Venezuela Expatriates

This report evidences that there is limited guidance available in Venezuela to aid in the interpretation of the definition of the permanent establishment (PE) concept. There is no statutory guidance available as it is not customary in Venezuela for Congress to "regulate" or condition the application of treaties beyond the provisions in the tax treaty itself, as approved by Congress.
Sources of authority are mostly limited to case law and to guidance issued by the Venezuelan tax authority (SENIAT) in advisory letter rulings or particular deficiency claims, neither of which creates a stare decisis status and hence may change without the need for proper or in-depth justification. On some occasions, as this report will show, limited guidance can also be found in tax treaty protocols.
Court cases dealing with the notion of PE are virtually non-existent. The only exception worth mentioning is the Geoservices case1 which to some extent has language that could be interpreted as a ratification that under a standard PE definition the rendering of services per se should not create a PE for the taxpayer.
Unfortunately for taxpayers, Venezuelan law does not require advisory letter rulings to be made public, or for consistency between them, with respect to administrative case law. SENIAT consistently makes use of such discretionary power with the consequence that it is extremely difficult for tax practitioners and taxpayers to keep up to date with its position, a situation that is even more delicate when dealing with complex international tax cases, let alone when there is a tendency in Venezuelan tax treaty negotiation, evidenced more particularly in the last decade, to rely more heavily on the PE rule under the UN model, with the added complexities of some peculiar changes and adjustments dealing with the services PE, insurance PE and most notably the agency PE.
As the report will also show, because of the non-binding nature of private letter rulings, it is very common to find similar cases with contradictory opinions by SENIAT. Particularly disturbing is a recent ruling that changes the traditional interpretation that a subsidiary would not on its own result in a PE for its parent.2
Although there has been some modest evolution in the analysis of the definition by SENIAT there is still a long way to go before a clear and complete understanding of the term under applicable tax treaties emerges. In general, and consistent with the OECD and UN commentaries, SENIAT recognizes that the first step in determining whether a PE is deemed to exist is the analysis of whether the relevant taxpayer has a "fixed place of business through which the business of an enterprise is wholly or partly carried on" .
Nevertheless, there is still a lot to cover in understanding all the aspects associated with such basic definition and the ramifications resulting from its interplay with the other paragraphs completing the full scope of the definition contained under article 5 of both the OECD and UN models.
With a view to these circumstances, the report underlines the view of the reporters that to a reasonably large extent significant weight has and should continue to be given to the OECD and UN model commentaries when interpreting the PE definition under Venezuelan tax treaties.