Law for the Coordination and Harmonization of the Tax Powers of States and Municipalities

Last Thursday, August 10, 2023, the Organic Law on Coordination and Harmonization of the Tax Powers of States and Municipalities was enacted (Official Gazette Special No. 6755 of August 10, 2023). Please find below some relevant aspects:

Purpose. The purpose of the Law is the coordination and harmonization of the tax powers of the States and Municipalities, establishing the principles, parameters, limitations, taxes and applicable rates (article 1).

Supplementary application. The provisions of the Law take precedence over the existing ones, the provisions of the Organic Tax Code will be considered supplementary to the contents of the Harmonization Law (article 6)

Limits to the tax powers. The Harmonization Law emphasizes that taxes may not be confiscatory in nature or allow multiple interjurisdictional taxation. Likewise, taxes affecting imports are prohibited, as well as those that serve as barriers to exports or the transit of goods (article 10).

Non-discrimination and freedom of movement. The Harmonization Law prohibits states and municipalities from taxing goods originating from states or municipalities other than their own and the products of their own jurisdiction (article 11).

Payment in local currency. All taxes, as well as their penalties, must be paid in bolivars (article 13)

Account unit. The states and municipalities may only use, as a dynamic account unit for the calculation of taxes, accessories and penalties, the exchange rate of the highest value currency published by the Central Bank of Venezuela, without prejudice to the exclusivity of payment in bolivars (article 14).

Limitations on penalties. Penalties established for tax infringements or noncompliance may not exceed the limits established in the Organic Tax Code (article 15).

Simplification of requirements. Authorities may not require taxpayers to obtain the necessary solvency for the execution of a procedure when it is the responsibility of the authority to issue the solvency (article 18). They may not require the fulfillment of a procedure that has been previously verified for a previous procedure whose completion is a prerequisite for the procedure in question (article 19). Likewise, the states and municipalities must coordinate the procedures whose coordination is possible, avoiding unnecessary repetitions (article 26).

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