Venezuelans Abroad - Savings and Investment Options and Tax Treatment

Table of Contents

• What savings options exist when sending money to Venezuela?
• LocalBitcoins
• AirTM
• Payoneer
• PayPal
• What are good investment options in Venezuela for overseas Venezuelans?
• Real Estate investments
• Investment in the Stock Market
• Opportunities to export to Venezuela
• What taxes Venezuelan overseas must pay for their investments and savings in their home country?
• Income Tax (Impuesto Sobre La Renta, ISLR)
• Value Added Tax (Impuesto al Valor Agregado, IVA)
• Large Financial Transactions Tax
• Municipal Taxes
• Conclusion

Just a few years ago Venezuela was prominent amongst Latin American countries with the best economic projection for the future. At the time, Venezuelans overseas represented a small proportion of the population.

For the year 2005, Venezuelans abroad were less than 500,000. After 15 years, this figure is approximately 10 times higher. Before the Covid-19 crisis start, the International Organization for Migration (IOM) made an impressive projection - they estimated that there would be more than 5 million Venezuelans overseas in March 2020.

What is the reason for this significant increase? The country's disastrous handling of the economy and its constant political struggles. This plunged the country into a hyperinflation process prompting Venezuelans to seek opportunities abroad.

Most Venezuelans overseas send money back home using remittances to help their families. Others choose to invest in their native country despite the existing situation or to keep their businesses running in Venezuela.

How they do that? That's what we'll discuss in the next paragraphs.

We will cover the below topics:-

1. What savings options exist when sending money to Venezuela?
2. What are good investment options in Venezuela for overseas Venezuelans?
3. What taxes Venezuelan overseas must pay for their investments in Venezuela?

What savings options exist when sending money to Venezuela?

Venezuelans abroad use services such as Western Union and MoneyGram to send remittances to Venezuela.

In Venezuela, Western Union works through the company Grupo Zoom Casa de Cambio. Meanwhile, MoneyGram has the exchange house Italcambio as its ally.

Western Union and MoneyGram sending fees vary relying on the country from you to send money. After using the MoneyGram shipping simulator, we found that in this year's mid-July, MoneyGram's commission is around 15%. As for Western Union, the transfer fee is up to $15 for every $100 you send depending on the payment method you use.

But, your relatives in Venezuela will need to convert the bolivars they will receive back to dollars. To do this, they can go to a private bank and buy dollars or euros in cash. This procedure was authorized by the Central Bank of Venezuela in May 2019.

At the same time, many other money transfer digital platforms have gained popularity among Venezuelans abroad. These options tend to charge lesser fees on money sent back home. Some of such most used digital money transfer services for remitting to Venezuela include the below.

LocalBitcoins

LocalBitcoins helps to exchange cryptocurrencies like Bitcoin, Ethereum, XRP, and Litecoin for local currency. Its operation is simple whereby users post buying or selling announcements. They set the rates and payment methods. Other users can then initiate exchanges with them through those ads using bank transfers and payment processors, among other methods.

AirTM

AirTM is a cloud wallet that serves as an intermediary between its users. Some members of this platform work as "cashiers". They have funds in different payment processors, so they exchange balances in several currencies.

Both platforms - LocalBitcoins and Airtm - have scoring procedures for their users. This allows measuring and publishing a user's reputation. These websites warrant your funds' security by offering escrow and dispute resolution systems. They also verify every user's identity.

Payoneer

Payoneer provides online money transfers and digital payments. Users can send and receive funds to their international bank account, Payoneer e-wallet, or to a prepaid MasterCard; this card can be used online, at ATMs outside of Venezuela or in Venezuelans physical stores. This card can be sent to Venezuela and you can use it to make payments in many establishments. The funds will be debited from the balance on the card at the official exchange rate.

If you are a Venezuelan overseas this card can be a good option. You can send money in the form of payments to your relatives too.

PayPal

PayPal works as a payment processor for both online and physical merchants. PayPal offers personal and business accounts. For each transaction, PayPal charges the sender a commission of 5.4% and the recipient a $0.30 flat amount. It also charges commissions between 2.5% and 4% for converting currencies.

This platform does not support transfers to bank accounts in Venezuela. Thus, you must use a money exchange service such as Airtm or LocalBitcoin to do this. The aggregated commission charges can be high, reaching up to 20%.

What are good investment options in Venezuela for overseas Venezuelans?

A popular saying proclaims: "in the crisis, there are the opportunities". For many Venezuelans overseas this may be true. In this sense, we'll point out some interesting investment options for Venezuelans overseas.

Real Estate investments

The economic crisis has led people to sell their properties to leave the country. Excess supply and lack of demand have caused a fall in prices. The Venezuelan Real Estate Chamber's estimated last year that in the last 20 years, real estate depreciation was about 75%.

The prices of real estate in Venezuela are the lowest in Latin America. This makes real estate investment an attractive opportunity for Venezuelans abroad that have investing capacity.

Are you a Venezuelan overseas looking to invest in real estate? Then, you will need a local legal representative or someone you trust to carry out the operation.

Investment in the Stock Market

You can invest in stocks or bonds that generate a return through their price variance. You can also earn money if these stocks generate dividends. Investing in real estate funds is another option.

This option does require some knowledge of how the stock market works. You can also seek the advice of a professional investment firm.

Opportunities to export to Venezuela

The massive closure of industries over the last few years was a contributing factor to the Venezuelan economic crisis. Hence, many goods required locally are now imported. To avoid the shortage of various products, the Government has made it easier to import them.

This opens a door for Venezuelans abroad who can supply these needs by exporting various goods to Venezuela.

Beverages and foods occupy the first position in this arena. Until a couple of years ago, supermarkets and grocery stores were empty. But, opening up to imports has offset this gap to some extent. Additionally, there are many more types of goods related to basic services.

Currently, many public services also lack many inputs necessary for their proper functioning. The drinking water supply, for example, requires pumps, filters, and equipment. In recent years, establishments selling purified water have become popular.

Electrical supplies are also an important need as many of them are not made in Venezuela. From consumables such as light bulbs to high-voltage equipment, all these products are needed.

The transport sector also demands a large number of spare parts for private cars, buses, and trucks. The industries that still remain standing also need many supplies. There are also many needs in the medical equipment field.

These above are just a few examples of existing export investment opportunities in various sectors.

What taxes Venezuelan overseas must pay for their investments and savings in their home country?

There is a high amount of tax payments in Venezuela. If you are a Venezuelan living abroad with a business operating in this country, you must pay the following taxes.

Income Tax (Impuesto Sobre La Renta, ISLR)

This tax applies to both companies and individuals, and is levied at 34% of the profits realized during the fiscal period. All non-residents in Venezuela must pay the ISLR if they have any business or investment generating income in this country.

Value Added Tax (Impuesto al Valor Agregado, IVA)

This tax applies to all companies in Venezuela. Each business must withhold this tax from its clients and pay it to the Servicio Nacional Integrado de Administración Tributaria. The rate to be paid is 16%.

Large Financial Transactions Tax

This applies to bank operations carried out by companies classified as Special Taxpayers. These pay a 2.00% rate.

Municipal Taxes

Every year commercial companies must pay 0.75% municipal tax on their gross income.

There are other taxes for social aspects such as Social Security and houses building. These taxes can reach up to 14% of a business' gross income.

Likewise, many Venezuelans abroad maintain personal savings or investment options in their country. Among these options are bank deposits, loans, bonds, and company stocks. Besides the ISLR, there is the big patrimonies' tax (Impuesto a Los Grandes Patromonios, IGP). This tax is meant for taxpayers with a net worth equal to or greater than 150 million Tax Units (Unidades Tributarias). It applies to both individuals and companies. Currently, a Tax Unit is equal to 1500 bolivars. So, this figure is equal to 225 billion bolivars. The applicable rate for this tax is 0.25%.

Conclusion

Despite the crisis Venezuela is going through, Venezuelans overseas have options to send money back to their homes. These options are digital alternatives provided by the internet and new technologies. They allow them to save money when sending remittances. Regarding investing in Venezuela, it seems like this country will always offer opportunities. To take advantage of them, you should know Venezuela's economic and political dynamics and the tax payments you must pay on your savings and investments.

Who better than a Venezuelan overseas to seize these investment options!