By Carolina Soteldo Silva, Anabel Paz Miranda and Sergio Fernández

The new value of the T.U. applies to all national taxes. This means that any amounts set in tax units under our tax laws must be expressed in bolivars following its conversion using the new value of Bs. 14,800.

For VAT, individuals and legal entities shall be subject to the tax when making or expecting to make sales of goods or services in an amount greater than Bs. 44,400,000 during the current fiscal year.

1. FOR INDIVIDUALS

1a Income other than salaries and wages:

The change in value of the Tax Unit implied the modification of the applicable withholdings. For the purposes of income tax withholdings applicable to payments other than the salaries of individuals, the following subtrahends shall apply immediately, in accordance with the stated withholding percentage:

WITHHOLDING

SUBTRAHEND

PAYMENTS IN EXCESS OF Bs.

1%

12,333

1,233,334

3%

37,000

1,233,334

Accordingly, withholdings shall solely apply to individuals when a payment exceeds Bs. 1,233,334.

Additionally, in determining their Net Annual Income for Income Tax purposes, individuals are entitled to a standard exemption of 774 TUs, now equivalent to Bs. 11,455,200.

1b Income from Salaries and Wages:

The variation in the withholding percentages of the persons receiving salaries and wages must be notified to the withholding agents within the first fifteen days of March, in accordance with the provisions of the first paragraph of Article 7 of the current Withholding Regulations (Decree No. 1.808, Official Gazette No. 36.203). Such variations shall be considered from the month of April.

Additionally, only individuals expecting to obtain compensation from one or more debtors in excess of Bs. 14,800,000.00 during the current calendar year shall be subject to withholding at source, in accordance with Article 2 of the current Withholdings Regulations.

For individuals to determine the Net Annual Taxable Income under the Income Tax, the standard exemption of 774 TUs is now equivalent to Bs. 11,455,200.

2. FOR LEGAL ENTITIES

For withholdings made from legal entities, the change in the Tax Unit applies immediately upon publication in the Official Gazette.

Additionally, in the area of the Income Tax, the brackets for rates applicable to individuals and legal entities are modified in accordance with the adjusted Tax Unit.

For VAT, whether an individual or legal entity is subject to the tax, is determined by whether they make or expect to make sales of goods or services exceeding Bs. 44,400,000 during the current fiscal year.

Also, starting in March 2002, it is important for those needing the services of Public Agencies (agreements, powers of attorney, formalities, briefs, appeals and applications, among others) to know that, except in special cases, each folio must bear the equivalent to Bs. 296 in revenue stamps.

The importance of these changes in the area of withholdings is particularly significant due to the strict Penalty System established in the 2001 Reform of the Organic Tax Code.

If you require additional information or clarification on the matters set out herein, please do not hesitate to contact our Tax Department.

Venezuela TORRES, PLAZ & ARAUJO Carolina Soteldo S. csoteldo@tpa.com.ve. Anabel Paz M. apaz@tpa.com.ve Sergio Fernández C.