The partial reform of the Organic Hydrocarbons Law, approved by the National Assembly, positions Venezuela as having the lowest fiscal burden for heavy and extra-heavy crude oil projects in all of America, based on available comparative data.
Preliminary estimates indicate that the total tax burden could range between 32% and 42%, which is significantly lower than the rates applied in Mexico (50%–65%) and Canada (55%–65%), the other leading producers of these types of crudes on the continent.
The official text has not yet been published, so these conclusions are drawn solely from the information disclosed during the second parliamentary discussion.
The new fiscal scheme is structured around three components: a flexible royalty with a maximum limit of up to 30%, a comprehensive gross income tax with a maximum rate of 15%, and the potential to reduce the Oil Income Tax, traditionally set at 50%.
According to the approved criteria, this tax can be lowered to 34% when necessary to maintain the economic balance of the project. This possible reduction enhances the competitiveness of the new fiscal framework.
The determination of these percentages will be in the hands of the National Executive, with the involvement of the ministries of hydrocarbons and finance, under criteria related to the nature of the project, investment requirements, economic feasibility, and international competitiveness.
The reform also introduces a wide range of exemptions that significantly lessen the parafiscal burden. Companies operating under this framework will be exempt from the wealth tax and special contributions outlined in the science and technology, sports, drugs, and pension protection laws, in addition to being free from state and municipal taxes or the corporate social responsibility commitments of public contracting laws.
Together, these measures create a simpler and more competitive tax regime aimed at attracting investments and improving the economic viability of heavy and extra-heavy crude projects.
While the final impact will ultimately depend on the publication of the official text and its implementation, the parameters approved in the parliamentary session represent a significant shift in Venezuela’s oil policy and position the country as having the most favorable fiscal environment in the continent for this type of hydrocarbons.