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Doing Business in Venezuela 2017

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Doing Business in Venezuela 2017 Caracas Doing Business in Venezuela 2017 Table of contents Constitutional Law ............................................................................................................................... 1 Organizing a Company ........................................................................................................................ 4 Industry Location ................................................................................................................................. 7 Requirements for Registration and Permits ......................................................................................... 9 Tax System ....................................................................................................................................... 19 Foreign Investments .......................................................................................................................... 32 Intellectual Property ........................................................................................................................... 38 Mergers and Acquisitions .................................................................................................................. 41 Banks ................................................................................................................................................ 44 Securities Market ............................................................................................................................... 46 Foreign Exchange Control in Venezuela ............................................................................................ 49 Relevant Aspects of the Law on Insurance Activities ......................................................................... 53 Telecommunications .......................................................................................................................... 55 Electronic Commerce & Data Privacy ................................................................................................ 58 Foreign Trade .................................................................................................................................... 62 Energy and Natural Resources .......................................................................................................... 69 Environmental Law ............................................................................................................................ 92 Labor Legislation ............................................................................................................................... 95 Immigration Laws and Practices ........................................................................................................ 98 Price Regulation .............................................................................................................................. 101 Consumer Protection ....................................................................................................................... 106 Competition Regulation ................................................................................................................... 109 Dispute Resolution .......................................................................................................................... 112 Criminal Law .................................................................................................................................... 115 Human Rights .................................................................................................................................. 118 Science, Technology and Innovation ............................................................................................... 121 www.bakermckenzie.com | i IMPORTANT DISCLAIMER The information in this paper is current as of April 1st, 2017. Subsequent legislative amendments and other legal developments may impact the accuracy of the information contained herein. The general nature of the discussion is such that it may not be applicable to all circumstances. While every effort has been made to ensure accuracy, no responsibility can be accepted for errors and omissions, however caused. The information contained in this paper should not be relied on as legal advice and should not be regarded as a substitute for detailed advice in individual cases. No responsibility for any loss occasioned to any person acting or refraining from action as a result of material in this paper is accepted by the editors, authors or Baker & McKenzie nor its correspondent law firms who participated in the production of this publication. If advice concerning individual problems or other assistance is required, please contact your local Baker & McKenzie office. Despacho de Abogados is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional services organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. ©2017 Baker & McKenzie. All rights reserved. www.bakermckenzie.com | 2 Constitutional Law Probably no other area of law has had a more dramatic impact on the operation of the Venezuelan legal system, and on the daily life of Venezuelan citizens, than constitutional law. The reason is the perception by the Venezuelan society at large of the significance of the constitution and the significance of the legislation which has been implemented based on the constitution. True to its constitutional tradition, in December 1999, Venezuela approved its 27th Constitution. The first Venezuelan Constitution, which dates back to 1811, was only the world’s fourth constitution. Since then, there have been 26 other constitutions in force in Venezuela. The political instability associated with the continuing change of constitutions led one political leader of the 19th century to affirm that in Venezuela, “the Constitution is a little yellow book that serves any purpose.” Since 1961, the constitution has fathered a number of legal achievements. It also had a major impact on business planning in Venezuela. On 15 August 2007, the President of the Republic officially presented his proposal for the reform of several articles of the 1999 Constitution. The reforms included in the proposal were intended to create a socialist republic. Some of the major changes included: 1) a reorganization of the political-territorial division of the republic which sanctions the presidential control over elected state officials through an unelected people’s power; 2) the elimination of the state’s prohibition to fund political associations; 3) the reduction of daytime work hours to six hours; 4) a decrease in the voting age from 18 to 16; 5) the abolishment of limits on re-election for presidential terms in office; and 6) the reduction of the Venezuelan Central Bank’s power over monetary matters, giving control to the executive branch. Further, the proposed changes included a redefinition of the constitution’s economic freedom clause whereby social security benefits would be expanded and additional power granted to the State for “the cooperative construction of a Socialist Economy,” and the reform of property rights which adds the concept of social and collective property. According to the results announced by the national electoral board, the proposal was narrowly defeated on 2 December 2007 and, thus, the 1999 Constitution remained intact. However, the Constitution was later amended by a constitutional referendum held on 15 February 2009. This amendment eliminated restrictions on the re-election of the president, governors, mayors, members of the national assembly and members of the state legislatures. Venezuela is a democratic republic, divided into twenty-three states, one capital district, the federal dependencies, the federal territories and some three hundred municipalities. It is a federal state with several limitations on the powers of the states and municipalities. The main legislative powers lie with the national government and thus are centralized in the capital, the city of Caracas, which is the seat of the government. The national government consists of a legislative, an executive, a judicial, a citizen’s, and an electoral branch. The states and the municipalities only have a legislative and an executive branch. The national legislative branch or national assembly is composed of representatives who are elected every five years by secret ballot. Their powers are not restricted to the approval of laws, but also encompass the control of the public administration. The main political parties are represented in the national assembly. www.bakermckenzie.com | 1 The state and municipal legislatures exercise basically the same powers at a local level. The ordinances enacted by the municipal governments may have a decisive influence on the structuring of business within a given municipality. At times, through special laws, i.e., enabling laws, the national assembly has temporarily empowered the President of the Republic to enact laws on different matters. The main political actors are the members of the executive branch of the government, which is made up of the president of the republic, the executive vice-president of the republic, and the ministers. Together, they act as the full cabinet. The president of the republic is elected every six years by
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