I OVERVIEW OF M&A ACTIVITY

During 2016, M&A activity in Venezuela was not very significant, apart from the very few implementations in Venezuela of international acquisitions between multinational conglomerates.

II GENERAL INTRODUCTION TO THE LEGAL FRAMEWORK FOR M&A

Although the Venezuelan Code of Commerce does not define ‘mergers’, Articles 343 to 346 provide the registration and publication requirements that must be complied with for a merger to become effective; specifically, each entity must notify the respective mercantile registry (attaching the merging entities’ balance sheets) to record the merger agreement. Additionally, the merger will not become effective until a waiting period of 90 days, counted from the date of publication of the merger resolution and its registration data, has elapsed.

With respect to acquisitions, these can be divided into two kinds.

i Acquisition of shares

As per Article 296 of the Venezuelan Code of Commerce, the transfer of ownership of shares is accomplished by the execution of the respective transfer entry in the company’s share registry book by the transferor and the transferee. Moreover, a review of the articles of incorporation of the company whose shares are being transferred must be conducted, as the company may have preferential rights granted to other shareholders.

In addition to the Code of Commerce, there are certain statutes that are relevant to the acquisition of shares, such as the Security Markets Law and the rules issued by virtue of said Law for shares that are publicly traded. Additionally, the Law to Promote and Protect the Exercise of Free Competition is applicable in cases, where, inter alia, the acquisition could produce an economic concentration.

With regard to acquisitions of shares in areas such as telecommunications and banking, previous authorisation or clearance may be needed, depending on the pertinent statute.

ii Acquisition of assets

Depending on the type of assets, different requirements must be met:

Real estate

The provisions of the Venezuela Civil Code and the pertinent statute that establishes and organises the public registry system shall be applicable. Therefore, for a transfer of ownership of real estate to be effective before third parties, registration of the deed of transfer at the public registry office that has jurisdiction over the aforementioned property must be made.

Moveable goods or chattel property

Requirements will depend on the type of good or asset.

If the transaction comprises the transfer of ownership of a business by the disposal of chattel property and the transferee wishes to avoid joint liability for the business obligations of the transferor,2 then the provisions of Articles 151 and 152 of the Venezuelan Code of Commerce shall be applicable. Such provisions contain the obligation for three notifications to be published in a local newspaper announcing the disposal of the ownership of a business.

If the transaction involves intangible assets such as intellectual or industrial property, then registration at the competent registry office must be made for the transfer to become effective before third parties.

In general, all the above-mentioned transactions could have tax consequences, as explained in Section VIII, infra.

Iii FOREIGN INVOLVEMENT IN M&A TRANSACTIONS

According to governmental sources, investment was the product of strategic alliances between Venezuela and Argentina, Belarus, China, Cuba, Spain, France, Iran, Japan, Portugal and Vietnam. The economic sectors that were recipients of investment include manufacture, telecommunications, automobiles, petroleum and infrastructure (construction). The investments were the product of associations between entities from those foreign countries and the Venezuelan government, and also between non-governmental entities of the respective foreign country and Venezuela.

Additionally, the world economic crisis – together with the country risk factor – continue to have an impact on investment and profitability levels of the multinational entities operating in Venezuela, which have implemented budget cuts and reviewed their investment programmes.

iV SIGNIFICANT TRANSACTIONS, KEY TRENDS AND HOT INDUSTRIES

The government in developing its policy to become the leader in the food industry and marketing chain, and between 2002 and 2012 announced the acquisition of almost 1,200 companies. Most of those companies are still in the process of nationalisation.

V FINANCING OF M&A: MAIN SOURCES AND DEVELOPMENTS

There have not been any new relevant ways of financing acquisitions made by the state; its primary source has been revenue from the sale of oil and from the placement of debt instruments.

VI EMPLOYMENT LAW

In connection with the merger of companies in Venezuela and also with the acquisition of businesses, it is worth bearing in mind from a labour relations point of view that such negotiations will have several consequences for a company’s employees, as follows. In May 2012, a new Organic Labour and Employees Law was published that establishes the following.

i Employer substitution

Article 66 of the Organic Labour Law provides: ‘There will be an employer substitution when the property, ownership or the running operation of a company is transferred for any reason, from a natural or juridical person to another, and the operation of the company continues on.’ In the same manner, Article 68 of the Law provides:

Substitution of the employer will not affect existing work relationships. The substituted employer will be jointly responsible, with the new employer, for obligations derived from the Law or from contracts in effect prior to the substitution and until expiration of the prescription period provided for in Article 61 of this Law.

Upon termination of this period, only the new employer’s responsibility will subsist, unless previous labour suits exist, in which case the final judgment shall be executed indistinctly against the substituted owner or against the substitute. The responsibility of the substituted employer will only subsist, in this case, for five years as of the date in which a definite sentence has been declared.

Article 32 of the Organic Labour Law Regulation states:

The transfer or assignment of the worker is verified when the employer agrees or requires the worker to render his services on a permanent basis under the dependency of and on account of another, with the consent of the latter. The worker transfer or assignment shall be subject to the employer substitution regime and will produce the same effects.

On the other hand, by motion of Justice Dr Omar Mora Díaz, Social Court of Appeal of the Supreme Court of Justice, the decision issued on 19 September 2001 in the lawsuit brought by R Cameron against Compañía Occidental de Hidrocarburos, Inc, published in Ramírez y Garay, Book CLXXX, September 2001, stated:

[T]his Social Court of Appeal before deciding on the appropriateness of the accusation, wishes to make, in the first place, some considerations regarding the form known as employer substitution.

In fact, in Estudio Analitico de la Ley del Trabajo Venezolana, Dr Rafael Alfonzo Guzmán mentions the point in question with the following considerations:

There is a substitution of employer when the owner or holder of a company, establishment, running operation or work, transfers his rights to another natural or juridical person who continues the same economic activity or, at least, continues it without substantial changes. […]

Mario de la Cueva states that for the employer substitution to take effect, it is not enough to sell the products of the negotiation or part of the machinery, utensils or equipment, but it is necessary to transfer them to the company as an economic-juridical unit or part of the company itself, which in turn constitutes an economic-juridical unit; in the first case, the employers substitution is total, in the second case, it only works in respect to the workers who provide their services in a branch or the transferred premises […]

From the transcribed text above, it is evidenced that there may exist two types of employer substitution as provided for in the Mexican doctrine, which has been influential in the Venezuelan Labour Law. These are, as stated by Mario de la Cueva, on the one hand total substitution, which materialises when the company itself is transferred as an economic-juridical unit, and on the other, the company itself that in turn constitutes an economic unit.

On applying such criteria to the case under study, we may determine that what the defendant showed is that there was an employer substitution, which opinion is shared by the court, since, as can be seen from the records, on being transferred to Venezuela the defendant continued to provide his services to a branch of the company domiciled in the United States, evidencing the continuity of the labour relationship.

By virtue of the foregoing, it is evident that when the transfer of an employee from one company takes place, because the company merges and the business continues to operate, there is what the law, the doctrine and the jurisprudence have defined as an employer substitution.

ii Effects of an employer substitution

An employer substitution is intended to maintain the stability of the workers. Therefore the existing labour relations are not affected, and thus the workers are entitled to continue receiving all legal and contractual benefits that they were already receiving.

In fact, when an employer substitution takes effect and the existing labour contracts are not affected, the transferred service station workers shall enjoy the benefits and conditions that they were enjoying when they worked for the former company, that is, all the legal and contractual benefits to which they were entitled. In the same manner, the new employer shall be responsible for all the benefits, fringe benefits and indemnities that may be due to the workers who now provide their services to the substituted employer from the beginning of the labour relationship.

On the other hand, it is important to point out that pursuant to the provisions of Article 70 of the Organic Labour and Employees Law, assuming that the workers receive some payment on account of fringe benefits or indemnities due to the employer substitution, and continue to provide their services, the payment received will be considered an advance of the payment to which they are entitled upon the termination of the labour relationship.

VII TAX LAW

i Income tax

Under the Venezuelan tax framework, particularly under the Master Tax Code (MTC) and the Income Tax Law (ITL), in a scenario of a statutory merger, any outstanding benefits (attributes) or liabilities remain on the surviving company regardless of whether the merger is carried out as an incorporation or absorption merger.

According to Article 24 of the MTC3 and Paragraph 5, Article 16 of the ITL,4 for income tax purposes, the subsisting entity will assume all liabilities and benefits of the merged entity, as well as future liabilities and benefits, including income tax credits (ITCs), which may arise after the merger becomes effective, all of which are based on activities carried out prior to such merger.

The surviving company would be in a position to use all the tax attributes that will be used in the absorbed entity, including, but not limited to, ITCs, net operating losses (NOLs), other tax losses (i.e., losses resulting from the adjustment per inflation (API) system), and other tax credits such as those resulting from excess withholding (i.e., taxes paid in excess in prior fiscal years), input VAT (tax credits) and VAT withholding.

In a merger by absorption, from the fiscal standpoint, the fixed assets and liabilities of the merged company maintain their tax cost basis (including revaluation for inflation), that is, tax basis carry-over. In this regard, such assets and liabilities may be restated for inflation at the first fiscal year-end following the date on which the merger took place. Non-monetary items would be adjusted for inflation since the date of the merger. As a result, no major effect arises with regard to adjustment for fiscal inflation of fixed assets, as these maintain the same date of acquisition, historical costs and the restated values they held in the books of the merged company.

A merger by absorption interrupts the current fiscal year and begins a new fiscal year for the combined operations of the merging companies. Therefore, the merged company must file its income tax return for the fiscal year in which it performed individual operations within the three months immediately following the cessation of its activities in accordance with Articles 1465 and 1506 of the ITL Regulations. This final year may be shorter than 12 months and could further cut short the carryover term for attributes (i.e., three fiscal years for ITCs and NOLs, and one year for losses pursuant to API). The surviving entity must notify the Tax Administration of the transaction under Article 155.6 of the MTC.7

ii Other taxes (stamp tax and real property tax)

The registration of acts and documents with the civil law registry office or the commercial registry office is subject to this registration tax.

Real estate transfer taxes are due and payable by the transferring company upon the transfer of assets from the target company to the acquiring company. Normally, upon the registration of purchase-sale documents for real property and any other events, a 1 per cent fee on the value of the property must be paid.

In the case of a sale of real property to a third party, the 1 per cent payment would apply, in addition to a 0.5 per cent withholding prepayment, in either cash or credit, for income tax determined on the sale price. This prepayment shall be credited to the income tax amount resulting from the final income tax return of the year.

iii VAT

The VAT Law provides that sales of tangible goods, including any part of their property rights as well as withdrawals or retirements of moveable goods by taxpayers, are subject to VAT. However, sales of intangible goods, such as fiscal rights, stocks, bonds, mortgage bonds, mercantile effects, and other securities and personal goods in general that represent money, credit, or rights other than property rights over tangible goods, are not subject to VAT.

As a general rule, under the Venezuelan VAT legal framework, in the case of a merger, the property transferred (i.e., moveable property) qualifies as a sale operation and constitutes a taxable event for VAT purposes under Article 3.1 of the VAT Law8 in accordance with Article 10.5 of the VAT Law’s Regulation.9

However, the VAT Law’s Regulation (Article 10.5) states that if the surviving company carries on with the same purpose or activities that the dissolving companies pursued, wholly or partially, in this case, it should not be deemed that there has been a transfer of ownership of corporate goods attributable to a sale for VAT purposes, and hence no taxes should be applicable.

Finally, the surviving company would be in a position to use all of the VAT tax credits that will be used in the absorbed entity, including those resulting from excess VAT withholding (i.e., taxes paid in excess in prior fiscal years), and input VAT (tax credits) under Article 41 of the VAT Law.10

iv Municipal tax (tax on industrial, commercial and services activities)

In Venezuela, a municipal tax is applicable to all industrial, commercial and service activities (except professional services) performed in the territory of the municipality. The taxable base is the turnover (gross proceeds) received by the taxpayer and arising from the activity performed in said locality. The tax rates vary from locality to locality, range from 0.5 to 5 per cent, and are usually paid and a return filed yearly.

Regarding municipal tax on industrial, commercial and services activities, the absorbed company must notify the relevant municipal tax authorities of the suspension (or termination) of its activities in the municipality where it conducted its activities in accordance with Article 155.6 of the MTC,11 and pay any debt owed to the municipal tax authorities. Municipal tax rates vary depending on the municipality in which the business was conducted.

The surviving company shall request a business licence to incorporate new activities (if any), and to carry out the activities of the absorbed company within the jurisdiction of the municipality in which the surviving company operates.

v Science and technology contribution

A contribution for science and technology is provided for in the recent amendment to the Organic Science and Technology, which applies to entities defined in the law as large ventures (companies with a turnover of 100,000 bolivares or more).

The contribution is 2 per cent of turnover (gross proceeds) for entities engaged in the manufacturing or commercialisation of alcohol and spirits, as well as that of tobacco and tobacco products; gambling activities are subject to a similar rate. Hydrocarbon activities and mining activities, when carried out by private parties, are taxed at 1 per cent on turnover, while when said activities are carried out by entities whose capital is considered public capital (i.e., wholly or partially state-owned entities, controlled by the state), then these entities are taxed 5 per cent of their turnover. Any other industry or commercial activities (i.e., activities in general) are subject to a 0.5 per cent rate on their turnover.

Regarding the science and technology contribution, an absorbed company must notify to the relevant tax authorities of FONACIT, the special science and technology fund, about the suspension (or termination) of its activities in accordance with Article 155.6 of the MTC, and must pay any debt owed to FONCIT.

vi Anti-drug enforcement contribution

A contribution for the purposes of illegal drug enforcement and education is provided for, computed at a rate of 1 per cent on the net earnings of taxpayers engaged in commercial, industrial or services activities. Taxpayers engaged in manufacturing spirits and liquor, and those manufacturing cigarettes and tobacco, are subject to a 2 per cent contribution on their net earnings. The tax basis is net earnings (accounting income before taxes) as per Venezuelan GAAP, as stems from the regulations (Rulings 006-2011 and 007-2011 of March and May 2011).

The Organic Law on Drugs was passed on November 2010, and Articles 32 and 34 cover the relevant contributions. Contributions are paid into FONA, a special fund, and are used for projects identified by law, which may include reinvestment (up to 40 per cent) in approved activities or projects (Ruling 0001-2011).

Regarding anti-drug enforcement contributions, the absorbed company must notify to the relevant tax authorities of the FONA the suspension (or termination) of its activities in accordance with Article 155.6 of the MTC, and pay any debt owed to FONA.

vii Sport law contribution

A contribution for the purposes of funding a special fund – the National Fund for the Development of Sport, Physical Activity and Physical Education – was established in the Sports Law passed on August 2011.

The contribution under the Sport Law arises upon the exercise in Venezuela of any commercial, industrial or services activity by any person (inter alia, individuals, companies, partnerships) resulting in net earnings in a given year in excess of 20,000 tax units, and is computed as 1 per cent of the net earnings of the relevant taxpayers.

The tax basis are net earnings (accounting income before taxes) as per Venezuelan GAAP, as identified in Regulation No. 1 of the Law, and the contribution may be paid in cash in full, or part of the same may be used in projects identified in the Law and approved by the National Sports Institute, which may include reinvestment (up to 50 per cent) in approved activities.

Regarding the Sport Law contribution, the absorbed company must notify to the relevant tax authorities of the National Sports Institute the suspension (or termination) of its activities in accordance with Article 155.6 of the MTC, and pay any debt owed to such authorities.

VIII COMPETITION LAW

The Venezuelan legal framework in terms of economic concentrations (M&A) in the field of the analysis of competition is based on Article 113 of the Constitution of the Bolivarian Republic of Venezuela of 1999, which establishes an express prohibition of monopolies. Specifically, any acts, activities, behaviour or agreements between private parties that are intended to establish monopolies are declared unconstitutional.

i Rules pertaining to economic concentrations in the field of antitrust laws

The following contain all the regulations regarding competition in Venezuela, starting with the Free Competition Promotion and Protection Law, published in Official Gazette No. 34,880, dated 13 January 1992, which was amended by the Decree with Rank, Value and Force of Antitrust Law, published in Extraordinary Gazette No. 6,151, dated 18 November 2014.

To ensure the correct application of the Decree Law, the Superintendency of Antitrust was created as the public institution in charge of applying the law, with functional autonomy in the matters within its jurisdiction and administratively managed by the ministry with jurisdiction over matters of internal commerce. Decisions of the Superintendency culminate all administrative proceedings. They may be appealed through judicial proceedings at the contentious administrative courts at first instance, and through second instance appeals to the Supreme Court.

Under Chapter II of the Decree Law, all economic concentrations that produce or reinforce a dominant position in all or part of the market, or that may cause adverse effects to effective competition, and any democratisation in the production, distribution and marketing of goods and services are prohibited. Nevertheless, small and medium-sized companies, and cooperatives that are covered by the system of communal economy, are exempted from the above. The procedures of evaluation and approval are established by the regulations of this Decree Law. The Decree Law of Antitrust states that the procedures for the notification, evaluation and approval of economic concentrations shall be established in the regulations, which have not yet been published.

Furthermore, Instruction No. 3 regarding Economic Concentration Operations, published in Official Gazette No. 36,209, dated 20 May 1997, outlines the information required by the Superintendency for the authorisation of an economic concentration operation. Prior notification of an economic concentration operation is not mandatory under the current laws, and is voluntary for those concerned. This does not preclude the Superintendency from opening an investigation once an operation is declared certain to determine whether it could have a negative impact on free competition. The Superintendency of Antitrust has up to one year as of the date on which the economic concentration operation is actually closed to conduct such investigation.

Moreover, there are no exceptions in Venezuela regarding the economic activities or sectors in which economic agents are involved. Therefore, profit and non-profit, private and public economic agents engaged in economic activities inside the national territory, or operations with effects on the national market, are all subject to the regulations governing matters of economic concentrations.

Resolution by Procompetencia (before Superintendency) No. 2451, dated 11 July 1996, published in Official Gazette No. 36,000, dated 15 July 1996, establishes, based on Article 2 of Regulation No. 2 of the Law, the minimum limits that shall apply to economic concentration operations subject to antitrust laws. These include when the overall volume of business of the companies involved in the economic concentration operation is greater than 120,000 tax units;12 and when the merging of companies involves divisions from several companies, the overall volume of business of the divisions participating in the operation shall be taken into consideration.

ii Economic concentration modalities according to Regulation No. 2

Under Regulation No. 2, mergers among independent companies are defined as follows:

  • a the incorporation of a common company where the resulting company acts permanently as an independent company;
  • b operations whereby one or more companies acquire control of one or more companies that were independent or parts of companies; and
  • c acquisition of productive assets, going concerns, and any other act or contract whereby companies, divisions or parts of companies are concentrated.

Chapter II of Regulation No. 2 of the Free Competition Promotion and Protection Law establishes the procedure for the prior evaluation of an economic concentration operation for its authorisation by the Superintendency. Considering that the prior notification system is voluntary, there are no limitations for making such notification, and there are no penalties in the event of a notification not being made. According to the provisions of Article 6 of Regulation No. 2 to the Law, the process for requesting prior evaluation does not prevent the economic concentration operation from following its natural course and even taking place before a decision is obtained from the Superintendency, notwithstanding whatever is ultimately indicated.

iii Procedures

Prior authorisation procedures are governed by the provisions of Chapter I of Title III of the Organic Administrative Procedure Law as regards Ordinary Proceedings.

The penalty procedure is governed by the provisions of Chapter I of Title V, in Article 43 et seq of the Decree with Rank, Value and Force of Antitrust Law if, once the economic concentration has taken place, it is presumed that it could have anticompetitive effects or create or strengthen a dominant position on the market.

iv Terms

The ordinary proceeding contained in the Organic Administrative Procedure Law establishes a term of four months from the time that the request for prior evaluation is formally presented. This term may be extended for another two months if necessary, depending on the complexity of the investigation.

The Superintendency receives all the information required under Instruction No. 3 for the opening of the proceeding from each party involved. It may later send questionnaires to independent third parties, whether they are competitors or are located at another level of the chain, to complete the information it requires to determine the dynamics of the market.

If necessary, the agency may require additional information or clarification of the information from the parties to make its final decision.

The term established for substantiating the penalty procedure is 15 business days, which is extendible for another 15 business days. The decision stage for the file lasts 30 business days, with the possibility of being extended for an additional three days. In other words, the minimum term for the penalty procedure is 45 business days.

v Sectoral regulations
Public companies

Merger operations of capital markets companies must be informed to and gain the prior approval of the National Exchange Superintendency. Likewise, economic concentration operations among companies participating in the capital markets are also subject to the Decree with Rank, Value and Force of Antitrust Law. Although the request for prior evaluation is voluntary, the Superintendency may investigate the operation when it suspects that it could have restrictive effects on competition or could create or strengthen a dominant position on the market.

Banking

Economic concentration operations in the banking sector require the prior approval of the Superintendency of Banks and Other Financial Institutions. Additionally, a request for the prior evaluation for this type of institution is voluntary in the area of antitrust law: once notified, such institutions may be subject to investigation and penalties by the Superintendency.

Insurance

Transfers of portfolios, mergers and split operations of insurance and reinsurance companies require the prior approval of the Superintendency of Insurance Activity once it has heard the Antitrust Superintendency’s opinion, which has binding effect.

vi Consequences and penalties

The Decree Law establishes that those who engage in prohibited practices or acts described in Chapter II shall be punished by the Superintendency with a fine of up to 10 per cent of the value of their gross annual revenue if there are mitigating circumstances. If aggravating circumstances attend the offender’s conduct, that amount may be increased up to 20 per cent. In the case of recidivism, the fine will be increased to 40 per cent as a general penalty. Furthermore, the Decree Law states that the notification, evaluation and approval procedures for economic concentrations shall be established in the Regulation, which has not been published.

However, there are no penalties under Instruction No. 3 for not requesting a prior authorisation for economic concentration operations, as such request is voluntary.

In the case of a prior evaluation, the Superintendency may recommend the modification of some of the conditions of the economic concentration operation to minimise any anticompetitive effect that could derive from the operation or recommend divestment in part of the market.

If the parties do not accept the observations of the Superintendency, once the economic operation takes place the Superintendency may open a penalty procedure for presumptive anticompetitive effects, which could include the following: full or partial divestment of the economic concentration operation; other orders of lesser magnitude, such as the modification of territories, exclusive rights in the distribution of products or in the purchase of inputs, non-compete clauses; or a fine of up to 20 per cent of the aggregate gross sales of the parties involved in the operation.

Finally, the Superintendency of Antitrust has not issued any resolution about economic concentrations under the term of the new Decree Law, and the procedures of evaluations and approval will be established by the Regulation of this Decree Law, which is pending publication.

iX OUTLOOK

In view of the global and national economic crisis, it is expected that the Venezuelan economy will see somewhere between very moderate and no growth in 2016. Moreover, it is expected that if foreign private investment is made, it will be derived from bilateral cooperation agreements, mainly in the construction, oil, gas and mining sectors.

Footnotes

1 Guillermo de la Rosa and Juan D Alfonzo are senior partners, Nelson Borjas is a junior partner and Domingo Piscitelli is an associate at Torres, Plaz & Araujo.

2 The conveyance of property of those goods must produce the ceasing of the business activities of the transferor carried out within its premises.

3 Article 24 MTC: ‘In the case of mergers, the company that subsists or that is created from the original one(s), will assume any tax benefit or responsibility that corresponds to the merged company(ies).’

4 Paragraph 5, Article 16 ITL: ‘For tax purposes, any tax benefit or liability corresponding to merged companies shall subsist for the company resulting from the merger, notwithstanding the rights and obligations of the merged companies.’

5 Article 146 ITL Regulations: ‘Definitive income tax return will be presented within the three (3) months following the completion of the taxable period of the taxpayer without prejudice to the prorogations granted by the Tax Authorities.’

6 Article 150 ITL Regulations: ‘In case of legal entities or communities who ceased their business by sale, exchange, cession of their assets, business or commerce fund, merger or any other cause different from the dissolution, the tax period will be finished the day of cessation.’

7 Article 145 MTC: ‘The Taxpayers, persons in charge and third persons are compelled to fulfil the formal duties related to the control tasks and investigation made by the Tax Authorities, and especially must: […]

6 Communicate any change in the situation that could originate on their tax responsibility, especially when the charge is related to the beginning or ending of activities of the taxpayer.’

8 Article 3 VAT Law: ‘For the purposes hereof, the following activities, legal transactions or operations shall constitute taxable events:

Sale of tangible moveable property, including aliquot parts on the property right on such property, and the retirement or disincorporation of moveable goods by the taxpayer of this tax.’

9 Article 10 VAT Law’s Regulation: ‘For the purposes of this tax, sale is considered, among others, the following acts and contracts that deal with onerous transfers of real personal domain of an aliquot of property rights over them: […]

5 Contributions or act to transferring rights to assets for the establishment, expansion, modification, merger, takeover or the other similar, with respect of companies or legal entities or economic.

In any case, if the new companies emerged continue the same line of activities of the predecessor companies, whether in whole or in part, it should not be deemed that there had been an act, transaction or transfer of ownership of corporate goods attributable to a sale for purposes relating to the application of this tax, unless an increase in the capital take place through contributions of new moveable property.’

10 Article 41 VAT: ‘The right to deduce the tax credit from the tax debits is individual for each ordinary taxpayer and it not be assigned to third parties, except for the case indicated in Article 43 or when it is a merger or take over of companies, in which case, the resulting partnership of said merger shall enjoy the remaining tax credit that corresponded to the companies that formed part of such fusion.’

11 Article 145 MTC: ‘The taxpayers, person in charge and third persons are compelled to fulfil the formal duties related to the control and investigation made by the Tax Authorities and, especially, they must: […]

‘6 Communicate any charge in the situation that could originate alterations on their tax responsibility, especially when the change is related to the beginning or ending of activities of the taxpayer.’

12 At the time of writing, the value of the tax unit is 127 bolivares.