Business Opportunities in Venezuela
The idyllic geographic location and mammoth oil reserves make Venezuela a hot pick among investors. The Latin American country has the largest oil reserves in the world, with more than 300 billion barrels in reserves. It alone contributes nearly 18% of the world’s oil. Venezuela’s Gross Domestic Product (GDP) was 111.81 billion USD in FY 2021 and is estimated to rise to 200 billion USD by the end of 2023.
Recently, the country has grown beyond its dependence on oil reserves that make up 50% of its revenue. One potential opportunity is the significant increase in electronic commerce, with the Venezuelan Chamber of Electronic Commerce recording a growth of over 2000% in e-commerce. Other industries contributing significantly to the Venezuelan economy include construction materials, food processing, textile, steel and mining.
Despite its small economy, the introduction of several investor-friendly policies by the Venezuelan government makes the country a highly promising ground for new business ventures. However, companies looking to do business in Venezuela must navigate the challenges and risks associated with the country’s economic and political situation.
If you wish to start a business in Venezuela, this article will walk you through the nitty-gritty of the company registration process in Venezuela and how to start a business in Venezuela.
Benefits of Starting a Business in Venezuela
Of the various advantages of doing business in Venezuela, some are –
- A highly privileged location on the South American coastline and the country offers easy access to Panama Canal, the Caribbean, Central America, and the US east coast to the companies establishing a business here. It provides a huge customer base of over 332 million people.
- Venezuela is a great country to start a business as the government provides non-discriminatory policies for national and foreign investors. With equal opportunities in hand, your company can grow tremendously.
- Favorable labor laws giving employers the upper hand attract potential businesses to set up their ventures in this Hispanic country.
- Based on oil production alone, Venezuela is the fifth largest member of OPEC. It is among the top four foreign oil suppliers to the United States. It offers favorable market opportunities to established businesses and startups alike.
Requirements for Starting a Business in Venezuela
Cartagena Agreement Commission oversees all foreign investments in Venezuela. The Investment Fund of Venezuela (Fondo de Inversiones de Venezuela) (FIV), the Ministry of Finance’s Foreign Investment Superintendency or SIEX (Superintendencia de Inversiones Extranjeras), and various other ministries govern all employment and investments. The Central Bank of Venezuela documents foreign investment transactions and the Foreign Exchange Administration registers them.
Some of the most crucial eligibility criteria to start a business in Venezuela are
Individuals need to obtain a business visa, that is, TR-N Visa, to start a business in Venezuela legally.
The TR-N visa is granted for a year and allows one a continuous or cumulative stay for up to 180 days within the validity.
Business name registration in Venezuela is the next important step to establishing a business. Employers must be careful while choosing a name for their organization. Following are the steps to register the company name with the Mercantile Registry:
- Perform a name search before the Mercantile Registry to determine if the name is available.
- If the name is available, pay the corresponding fees to reserve the name.
Every company, be it an LLC (Sociedad de Responsabilidad limitada) or a PLC (Publicly Limited Company), must appoint a director of any nationality to set up business in Venezuela. Enterprises can have multiple directors if required. LLCs can have 100% foreign ownership. Directors must also be entered into the public register.
All enterprises must have one shareholder. If it’s a PLC, the requirement is only 1, while for an LLC, it is at least 1. A company can have as many shareholders as they want.
All companies must register with the national tax authorities to obtain a TIN (Tax Identification Number). To begin operations, they must also obtain the necessary registration from the Municipal Tax Authorities and labor authorities.
Licenses & permits
Once the company registration process in Venezuela is complete with relevant authorities such as the tax and labor departments and the Mercantile Registry, the company is issued the appropriate trade license. Specific industrial sectors like construction, health, and hospitality may need additional licenses from relevant Venezuelan authorities. Businesses must also procure permits/certificates from road, fire and telecom agencies. They must also complete property registration.
The total amount of capital a shareholder contributes to a particular business is the paid-up capital. An LLC requires a minimum capital of USD 4 and a maximum paid-up capital of 400 USD, whereas a PLC has no limitations.
Businesses of varying sizes and taxable incomes in Venezuela comply with varying tax structures. Some taxes entrepreneurs need to pay to include corporate tax, local municipal tax, asset tax, capital gains tax, and others. The payable tax is revised every year in February. The various tax rates the Venezuelan government imposes on businesses are:
- Corporations must pay a progressive tax rate starting at 15% up to 34%, depending on their size.
- 1% tax on assets and 1% tax on capital gains.
- Value-Added Tax (VAT): The standard VAT rate in Venezuela is currently 16%, although it may change every year, ranging from 8% to 16.5%.
- Municipal taxes: Municipalities in Venezuela have the power to create and collect taxes, and businesses may be subject to various municipal taxes depending on their location and activities. These may include taxes on real estate, business licenses, and advertising.
Foreign companies operating within the territory of Venezuela are liable to pay corporate income taxes for the income generated from within the country only.
Types of Business Structures in Venezuela
The most common business structures foreign enterprises use to set up a business in Venezuela are:
Limited Liability Company (LLC)
- A foreign company can set up an LLC in Venezuela by submitting paid-up capital.
- It should be registered with the Commercial Register Office.
- The liability is restricted to the fund or paid-up capital.
- LLC must appoint one director and shareholder.
- Any branch office in Venezuela by a foreign company has no separate legal identity.
- The parent company bears complete legal responsibility for the branches.
- It can be completely foreign-owned and conduct its business within the Venezuelan territory. It provides services in the country.
- A PLC or Publicly Limited Company requires no paid-up capital and is foreign entrepreneurs’ preferred business structure.
- It requires only one shareholder and one director for the incorporation, irrespective of their nationality.
- Entrepreneurs can enter into partnerships with local businesses to establish a General Commercial Partnership or a Limited Liability Partnership (LLP).
- In the case of General partnerships, the shareholders are completely liable for the debts on their assets.
- In LLP, the general partner’s liability is unlimited, while the limited partner’s liability is restricted to their share in the paid-up capital.
Company Registration Process
The procedure for incorporation of a company in Venezuela has been broken down in detail:
Step 1: Select a legal entity
- Start the company registration process in Venezuela by selecting a legal entity.
- Ensure it justifies the company operation you have in mind.
Step 2: Company name search and registration
- Select a suitable company name and search for its availability.
- Once decided, you can register your company name with Mercantile Registry.
Step 3: Publish Articles in the newspaper
- Publish articles in a local newspaper (Gaceta Forense del Registro Mercantil) for three days.
Step 4: Register the Board of Directors
- Next, register corporate books, Shareholders’ Books, and Shareholders’ Meeting Minutes Book.
- Register Board of Directors.
Step 5: Register Company
- Register the company at SENIAT (National integrated service of customs and tax administration) with RIF (Fiscal Registry) to obtain the fiscal number.
- Paying the company registration fee.
Step 6: Other requirements
- Register as a taxpayer with the Venezuelan national tax authorities
- Obtaining a commercial license from the appropriate municipal corporation.
How Much Does it Cost to Incorporate a Company in Venezuela?
The cost of incorporating a company in Venezuela varies depending on multiple factors and requirements:
- The type of business
- The volume of business activities
- The fees of service providers
Depending on the company structure and type, businesses wanting to incorporate their companies in Venezuela must pay a one-time company incorporation fee and other annual fees.
- The approximate cost of incorporating an LLC in Venezuela is US$ 6,500 for one year. Other engagement fees include corporate bank account set-up, RIF application, legal registered office, translation, project management, tax and all government registration fees, amounting to US$ 42,820.
- The engagement fee for incorporating a PLC is US$ 14,100, for a branch of a foreign company, it is US$ 45,620, and for a representative office, it is US$ 42,820.
- The specific costs mentioned are subject to yearly change.
Are Foreigners in Venezuela on Certain Passes Allowed to Start a Business in Venezuela?
Entrepreneurs wishing to start a business in Venezuela must obtain the necessary work visa/permit. The Venezuelan incorporation process is quite straightforward. The first step for foreign nationals is to register the company with the Mercantile Registry and Tax Authority. In addition, foreigners in Venezuela do not need a permanent residence to own a business.
Government Assistance for Foreign-owned Businesses
The Venezuelan Constitution does not discriminate between national and foreign-owned businesses offering fair competition to companies of all origins. The progressive labor laws work in favor of entrepreneurs giving them increased control over salary structures.
The Government is of late promoting FDIs and has decriminalized foreign exchange giving greater access and ease to foreign companies and investors. In addition, the Latin American country offers a wide tax and investment treaty network. The Government has bilateral investment treaties (in force) with 25 countries to protect further and welcome investors.
How Multiplier Can Help?
Multiplier can assist you by offering a robust, reliable, and secure infrastructure to set up a business in Venezuela.
Our integrated SaaS-based platform can help you attract talent across borders and communicate with your cross-border teams, minus the hassle of incorporating a new entity. Streamline payroll management, ESOPs for startups, employment contract generation, and contingent workforce management at affordable costs with experts at Multiplier.