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TAX NEWS - January 2010

Venezuela: Changes made to foreign currency exchange rates

The Venezuelan government and the country's central bank issued an agreement (Exchange Agreement No. 14) on 8 January 2022 that introduces a multiple exchange rate system. The agreement sets two initial official exchange rates: a "preferential rate" of VEF 2.60 to USD 1 and a "free rate" or "oil dollar" of VEF 4.30 per USD 1. Agreement No. 14 entered into effect on 11 January 2010.

The preferential rate generally will be applied to most essential items (e.g. food, medical care, family remittances of USD to Venezuelan students abroad, consulates and embassies in the country as well as retirees, pensioners and special cases), imports of machinery and equipment, science and technology and the non-oil public sector, including payment of the external public debt.

The free rate will be applied to the automobile industry, trade, telecommunications, chemicals, steel industries, computers, rubber and plastics, electrical appliances, textiles, electrical services, construction, electronics, graphics, tobacco and beverages, as well as to dividends, royalties and capital repatriation, among others.

Different foreign exchange rates will be applied in specific cases as follows:

- VEF 2.5935 to USD 1 for purchases of foreign currency from the public sector, except for foreign currency from the export of oil and gas and non-oil exports. This exchange rate also will apply to purchases of foreign currency from consulates, embassies, their officials and officials of international organizations (exchange rates for purchases of foreign currency from consulates, etc., is set forth in Exchange Agreement No. 15, published in the Official Gazette on 19 January 2022);

- VEF 4.2893 to USD 1 or VEF 2.5935 to USD 1 for purchases of foreign currency from the export of oil and gas. The central bank will determine which rate applies;

- VEF 4.2893 to USD 1 for purchases of foreign currency from FONDEN, a state-owned corporation whose purpose is to finance projects in Venezuela;

- VEF 2.60 to USD 1 USD or VEF 4.30 to USD 1 for purchases of foreign currency by PDVSA, the State-owned oil enterprise. The central bank will determine which rate applies;

- The central bank and the executive government will publish another exchange agreement that will set the exchange rate for the purchase of foreign currency to pay principal, interest, guarantees and collateral payments on foreign private debt with foreign creditors, including multilateral and bilateral entities, foreign government entities and export finance agencies; and

- The central bank and the executive government will determine the exchange rate for the purchase of securities issued by Venezuela or other Venezuelan government entities in USD from the primary market paid in VEF.

Individuals and private enterprises exporting goods and services may retain up to 30% of the foreign currency received from the export of goods and services, but the retained amounts must be used to cover expenses related to the export of goods and services, excluding financial debt.

Transactions in foreign currency must be entered in the financial statements at the applicable exchange rate. When VAT is paid to the customs authorities, the exchange rate of VEF 2.60 or VEF 4.30 will apply to the import of goods and services, respectively. An exchange rate of VEF 4.2893 to USD 1 will be applied to the export of goods and services.

A grandfathering provision applies to currency requests that were formally approved by the Foreign Exchange Commission (CADIVI) before 11 January 2010. In those cases, the exchange rate is VEF 2.15 to USD 1, although the VEF 2.60 rate will apply to currency requests approved by CADIVI, and submitted and received by the central bank by 8 January 2022 for which liquidation was not requested by the exchange operators to the central bank prior to that date.
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