
Service), 21 (Students, Trainees, Teachers and Researchers), and 28 (Diplomatic Agents
and Consular Officers), upon individuals who are neither citizens of, nor have
immigrant status in, that State.
ARTICLE 2
Taxes Covered
1. The existing taxes to which this Convention shall apply are:
a) in Venezuela: the tax on income and the business assets tax;
b) in the United States: the Federal income taxes imposed by the Internal
Revenue Code (but excluding social security contributions).
2. The Convention shall apply also to any identical or substantially similar taxes that
are imposed after the date of signature of the Convention in addition to, or in place of, the
existing taxes. The competent authorities of the Contracting States shall notify each other of
any significant changes that have been made in their respective taxation laws and of any official
published material concerning the application of the Convention.
ARTICLE 3
General Definitions
1. For the purposes of this Convention, unless the context otherwise requires:
a) the term "Venezuela" means the Republic of Venezuela;
b) the term "United States" means the United States of America but does not
include Puerto Rico, the Virgin Islands, Guam, or any other United States possession or
territory;
c) the terms "a Contracting State" and "the other Contracting State" mean
Venezuela or the United States as the context requires;
d) the term "person" includes an individual, an estate, a trust, a partnership, a
company, and any other body of persons;
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e) the term "company" means any body corporate or any entity which is treated
as a body corporate for tax purposes;
f) the terms "enterprise of a Contracting State" and "enterprise of the other
Contracting State" mean, respectively, an enterprise carried on by a resident of a
Contracting State and an enterprise carried on by a resident of the other Contracting
State; the terms also include an enterprise carried on by a resident of a Contracting State
through an entity that is treated as fiscally transparent in that Contracting State;
g) the term "national" means:
i) any individual possessing the nationality of a Contracting State; and
ii) any legal person, association, or other entity (including an "entidad"
or "colectividad") deriving its status as such from the law in force in a
Contracting State;
h) the term "international operation of ships or aircraft" means any transport by a
ship or aircraft, except when such transport is solely between places within a
Contracting State;
i) the term "competent authority" means:
i) in the case of the United States: the Secretary of the Treasury or his
delegate; and
ii) in the case of Venezuela: the Integrated National Service of Tax
Administration (Servicio Nacional Integrado de Administración
Tributaria—SENIAT), its authorized representative or the authority which is
designated by the Ministry of Finance as a competent authority for the purposes
of this Convention.
2. As regards the application of the Convention by a Contracting State, any term not
defined therein shall, unless the context otherwise requires or the competent authorities agree to
a common meaning pursuant to the provisions of Article 26 (Mutual Agreement Procedure),
have the meaning which it has under the laws of that State concerning the taxes to which the
Convention applies.
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ARTICLE 4
Residence
1. For the purposes of this Convention, the term "resident of a Contracting State"
means:
a) in the case of the United States, any person who, under the laws of the United
States, is liable to tax therein by reason of his domicile, residence, citizenship, place of
incorporation, or any other criterion of a similar nature. The term includes an individual
who is a United States citizen or an alien lawfully admitted to the United States for
permanent residence (a "green card" holder) and who is not a resident of Venezuela
"under paragraph 1 b) only if the individual has a permanent home or habitual abode in
the United States.
b) in the case of Venezuela, any resident individual ("domiciliado"), any legal
person that is created or organized under the laws of Venezuela, and any entity or
collectivity ("entidad o colectividad") formed under the laws of Venezuela which is not
a legal person but is subject to the taxation applicable to corporations in Venezuela.
2. An item of income, profit or gain derived through an entity that is fiscally transparent
under the laws of either Contracting state shall be considered to be derived by a resident of a
State to the extent that the item is treated for purposes of the taxation law of such Contracting
State as the income, profit or gain of a resident.
3. Where by reason of the provisions of paragraph 1, an individual is a resident of both
Contracting States, then his status shall be determined as follows:
a) he shall be deemed to be a resident of the State in which he has a permanent
home available to him; if he has a permanent home available to him in both States, he
shall be deemed to be a resident of the State with which his personal and economic
relations are closer (center of vital interests);
b) if the State in which he has his center of vital interests cannot be determined,
or if he does not have a permanent home available to him in either State, he shall be
deemed to be a resident of the State in which he has an habitual abode;
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c) if he has an habitual abode in both States or in neither of them, he shall be
deemed to be a resident of the State of which he is a national;
d) if he is a national of both States or of neither of them, the competent
authorities of the Contracting States shall endeavor to settle the question by mutual
agreement.
4. Where, by reason of the provisions of paragraph 1, a person other than an individual
is a resident of both Contracting States, the competent authorities of the Contracting States shall
endeavor to settle the question by mutual agreement and determine the mode of application of
the Convention to such person. If they are unable to make such a determination, such person
shall not be considered a resident of either Contracting State for purposes of enjoying benefits
under this Convention.
ARTICLE 5
Permanent Establishment
1. For the purposes of this Convention, the term "permanent establishment" means a
fixed place of business through which the business of an enterprise is wholly or partly carried
on.
2. The term "permanent establishment" includes especially:
a) a place of management;
b) a branch;
c) an office;
d) a factory;
e) a workshop; and
f) a mine, an oil or gas well, a quarry, or any other place of extraction of natural
resources.
3. The term "permanent establishment" likewise encompasses:
a) A building site or construction or installation project, or an installation or
drilling rig or ship used for the exploration of natural resources, but only where such
site, project or activities continue for a period or periods aggregating more than 183
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days within any twelve month period commencing or ending in the taxable year
concerned; and
b) The furnishing of services, including consultancy services, by an enterprise
through employees or other personnel engaged by the enterprise for such purpose, but
only where activities of that nature continue (for the same or a connected project) within
the country for a period or periods aggregating more than 183 days in any twelve month
period commencing or ending in the taxable year concerned.
4. Notwithstanding the preceding provisions of this Article, the term "permanent
establishment" shall be deemed not to include:
a) the use of facilities solely for the purpose of storage, display, or delivery of
goods or merchandise belonging to the enterprise;
b) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of storage, display, or delivery;
c) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of processing by another enterprise;
d) the maintenance of a fixed place of business solely for the purpose of
purchasing goods or merchandise, or of collecting information, for the enterprise;
e) the maintenance of a fixed place of business solely for the purpose of carrying
on, for the enterprise, any other activity of a preparatory or auxiliary character;
f) the maintenance of a fixed place of business solely for any combination of the
activities mentioned in subparagraphs a) to e), provided that the overall activity of the
fixed place of business resulting from this combination is of a preparatory or auxiliary
character.
5. Notwithstanding the provisions of paragraphs 1 and 2, where a person–other than an
agent of an independent status to whom paragraph 6 applies–is acting on behalf of an enterprise
and has and habitually exercises, in a Contracting State an authority to conclude contracts in the
name of the enterprise, that enterprise shall be deemed to have a permanent establishment in
that State in respect of any activities which that person undertakes for the enterprise, unless the
activities of such person are limited to those mentioned in paragraph 4 which, if exercised
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through a fixed place of business, would not make this fixed place of business a permanent
establishment under the provisions of that paragraph.
6. An enterprise shall not be deemed to have a permanent establishment in a
Contracting State merely because it carries on business in that State through a broker, general
commission agent, or any other agent of an independent status, provided that such persons are
acting in the ordinary course of their business. However, when the activities of such an agent
are devoted wholly or almost wholly on behalf of that enterprise and the transactions between
the agent and the enterprise are not made under arm's length conditions, he shall not be
considered an agent of independent status within the meaning of this paragraph.
7. The fact that a company which is a resident of a Contracting State controls or is
controlled by a company which is a resident of the other Contracting State, or which carries on
business in that other State (whether through a permanent establishment or otherwise), shall not
of itself constitute either company a permanent establishment of the other.
ARTICLE 6
Income From Immovable Property (Real Property)
1. Income derived by a resident of a Contracting State from immovable property (real
property), including income from agriculture or forestry, situated in the other Contracting State
may be taxed in that other State.
2. The term "immovable property (real property)" shall have the meaning that it has
under the law of the Contracting State in which the property in question is situated. The term
shall in any case include property accessory to immovable property (real property), livestock
and equipment used in agriculture and forestry, rights to which the provisions of general law
respecting landed property apply, usufruct of immovable property (real property) and rights to
variable or fixed payments as consideration for the working of, or the right to work, mineral
deposits, sources and other natural resources. Ships, boats and aircraft shall not be regarded as
immovable property (real property).
3. The provisions of paragraph 1 shall apply to income derived from the direct use,
letting, or use in any other form of immovable property (real property).
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4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable
property (real property) of an enterprise and to income from immovable property (real property)
used for the performance of independent personal services.
5. A resident of a Contracting State who is liable to tax in the other Contracting State
on income from immovable property (real property) situated in the other Contracting State who
is not otherwise allowed to compute the tax on such income on a net basis as if such income
were business profits attributable to a permanent establishment in such other State shall be
allowed to elect such treatment for any taxable year. Any such election shall be binding for the
taxable year of the election and all subsequent taxable years unless the competent authority of
the Contracting State in which the property is situated agrees to terminate the election.
ARTICLE 7
Business Profits
1. The business profits of an enterprise of a Contracting State shall be taxable only in
that State unless the enterprise carries on business in the other Contracting State through a
permanent establishment situated therein. If the enterprise carries on business as aforesaid, the
business profits of the enterprise may be taxed in the other State, but only so much of them as
are attributable to that permanent establishment.
2. Subject to the provisions of paragraph 4, where an enterprise of a Contracting State
carries on business in the other Contracting State through a permanent establishment situated
therein, there shall in each Contracting State be attributed to that permanent establishment the
business profits which it might be expected to make if it were a distinct and independent
enterprise engaged in the same or similar activities under the same or similar conditions.
3. Nothing in this Article shall affect the application of any law of a Contracting State
relating to the determination of the tax liability of a person in cases where the information
available to the competent authority of that State is inadequate to determine the profits to be
attributed to a permanent establishment, provided that, on the basis of the available information,
the determination of the profits of the permanent establishment is consistent with the principles
stated in this Article.
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4. In the determination of the business profits of a permanent establishment there shall
be allowed as deductions expenses that are incurred for the purposes of the business of the
permanent establishment, including executive and general administrative expenses so incurred,
whether incurred in the State in which the permanent establishment is situated or elsewhere.
However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than
towards reimbursement of actual expenses) by the permanent establishment to the head office
of the enterprise or any of its other offices, by way of royalties, fees or other similar payments
in return for the use of patents or other rights, or by way of commission for specific services
performed or for management, or by way of interest on moneys lent to the permanent
establishment. Likewise, no account shall be taken, in the determination of the business profits
of a permanent establishment, for amounts charged (otherwise than towards reimbursement of
actual expenses), by the permanent establishment to the head office of the enterprise or any of
its other offices, by way of royalties, fees or other similar payments in return for the use of
patents or other rights, or by way of commission for specific services performed or for
management, or by way of interest on moneys lent to the head office of the enterprise or any of
its other offices. A Contracting State may, consistent with its law, impose limitations on
deductions, so long as these limitations are consistent with the concept of net income.
5. No business profits shall be attributed to a permanent establishment by reason of the
mere purchase by that permanent establishment of goods or merchandise for the enterprise.
6. For the purposes of this Convention, the business profits to be attributed to the
permanent establishment shall include only the profits or losses derived from the assets or
activities of the permanent establishment and shall be determined by the same method year by
year unless there is good and sufficient reason to the contrary.
7. Where business profits include items of income which are dealt with separately in
other Articles of the Convention, the provisions of those Articles shall not be affected by the
provisions of this Article.
8. In applying paragraphs 1 and 2 of Article 7 (Business Profits), paragraph 6 of Article
10 (Dividends), paragraph 6 of Article 11 (Interest), paragraph 4 of Article 12 (Royalties),
paragraph 3 of Article 13 (Gains), Article 14 (Independent Personal Services) and paragraph 2
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of Article 22 (Other Income), any income or gain attributable to a permanent establishment or
fixed base during its existence is taxable in the Contracting State where such permanent
establishment or fixed base is situated even if the payments are deferred until such permanent
establishment or fixed base has ceased to exist.
ARTICLE 8
Shipping and Air Transport1. Profits of an enterprise of a Contracting State from the operation of ships or aircraft
in international traffic shall be taxable only in that State.
2. For the purposes of this Article, profits from the operation of ships or aircraft include
profits derived from the rental of ships or aircraft on a full (time or voyage) basis. They also
include profits from the rental of ships or aircraft on a bareboat basis if such ships or aircraft are
operated in international traffic by the lessee, or if the rental income is incidental to profits from
the operation of ships or aircraft in international traffic. Profits derived by an enterprise from
the inland transport of property or passengers within either Contracting State shall be treated as
profits from the operation of ships or aircraft in international traffic if such transport is
undertaken as part of international traffic.
3. Profits of an enterprise of a Contracting State from the use, maintenance, or rental of
containers (including trailers, barges, and related equipment for the transport of containers)
used in international traffic shall be taxable only in that State.
4. The provisions of paragraphs 1 and 3 shall also apply to profits from participation in
a pool, a joint business, or an international operating agency.
ARTICLE 9
Associated Enterprises
1. Where:
a) an enterprise of a Contracting State participates directly or indirectly in the
management, control or capital of an enterprise of the other Contracting State; or

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b) the same persons participate directly or indirectly in the management, control,
or capital of an enterprise of a Contracting State and an enterprise of the other
Contracting State,
and in either case, conditions are made or imposed between the two enterprises in their
commercial or financial relations which differ from those that would be made between
independent enterprises, then any profits that, but for those conditions, would have accrued to
one of the enterprises, but by reason of those conditions have not so accrued, may be included
in the profits of that enterprise and taxed accordingly.
2. Where a Contracting State includes in the profits of an enterprise of that State, and
taxes accordingly, profits on which an enterprise of the other Contracting State has been
charged to tax in that other State, and the profits so included are profits that would have accrued
to the enterprise of the first-mentioned State if the conditions made between the two enterprises
had been those that would have been made between independent enterprises, then that other
State, if it agrees with such adjustment, shall make a corresponding adjustment to the amount of
the tax charged therein on those profits. In determining such adjustment, due regard shall be
paid to the other provisions of this Convention and the competent authorities of the Contracting
States shall if necessary consult each other.
3. The provisions of paragraph 1 shall not limit any provisions of the law of either
Contracting State that permit the distribution, apportionment, or allocation of income,
deductions, credits, or allowances between persons, whether or not residents of a Contracting
State, owned or controlled directly or indirectly by the same interests when necessary in order
to prevent evasion of taxes or clearly to reflect the income of any such persons.
ARTICLE 10
Dividends
1. Dividends paid by a company that is a resident of a Contracting State to a resident of
the other Contracting State may be taxed in that other State.
2. However, such dividends may also be taxed in the Contracting State of which the
company paying the dividends is a resident, and according to the laws of that State, but, except
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as provided in paragraph 3, if the beneficial owner of the dividends is a resident of the other
Contracting State, the tax so charged shall not exceed:
a) 5 percent of the gross amount of the dividends if the beneficial owner is a
company that owns at least 10 percent of the voting stock of the company paying the
dividends;
b) 15 percent of the gross amount of the dividends in all other cases.
This paragraph shall not affect the taxation of the company in respect of the profits out of which
the dividends are paid.
3. Subparagraph a) of paragraph 2 shall not apply in the case of dividends paid by a
Regulated Investment Company (RIC) or a Real Estate Investment Trust (REIT). In the case of
dividends paid by a RIC, subparagraph b) of paragraph 2 shall apply. In the case of dividends
paid by a REIT, subparagraph b) of paragraph 2 also shall not apply unless:
a) the beneficial owner of the dividends is an individual holding an interest of
not more than 10 percent of the REIT;
b) the dividends are paid with respect to a class of stock that is publicly traded
and the beneficial owner of the dividends is a person holding an interest of not more
than 5 percent of any class of the REIT's stock; or
c) the beneficial owner of the dividends is a person holding an interest of not
more than 10 percent of the REIT and the REIT is diversified.
4. Notwithstanding paragraph 2, dividends may not be taxed in the Contracting State of
which the company paying the dividends is a resident if the beneficial owner of the dividends is
the other Contracting State or a political subdivision or local authority thereof or a resident of
the other Contracting State that is a governmental entity constituted and operated exclusively to
administer or provide pension benefits, provided in each case that the dividends are not derived
from carrying on a trade or business or from an associated enterprise.
5. The term "dividends" as used in this Article means income from shares or other
rights, not being debt-claims, participating in profits, as well as income from other corporate
rights that is subjected to the same taxation treatment as income from shares by the laws of the
State of which the company making the distribution is a resident. The term "dividends" also
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includes income from arrangements, including debt obligations, carrying the right to participate
in, or determined with reference to, profits to the extent so characterized under the laws of the
Contracting State in which the income arises.
6. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the
dividends, being a resident of a Contracting State, carries on business in the other Contracting
State of which the company paying the dividends is a resident, through a permanent
establishment situated therein, or performs in that other State independent personal services
from a fixed base situated therein, and the dividends are attributable to such permanent
establishment or fixed base. In such case the provisions of Article 7 (Business Profits) or
Article 14 (Independent Personal Services), as the case may be, shall apply.
7. A Contracting State may not impose any tax on dividends paid by a company that is
a resident of the other Contracting State, except insofar as the dividends are paid to a resident of
that State or the dividends are attributable to a permanent establishment or a fixed base situated
in that State.
ARTICLE 11
Interest
1. Interest arising in a Contracting State and derived by a resident of the other
Contracting State may be taxed in that other State.
2. However, such interest may also be taxed in the Contracting State in which it arises
and according to the laws of that State, but if the beneficial owner of the interest is a resident of
the other Contracting State, the tax so charged shall not exceed:
a) 4.95 percent of the gross amount of the interest if the interest is beneficially
owned by any financial institution (including an insurance company); and
b) 10 percent in all other cases.
3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State
shall be exempt from tax in that State if:
a) the interest is paid by that State or a political subdivision or local authority
thereof;
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b) the beneficial owner of the interest is the other Contracting State or a political
subdivision or local authority thereof or an instrumentality wholly owned by that other
State; or
c) the beneficial owner of the interest is a resident of the other State and the
interest is paid with respect to debt obligations that have been made, guaranteed or
insured, directly or indirectly, by that other State or a wholly owned instrumentality
thereof.
4. a) Notwithstanding the provisions of paragraph 2, interest paid by a resident of a
Contracting State and that is determined with reference to receipts, sales, income, profits
br other cash flow of the debtor or a related person, to any change in the value of any
property of the debtor or a related person or to any dividend, partnership, distribution or
similar payment made by the debtor to a related person, and paid to a resident of the
other State also may be taxed in the Contracting State in which it arises, and according
to the laws of that State, but if the beneficial owner is a resident of the other Contracting
State, the gross amount of the interest may be taxed at a rate not exceeding the rate
prescribed in subparagraph b) of paragraph 2 of Article 10 (Dividends); and
b) notwithstanding the provisions of paragraphs 2 and 3, interest that is an
excess inclusion with respect to a residual interest in a real estate mortgage investment
conduit may be taxed by each State in accordance with its domestic law.
5. The term "interest" as used in this Convention means income from debt-claims of
every kind, whether or not secured by mortgage and whether or not carrying a right to
participate in the debtor's profits, and in particular, income from government securities, and
income from bonds or debentures, including premiums or prizes attaching to such securities,
bonds, or debentures, as well as all other income that is treated as interest by the taxation law of
the Contracting State in which the income arises. Income dealt with in Article 10 (Dividends)
and penalty charges for late payment shall not be regarded as interest for the purposes of the
Convention.
6. The provisions of paragraphs 1, 2, 3 and 4 shall not apply if the beneficial owner of
the interest, being a resident of a Contracting State, carries on business in the other Contracting
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State in which the interest arises through a permanent establishment situated therein, or
performs in that other State independent personal services from a fixed base situated therein,
and the interest is attributable to such permanent establishment or fixed base. In such case the
provisions of Article 7 (Business Profits), or Article 14 (Independent Personal Services), as the
case may be, shall apply.
7. For purposes of this Article, interest shall be deemed to arise in a Contracting State
when the payer is that State itself or a political subdivision, local authority, or resident of that
State. Where, however, the person paying the interest, whether a resident of a Contracting State
or not, has in a Contracting State a permanent establishment or a fixed base or derives profits
that are taxable on a net basis in that State under paragraph 5 of Article 6 (Income From
Immovable Property (Real Property)) or paragraph 1 of Article 13 (Gains), and such interest is
borne by such permanent establishment or fixed base or allocable to such profits then such
interest shall be deemed to arise in the State in which the permanent establishment or fixed base
is situated or from which such profits are derived.
8. Where, by reason of a special relationship between the payer and the beneficial
owner or between both of them and some other person, the amount of the interest, having
regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed
upon by the payer and the beneficial owner in the absence of such relationship, the provisions
of this Article shall apply only to the last-mentioned amount. In such case the excess part of the
payments shall remain taxable according to the laws of each Contracting State, due regard being
had to the other provisions of the Convention.
ARTICLE 11A
Branch Tax
Notwithstanding any other provisions of this Convention, a company that is a resident
of a Contracting State may be subject in the other Contracting State to a tax in addition to the
tax on profits. Such additional tax, however, may not exceed:
a) 5 percent of the "dividend equivalent amount" of the business profits of the
company that are either attributable to a permanent establishment in that other State or
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are subject to tax on a net basis in that other State under Article 6 (Income From
Immovable Property (Real Property)) or paragraph 1 of Article 13 (Gains); and
b) 10 percent of the "excess interest." In the case of persons referred to in
subparagraph a) of paragraph 2 of Article 11 (Interest), the tax imposed under this
subparagraph shall not be levied at a rate in excess of 4.95 percent.
ARTICLE 12
Royalties
1. Royalties arising in a Contracting State and derived by a resident of the other
Contracting State may be taxed in that other State.
2. However, such royalties may also be taxed in the Contracting State in which they
arise and according to the laws of that State, but if the beneficial owner is a resident of the other
Contracting State, the tax so charged shall not exceed:
a) 5 percent of the gross amount of the royalties described in subparagraph a) of
paragraph 3; and
b) 10 percent of the gross amount of the royalties described in subparagraph b)
of paragraph 3.
3. The term "royalties" as used in this Convention means payments of any kind
received in consideration:
a) for the use of, or the right to use, industrial, commercial, or scientific
equipment; or
b) for the use of, or the right to use, any copyright of literary, dramatic, musical,
artistic, or scientific work, including cinematographic films, tapes, and other means of
image or sound reproduction, any patent, trademark, design or model, plan, secret
formula or process, or other like right or property, or for information concerning
industrial, commercial, or scientific experience. The term "royalties" also includes
gains derived from the alienation of such right or property to the extent that such gains
are contingent on the productivity, use, or disposition thereof.
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4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the
royalties, being a resident of a Contracting State, carries on business in the other Contracting
State, in which the royalties arise, through a permanent establishment situated therein, or
performs in that other State independent personal services from a fixed base situated therein,
and the royalties are attributable to such permanent establishment or fixed base. In such case
the provisions of Article 7 (Business Profits) or Article 14 (Independent Personal Services), as
the case may be, shall apply.
5. Royalties shall be deemed to arise in a Contracting State when they are in
consideration for the use of, or the right to use, property, information or experience in that
State.
6. Where, by reason of a special relationship between the payer and the beneficial
owner or between both of them and some other person, the amount of the royalties, having
regard to the use, right, or information for which they are paid, exceeds the amount which
would have been agreed upon by the payer and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply only to the last-mentioned amount. In
such case the excess part of the payments shall remain taxable according to the laws of each
Contracting State, due regard being had to the other provisions of the Convention.
ARTICLE 13
Gains
1. Gains or income derived by a resident of a Contracting State from the alienation of
immovable property (real property) situated in the other Contracting State may be taxed in that
other State.
2. For the purposes of this Article, the term "immovable property (real property)
situated in the other Contracting State" includes immovable property (real property) referred to
in Article 6 (Income From Immovable Property (Real Property)) that is situated in that other
Contracting State and an interest in a partnership, trust or estate to the extent that its assets
consist of immovable property (real property) situated in that other State. It also includes a
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United States real property interest or an equivalent interest in Venezuelan immovable property
(real property).
3. Gains or income from the alienation of personal (movable) property that are
attributable to a permanent establishment that an enterprise of a Contracting State has in the
other Contracting State, or that are attributable to a fixed base that is available to a resident of a
Contracting State in the other Contracting State for the purpose of performing independent
personal services, and gains or income from the alienation of such a permanent establishment
(alone or with the whole enterprise) or such a fixed base, may be taxed in that other State.
4. Gains or income derived by an enterprise of a Contracting State from the alienation
of ships, aircraft, or containers operated in international traffic or personal property pertaining
to the operation or use of such ships, aircraft or containers shall be taxable only in that State.
5. Gains or income from the alienation of any property other than property referred to in
paragraphs 1 through 4 shall be taxable only in the Contracting State of which the alienator is a
resident.
ARTICLE 14
Independent Personal Services
1. Subject to the provisions of Article 7 (Business Profits), income derived by an
individual who is a resident of a Contracting State in respect of professional services or similar
activities of an independent character shall be taxable only in that State. However, such income
may be taxed in the other Contracting State if such individual has a fixed base regularly
available to him in the other Contracting State for the purpose of performing those activities. In
that case, only so much of the income as is attributable to that fixed base may be taxed in that
other Contracting State.
2. The term "professional services" includes especially independent scientific, literary,
artistic, educational, or teaching activities as well as the independent activities of physicians,
lawyers, engineers, architects, dentists, and accountants.
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ARTICLE 15
Dependent Personal Services
1. Subject to the provisions of Articles 16 (Directors' Fees), 19 (Pensions, Social
Security, Annuities, and Child Support), 20 (Government Service), and 21 (Students, Trainees,
Teachers and Researchers), salaries, wages, and other similar remuneration derived by a
resident of a Contracting State in respect of an employment shall be taxable only in that State
unless the employment is exercised in the other Contracting State. If the employment is so
exercised, such remuneration as is derived therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of
a Contracting State in respect of an employment exercised in the other Contracting State shall
be taxable only in the first-mentioned State if:
a) the recipient is present in the other State for a period or periods not exceeding
in the aggregate 183 days in any twelve month period beginning or ending in the taxable
year concerned;
b) the remuneration is paid by, or on behalf of, an employer who is not a
resident of the other State; and
c) the remuneration is not borne by a permanent establishment or a fixed base
that the employer has in the other State.
3. Notwithstanding the preceding provisions of this Article, remuneration described in
paragraph 1 that is derived by a resident of a Contracting State in respect of an employment as a
member of the crew of a ship or aircraft, or as other personnel regularly employed to serve
aboard a ship or aircraft, operated in international traffic shall be taxable only in that State.
ARTICLE 16
Directors' Fees
Notwithstanding the provisions of Articles 14 (Independent Personal Services) and 15
(Dependent Personal Services), directors' fees and other similar payments derived by a resident
of a Contracting State for services performed in the other Contracting State in his capacity as a
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member of the board of directors of a company which is a resident of the other Contracting
State may be taxed in that other State.
ARTICLE 17
Limitation on Benefits
1. A person that is a resident of a Contracting State and derives income from the other
Contracting State shall be entitled to the benefits of this Convention in that other Contracting
State only if such person is:
a) an individual and would not be a resident of another country under the
principles of subparagraphs a) and b) of paragraph 3 of Article 4 (Residence); or
b) a Contracting State, a political subdivision or local authority thereof, a
wholly-owned instrumentality of a Contracting State, a political subdivision or local
authority thereof, or a company wholly-owned, directly or indirectly, by a Contracting
State, a political subdivision or local authority thereof; or
c) an entity that is a not-for-profit organization (including a pension fund or
private foundation) and that, by virtue of that status, is generally exempt from income
taxation in its Contracting State of residence, provided that more than half of the
beneficiaries, members, or participants, if any, in such organization are entitled to the
benefits of this Convention; or
d) engaged in the active conduct of a trade or business in the first-mentioned
Contracting State (other than the business of making or managing investments, unless
these activities are banking or insurance activities carried on by a bank or insurance
company), the income derived from the other Contracting State is derived in connection
with, or is incidental to, that trade or business, and the trade or business is substantial in
relation to the activity carried on in the other Contracting State giving rise to the income
in respect of which treaty benefits are being claimed in that other Contracting State; or
e) a company in whose principal class of shares there is substantial and regular
trading on a recognized securities exchange; or
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f) a company of which at least 50 percent of each class of shares in the company
is owned directly or indirectly by five or fewer companies entitled to the benefits under
subparagraph e), provided that in the case of indirect ownership, each intermediate
owner is a person entitled to benefits of the Convention under this paragraph; or
g) both of the following conditions are satisfied:
i) more than 50 percent of the beneficial interest in such person (or in the
case of a company, more than 50 percent of the number of shares of each class of
the company's shares) is owned, directly or indirectly, by persons who are
entitled to the benefits of the Convention under subparagraphs a), b), c), e), or f)
or who are citizens of the United States; and
ii) less than 50 percent of the gross income of such person is used, directly
or indirectly, to meet liabilities (including liabilities for interest or royalties) to
persons who are not entitled to the benefits of the Convention under
subparagraphs a), b), c), e), or f) or who are citizens of the United States.
2. Notwithstanding paragraph 1, an entidad or colectividad formed under the laws of
Venezuela otherwise entitled to benefits under paragraph 1 shall not be entitled to the benefits
of this Convention if that entidad or colectividad, or another entidad or colectividad or other
person that controls such entidad or colectividad, has outstanding a class of interests:
a) the terms of which, or which is subject to other arrangements that, entitle its
holders to a portion of the income of the entidad or colectividad derived from the
United States that is larger than the portion such holders would receive absent such
terms or arrangements; and
b) 50 percent or more of the vote or value of which is owned by persons who
are not persons entitled to the benefits of this Convention under subparagraphs a), b), c),
e), or f) of paragraph 1 or citizens of the United States.
3. Notwithstanding paragraph 1, a former long-term resident of the United States shall
not be entitled to the benefits of this Convention for the 10-year period following loss of such
status, if such loss had for one of its principal purposes the avoidance of U.S. tax, determined in
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accordance with the provisions of United States law applicable to former U.S. citizens and
long-term residents.
4. A person that is not entitled to the benefits of the Convention pursuant to the
provisions of paragraph 1 may, nevertheless, demonstrate to the competent authority of the
State in which the income arises that such person should be granted the benefits of the
Convention. For this purpose, one of the factors the competent authorities shall take into
account is whether the establishment, acquisition, and maintenance of such person and the
conduct of its operations did not have as one of its principal purposes the obtaining of benefits
under the Convention.
5. For purposes of subparagraph e) of paragraph 1, the term "recognized securities
exchange" means:
a) the Caracas and Maracaibo stock exchanges, the Bolsa Electrónica and any
stock exchange registered with the Comisión Nacional de Valores in accordance with
the Ley de Mercado de Capitales;
b) the NASDAQ System owned by the National Association of Securities
Dealers, Inc. and any stock exchange registered with the Securities and Exchange
Commission as a national securities exchange for purposes of the Securities Exchange
Act of 1934; and
c) any other stock exchange agreed upon by the competent authorities of the
Contracting States.
6. For purposes of subparagraph g) ii) of paragraph 1, the term "gross income" means
gross receipts, or where an enterprise is engaged in a business which includes the manufacture
or production of goods, gross receipts reduced by the direct costs of labor and materials
attributable to such manufacture or production and paid or payable out of such receipts.
ARTICLE 18
Artistes and Sportsmen
1. Income derived by a resident of a Contracting State as an entertainer, such as a
theater, motion picture, radio, or television artiste, or a musician, or as a sportsman, from his
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personal activities as such exercised in the other Contracting State, which income may be
exempt from tax in that other Contracting State under the provisions of Articles 14
(Independent Personal Services) and 15 (Dependent Personal Services), may be taxed in that
other State except where the amount of the compensation derived by such entertainer or
sportsman, including expenses reimbursed to him or borne on his behalf, from such activities
does not exceed six thousand United States dollars ($6,000) or its equivalent in Venezuelan
bolivares for the taxable year concerned.
2. Where income in respect of activities exercised by an entertainer or a sportsman in
his capacity as such accrues not to the entertainer or sportsman but to another person, that
income of that other person may, notwithstanding the provisions of Articles 7 (Business Profits)
and 14 (Independent Personal Services), be taxed in the Contracting State in which the
activities of the entertainer or sportsman are exercised, unless it is established that neither the
entertainer or sportsman nor persons related thereto participate directly or indirectly in the
profits of that other person in any manner, including the receipt of deferred remuneration,
bonuses, fees, dividends, partnership distributions, or other distributions.
3. The provisions of paragraphs 1 and 2 shall not apply to income derived from
activities performed in a Contracting State as an entertainer or sportsman if the visit to that
State is wholly or mainly supported by public funds of one or both of the Contracting States or
political subdivisions or local authorities thereof. In such a case, the income is taxable only in
the Contracting State of which the artiste or sportsman is a resident.
ARTICLE 19
Pensions, Social Security, Annuities, and Child Support
1. Subject to the provisions of Article 20 (Government Service), pensions and other
similar remuneration derived and beneficially owned by a resident of a Contracting State in
consideration of past employment shall be taxable only in that State.
2. Social security benefits paid by a Contracting State to a resident of the other
Contracting State or a citizen of the United States may be taxed in the first-mentioned State.
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3. Annuities, other than those covered in paragraph 1, that are derived from a
Contracting State and beneficially owned by an individual resident of the other Contracting
State shall be taxable only in the first-mentioned State. The term "annuities" as used in this
paragraph means a stated sum paid periodically at stated times during a specific time period,
under an obligation to make the payments in return for adequate and full consideration (other
than services rendered).
4. Periodic payments for the support of a minor child made pursuant to a written
separation agreement or a decree of divorce, separate maintenance, or compulsory support, paid
by a resident of a Contracting State to a resident of the other Contracting State, shall be
taxable only in that other State.
ARTICLE 20
Government Service
1. a) Remuneration, other than a pension, paid by a Contracting State or a political
subdivision or a local authority thereof to an individual in respect of services rendered
to that State or subdivision or authority shall be taxable only in that State.
b) However, such remuneration shall be taxable only in the other Contracting
State if the services are rendered in that State and the individual is a resident of that
State who:
i) is a national of that State; or
ii) did not become a resident of that State solely for the purpose of
rendering the services.
2. Subject to the provisions of paragraph 2 of Article 19 (Pensions, Social Security,
Annuities, and Child Support):
a) Any pension paid by, or out of funds created by, a Contracting State or a
political subdivision or a local authority thereof to an individual in respect of services
rendered to that State or subdivision or authority shall be taxable only in that State.
b) However, such pension shall be taxable only in the other Contracting State if
the individual is a resident of, and a national of, that State.
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3. The provisions of Articles 14 (Independent Personal Services), 15 (Dependent
Personal Services), 16 (Directors' Fees), 18 (Artistes and Sportsmen), and 19 (Pensions, Social
Security, Annuities, and Child Support) shall apply to remuneration and pensions in respect of
services rendered in connection with a business carried on by a Contracting State or a political
subdivision or a local authority thereof.
ARTICLE 21
Students, Trainees, Teachers and Researchers
1. a) Except as provided in paragraph 2, an individual who is a resident of a
Contracting State at the beginning of his visit to the other Contracting State and who is
temporarily present in that other Contracting State for the primary purpose of :
i) studying at a university or other recognized educational institution in
that other Contracting State, or
ii) securing training required to qualify him to practice a profession or
professional specialty, or
iii) studying or doing research as a recipient of a grant, allowance, or
award from a governmental, religious, charitable, scientific, literary, or
educational organization,
shall be exempt from tax by that other Contracting State with respect to the amounts described
in subparagraph b) of this paragraph for a period not exceeding 5 taxable years from the date of
his arrival in the other Contracting State, and for such additional period of time as is necessary
to complete, as a full-time student, educational requirements as a candidate for a postgraduate
or professional degree from a recognized educational institution.
b) The amounts referred to in subparagraph a) of this paragraph are:
i) payments from abroad, other than compensation for personal services,
for the purpose of his maintenance, education, study, research, or training;
ii) the grant, allowance, or award; and
iii) income from personal services performed in that other Contracting
State in an aggregate amount not in excess of five thousand United States dollars
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($5,000) or its equivalent in Venezuelan bolivares for the taxable year
concerned.
2. An individual who is a resident of a Contracting State at the beginning of his visit to
the other Contracting State and who is temporarily present in that other Contracting State as an
employee of, or under contract with, a resident of the first-mentioned Contracting State, for the
primary purpose of:
a) acquiring technical, professional, or business experience from a person other
than that resident of the first-mentioned Contracting State, or
b) studying at a university or other recognized educational institution in that
other Contracting State,
shall be exempt from tax by that other Contracting State for a period not to exceed 12 months
with respect to his income from personal services in an aggregate amount not in excess of eight
thousand United States dollars ($8,000) or its equivalent in Venezuelan bolivares.
3. An individual who is a resident of a Contracting State at the beginning of his visit to
the other Contracting State and who is temporarily present in the other Contracting State for the
purpose of teaching or carrying on research at a recognized educational or research institution
shall be exempt from tax in the other Contracting State on his income from personal services
for teaching or research at such institution for a period not exceeding two years from the date of
the individual's arrival in that other State. In no event shall any individual have the benefits of
this paragraph for more than five taxable years.
4. This Article shall not apply to income from research if such research is undertaken
not in the public interest but primarily for the private benefit of a specific person or persons.
ARTICLE 22
Other Income
1. Items of income of a resident of a Contracting State, wherever arising, not dealt with
in the foregoing Articles of this Convention shall be taxable only in that State.
2. The provisions of paragraph 1 shall not apply to income, other than income from
immovable property (real property) as defined in paragraph 2 of Article 6 (Income From
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Immovable Property (Real Property)), if the recipient of such income, being a resident of a
Contracting State, carries on business in the other Contracting State through a permanent
establishment situated therein, or performs in that other State independent personal services
from a fixed place situated therein, and the right or property in respect of which the income is
paid is attributable to such permanent establishment or fixed base. In such case the provisions
of Article 7 (Business Profits) or Article 14 (Independent Personal Services), as the case may
be, shall apply.
3. Notwithstanding the provisions of paragraphs 1 and 2, items of income of a resident
of a Contracting State not dealt with in the foregoing Articles of this Convention and arising in
the other Contracting State may also be taxed in that other State.
ARTICLE 23
Capital
1. Capital represented by immovable property (real property) referred to in Article 6
(Income From Immovable Property (Real Property)), owned by a resident of a Contracting State
and situated in the other Contracting State, may be taxed in that other State.
2. Capital represented by personal (movable) property forming part of the business
property of a permanent establishment that an enterprise of a Contracting State has in the other
Contracting State, or by personal (movable) property pertaining to a fixed base available to a
resident of a Contracting State in the other Contracting State for the purpose of performing
independent personal services, may be taxed in that other State.
3. Capital represented by ships, aircraft, and containers owned by a resident of a
Contracting State and used in international operations, and by personal (movable) property
pertaining to the operation of such ships, aircraft, and containers shall be taxable only in that
State.
4. All other elements of capital of a resident of a Contracting State shall be taxable only
in that State.
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ARTICLE 24
Relief from Double Taxation
1. It is understood that double taxation will be avoided in accordance with the
following paragraphs of this Article.
2. When a resident of Venezuela derives income that, in accordance with the provisions
of this Convention, may be taxed in the United States, Venezuela shall allow a relief to such
resident. Such relief shall be allowed in accordance with the provisions and subject to the
limitations of the law of Venezuela, as they may be amended from time to time without
changing the principle hereof. The relief may consist alternatively of:
a) an exemption of such income from Venezuelan tax, or
b) a credit against the Venezuelan tax on income.
3. The United States shall allow to a resident or citizen of the United States as a credit
against the United States tax on income:
a) the income tax paid to Venezuela by or on behalf of such citizen or resident;
and
b) in the case of a United States company owning at least 10 percent of the
voting stock of a company which is a resident of Venezuela and from which the United
States company receives dividends, the income tax paid to Venezuela by or on behalf of
the distributing company with respect to the profits out of which the dividends are paid.
Such credit shall be allowed in accordance with the provisions and subject to the limitations of
the law of the United States (as it may be amended from time to time without changing the
general principle hereof).
ARTICLE 25
Non-Discrimination
1. Nationals of a Contracting State shall not be subjected in the other Contracting State
to any taxation or any requirement connected therewith which is other or more burdensome
than the taxation and connected requirements to which nationals of that other State in the same
circumstances are or may be subjected. This provision shall, notwithstanding the provisions of
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Article 1 (General Scope), also apply to persons who are not residents of one or both of the
Contracting States.
2. The taxation on a permanent establishment which an enterprise of a Contracting
State has in the other Contracting State shall not be less favorably levied in that other State than
the taxation levied on enterprises of that other State carrying on the same activities. This
provision shall not be construed as obliging a Contracting State to grant to residents of the other
Contracting State any personal allowances, reliefs, and reductions for taxation purposes on
account of civil status or family responsibilities which it grants to its own residents.
3. Nothing in this Article shall be construed as preventing either Contracting State from
imposing a tax as described in Article 11A (Branch Tax).
4. Except where the provisions of paragraph 1 of Article 9 (Associated Enterprises),
paragraph 8 of Article 11 (Interest), or paragraph 6 of Article 12 (Royalties) apply, interest,
royalties, and other disbursements paid by an enterprise of a Contracting State to a resident of
the other Contracting State shall, for the purposes of determining the taxable profits of such
enterprise, be deductible under the same conditions as if they had been paid to a resident of the
first-mentioned State. Similarly, any debts of a resident of a Contracting State to a resident of
the other Contracting State shall, for the purpose of determining the taxable capital of the first-
mentioned resident, be deductible under the same conditions as if they had been contracted to a
resident of the first-mentioned State.
5. Enterprises of a Contracting State, the capital of which is wholly or partly owned or
controlled, directly or indirectly, by one or more residents of the other Contracting State, shall
not be subjected in the first-mentioned State to any taxation or any requirement connected
therewith which is other or more burdensome than the taxation and connected requirements to
which other similarly situated enterprises of the first-mentioned State are or may be subjected.
6. The provisions of this Article shall, notwithstanding the provisions of Article 2
(Taxes Covered), apply to taxes of every kind and description imposed by a Contracting State
or a political subdivision or local authority thereof.
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ARTICLE 26
Mutual Agreement Procedure
1. Where a person considers that the actions of one or both of the Contracting States
result or will result for him in taxation not in accordance with the provisions of this
Convention, he may, irrespective of the remedies provided by the domestic law of those States,
and the time limits prescribed in such laws for presenting claims for refund, present his case to
the competent authority of either Contracting State.
2. The competent authority shall endeavor, if the objection appears to it to be justified
and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual
agreement with the competent authority of the other Contracting State, with a view to the
avoidance of taxation which is not in accordance with the Convention. Provided that the statute
of limitations has been interrupted in accordance with the steps designated by domestic law, any
agreement reached shall be implemented and complied with, notwithstanding any time limits or
other procedural limitations in the domestic laws of the Contracting States.
3. The competent authorities of the Contracting States shall endeavor to resolve by
mutual agreement any difficulties or doubts arising as to the interpretation or application of the
Convention. In particular, the competent authorities of the Contracting States may agree:
a) to the same allocation of income, deductions, credits, or allowances of an
enterprise of a Contracting State to its permanent establishment situated in the other
Contracting State;
b) to the same allocation of income, deductions, credits, or allowances between
persons;
c) to the same characterization of particular items of income;
d) to the same application of source rules with respect to particular items of
income;
e) to a common meaning of a term;
f) to increases in any specific amounts referred to in the Convention to reflect
economic or monetary developments; and
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g) to the application of the provisions of domestic law regarding penalties, fines,
and interest in a manner consistent with the purposes of the Convention.
They may also consult together for the elimination of double taxation in cases not provided
for in the Convention.
4. The competent authorities of the Contracting States may communicate with each
other directly for the purpose of reaching an agreement in the sense of the preceding
paragraphs.
ARTICLE 27
Exchange of Information
1. The competent authorities of the Contracting States shall exchange such information
as is necessary for carrying out the provisions of this Convention or of the domestic laws of the
Contracting States concerning taxes covered by the Convention insofar as the taxation
thereunder is not contrary to the Convention. The exchange of information is not restricted by
Article 1 (General Scope). Any information received by a Contracting State shall be treated as
secret in the same manner as information obtained under the domestic laws of that State and
shall be disclosed only to persons or authorities (including courts and administrative bodies)
involved in the assessment, collection, or administration of, the enforcement or prosecution in
respect of, or the determination of appeals in relation to, the taxes covered by the Convention or
the oversight of the above. Such persons or authorities shall use the information only for such
purposes. They may disclose the information in public court proceedings or in judicial
decisions.
2. In no case shall the provisions of paragraph 1 be construed so as to impose on a
Contracting State the obligation:
a) to carry out administrative measures at variance with the laws and
administrative practice of that or of the other Contracting State;
b) to supply information that is not obtainable under the laws or in the normal
course of the administration of that or of the other Contracting State;
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c) to supply information that would disclose any trade, business, industrial,
commercial, or professional secret or trade process, or information the disclosure of
which would be contrary to public policy.
3. If information is requested by a Contracting State in accordance with this
Article, the other Contracting State shall obtain the information to which the request relates in
the same manner and to the same extent as if the tax of the first-mentioned State were the tax of
that other State and were being imposed by that other State. If specifically requested by
the competent authority of a Contracting State, the competent authority of the other Contracting
State shall provide information under this Article in the form of depositions of witnesses and
authenticated copies of unedited original documents (including books, papers, statements,
records, accounts, and writings), to the same extent such depositions and documents can be
obtained under the laws and administrative practices of that other State with respect to its own
taxes.
4. For the purposes of this Article, the Convention shall apply, notwithstanding the
provisions of Article 2 (Taxes Covered), to taxes of every kind imposed by a Contracting
State.
ARTICLE 28
Diplomatic Agents and Consular Officers
Nothing in this Convention shall affect the fiscal privileges of diplomatic agents or
consular officers under the general rules of international law or under the provisions of special
agreements.
ARTICLE 29
Entry Into Force
1. This Convention shall be subject to ratification in accordance with the applicable
procedures of each Contracting State. Each Contracting State shall notify the other through the
diplomatic channel, accompanied by an instrument of ratification, when it has completed the
required procedures.
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2. The Convention shall enter into force upon the date of the later of the notifications,
accompanied by an instrument of ratification, referred to in paragraph 1, and its provisions shall
have effect:
a) in respect of taxes withheld at source, for amounts paid or credited on or after
January 1 of the year following the date on which the Convention enters into force;
b) in respect of other taxes, for taxable periods beginning on or after January 1 of
the year following the date on which the Convention enters into force.
ARTICLE 30
Termination
1. This Convention shall remain in force until terminated by a Contracting State. Either
Contracting State may terminate the Convention at any time after five years from the date on
which the Convention enters into force, provided that at least six months prior notice of the
termination has been given through the diplomatic channel. In such event, the Convention shall
cease to have effect:
a) in respect of taxes imposed in accordance with Articles 10 (Dividends), 11
(Interest), and 12 (Royalties), for amounts paid or credited on or after January 1 of the
year following the date on which the notice is given; and
b) in respect of other taxes, for taxable periods beginning on or after January 1 of
the year following the date on which the notice is given.
2. The appropriate authority of either Contracting State may request consultations with
the appropriate authority of the other Contracting State to determine whether amendment to the
Convention is appropriate to respond to changes in the law or policy of either Contracting State.
If these consultations determine that the effect of the Convention or its application have been
unilaterally changed by reason of domestic legislation enacted by a Contracting State such that
the balance of benefits provided by the Convention has been significantly altered, the
authorities shall consult with each other with a view to amending the Convention to restore an
appropriate balance of benefits.
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IN WITNESS WHEREOF, the undersigned, being duly authorized by their respective
Governments, have signed this Convention.
DONE at Caracas, in duplicate, in the English and Spanish languages, each text being
equally authentic, this 25th day of January, 1999.
FOR THE GOVERNMENT OF THE FOR THE GOVERNMENT OF
UNITED STATES OF AMERICA: THE REPUBLIC OF VENEZUELA:
PROTOCOL
At the signing today of the Convention between the Government of the United States of
America and the Government of the Republic of Venezuela for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital,
the Contracting States have agreed upon the following provisions, which shall form an integral
part of the Convention.
1. With reference to paragraph 4 of Article 1 (General Scope)
For purposes of U.S. tax, the term "citizen" shall include a former U.S. citizen whose
loss of such status had as one of its principal purposes the avoidance of U.S. tax, but only for a
period of 10 years following such loss.
2. With reference to paragraph la) and b) of Article 3 (General Definitions)
For the sole purposes of this Convention, when referred to in a geographical sense,
Venezuela and the United States include the areas of the seabed and subsoil adjacent to their
respective territorial seas in which they may exercise rights in accordance with domestic
legislation and with international law.
3. With reference to paragraph 1 of Article 4 (Residence)
The term "resident of a Contracting State" shall also include:
a) a Contracting State or a political subdivision or local authority thereof; and
b) a pension trust or any other organization that is constituted and operated
exclusively to provide pension benefits or for religious, charitable, scientific, artistic,
cultural, or educational purposes and that is a resident of that State according to its laws,
notwithstanding that all or part of its income may be exempt from income tax under the
domestic law of that State.
4. With reference to subparagraph a) of paragraph 3 of Article 5 (Permanent
Establishment)
a) It is understood that, if an enterprise (general contractor) that has undertaken
the performance of a comprehensive project subcontracts parts of such project to a
subcontractor, time spent by such subcontractor must be considered as time spent by the
general contractor. The subcontractor has a permanent establishment only if its
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activities last more than 183 days in any twelve month period commencing or ending in
the taxable year concerned.
b) The 183 day period begins as of the date on which the construction activity
itself begins; it does not take into account time spent solely on preparatory activities,
such as obtaining permits.
5. With reference to paragraph 4 of Article 5 (Permanent Establishment)
It is understood that, in order for paragraph 4 of Article 5 (Permanent Establishment) to
apply, the activities listed in subparagraphs 4 a) through f) and conducted by the resident of a
Contracting State must each be of a preparatory or auxiliary character. Therefore, maintaining
sales personnel in a Contracting State would not be an activity excepted under paragraph 4 and,
subject to paragraphs 1, 5 and 6 of Article 5 (Permanent Establishment), would constitute a
permanent establishment.
6. With reference to paragraph 4 of Article 7 (Business Profits)
Expenses allowed as a deduction include a reasonable allocation of expenses, including
executive and general administrative expenses, research and development expenses, interest,
and other expenses, incurred in the taxable year for the purposes of the enterprise as a whole (or
the part thereof which includes the permanent establishment), regardless of where incurred, but
only to the extent that such expenses have not been deducted by such enterprise and are not
reflected in other deductions allowed to the permanent establishment, such as the deduction for
the cost of goods sold or of the value of the purchases. The allocation of such expenses must be
accomplished in a manner that reflects to a reasonably close extent the factual relationship
between the deduction and the permanent establishment and the enterprise. In determining the
allocation of a specific deduction to the permanent establishment, examples of bases and factors
which may be considered include, but are not limited to:
a) comparison of units sold,
b) comparison of the amount of gross sales or receipts,
c) comparison of costs of goods sold,
d) comparison of profit contribution,
-3-
e) comparison of expenses incurred, assets used, salaries paid, space utilized,
and time spent which are attributable to the activities of the permanent establishment,
and
f) comparison of the amount of gross income.
Research and development expense incurred with respect to the same product line may be
allocated to a permanent establishment based on a ratio of the gross receipts of the permanent
establishment to the total gross receipts of the enterprise with respect to that product line.
Venezuela will not provide a deduction with respect to any expenses allocable to income not
subject to tax in Venezuela because of its territorial system of taxation.
7. With reference to Article 8 (Shipping and Air Transport)
The provisions of Article 8 (Shipping and Air Transport) shall not affect the provisions
of the Agreement of December 29, 1987, between the Government of the United States of
America and the Government of the Republic of Venezuela for the avoidance of double
taxation with respect to shipping and air transport.
8. With reference to Article 10 (Dividends)
It is understood that the reference in Article 10 (Dividends) paragraph 4 to "a
governmental entity constituted and operated exclusively to administer or provide pension
benefits" shall include, in the case of Venezuela, private, public or mixed entities operating
under or pursuant to the Ley del Subsistema de Pensiones, enacted under the Ley Organica del
Sistema de Seguridad Social Integral, so long as the system under which the entities are
operating provides universal coverage; requires mandatory contributions by both employers and
employees; limits the discretion of employers or employees to direct investment; restricts
distributions or borrowings, directly or indirectly, except upon or until death, retirement or
disability; and requires that accounts be maintained at only one such qualifying entity at a time.
Such entities also must be operated, and their investment parameters established, pursuant to
governmental oversight and regulation. The term also shall include any equivalent entities in
the United States.
-4-
9. With reference to Article 11 (Interest)
The instrumentalities referred to in paragraph 3 shall include the U.S. Export-Import
Bank, the Federal Reserve Banks and the Overseas Private Investment Corporation, the
Venezuelan Banco de Comercio Exterior, the Banco Central de Venezuela and the Fondo de
Inversiones de Venezuela and such other instrumentalities as the competent authorities may
agree upon.
10. With reference to Article 11A (Branch Tax)
a) In the case of the United States the term "dividend equivalent amount" shall
have the meaning it has under the laws of the United States, as it may be amended from
time to time without changing the general principle thereof.
b) The term "excess interest" means the excess, if any, of:
i) interest deductible in one or more taxable years in computing the
corporation's profits that are either attributable to a permanent establishment in
the other Contracting State or subject to tax in that other State under Article 6
(Income From Immovable Property (Real Property)) or Article 13 (Gains), over
ii) the interest paid by or from such permanent establishment or trade or
business.
11. With reference to paragraph 3 of Article 12 (Royalties)
Payments received as consideration for technical services or assistance, including
studies or surveys of a scientific, geological or technical nature, for engineering works
including the plans related thereto, or for consultancy or supervisory services or assistance shall
be considered payments to which the provisions of Article 7 (Business Profits) or Article 14
(Independent Personal Services) apply.
12. With reference to Article 14 (Independent Personal Services)
Article 14 (Independent Personal Services) shall be interpreted according to the
Commentary on Article 14 (Independent Personal Services) of the 1992 Model Convention for
the Avoidance of Double Taxation with Respect to Taxes on Income and on Capital of the
Organization for Economic Cooperation and Development, and of any guidelines which, for the
application of such Article, may be developed in the future. Accordingly, it is understood that
- 5 -
the tax will be imposed on net income as if the income were attributable to a permanent
establishment and taxable under Article 7 (Business Profits).
13. With reference to Article 15 (Dependent Personal Services) and Article 16 (Directors'
Fees)
The terms "similar remuneration" and "similar payments" include benefits in kind
received in respect of an employment and any other benefits, whether or not considered as
salary in the domestic legislation of both Contracting States (including, but not limited to, the
use of a residence or automobile, health or life insurance coverage and club memberships,
provision of meals, food and groceries, child care, reimbursement of medical, pharmaceutical
and dental care expenses, provision of work clothing, toys and school supplies, scholarships,
reimbursement of training course expenses, mortuary and burial expenses).
14. With reference to paragraph 3 of Article 17 (Limitation on Benefits)
The term "long-term resident" shall mean any individual who is a lawful permanent
resident of the United States in 8 or more taxable years during the preceding 15 taxable years.
In determining whether the threshold in the preceding sentence is met, there shall not count any
year in which the individual is treated as a resident of Venezuela under this Convention, or as a
resident of any country other than the United States under the provisions of any other tax treaty
of the United States, and, in either case, the individual does not waive the benefits of such
treaty applicable to residents of the other country.
15. With reference to paragraph 2 of Article 19 (Pensions, Social Security, Annuities, and
Child Support)
The term "social security benefits" as used in this paragraph is intended to include
United States tier 1 Railroad Retirement benefits.
16. With reference to Article 21 (Students, Trainees, Teachers and Researchers)
The amounts specified in paragraphs 1 b) iii) and 2 shall be in addition to any personal
exemption otherwise allowed under the domestic law of that other Contracting State.
-6-
17. With respect to paragraph 1 of Article 25 (Non-Discrimination)
It is understood that a non-resident of a Contracting State who is subject to tax by that
State on his worldwide income by reason of being a national thereof is not in the same
circumstances as a non-resident of that State who is subject to tax on income only from sources
in that State.
18. With respect to paragraph 2 of Article 26 (Mutual Agreement Procedure)
The competent authorities shall endeavor to resolve such cases as promptly as possible.
19. With respect to Article 27 (Exchange of Information)
It is understood that in order to comply with the provisions contained in Article 27
(Exchange of Information) the competent authorities of the Contracting States are empowered
by their respective domestic laws to obtain information held by persons other than taxpayers,
including information held by financial institutions, agents and trustees.
- 7 -
IN WITNESS WHEREOF, the undersigned, being duly authorized by their respective
Governments, have signed this Protocol.
DONE at Caracas, in duplicate, in the English and Spanish languages, each text being
equally authentic, this 25th day of January, 1999.
FOR THE GOVERNMENT OF THE
UNITED STATES OF AMERICA:
FOR THE GOVERNMENT OF
THE REPUBLIC OF VENEZUELA:

 

 

 



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