Fernandez-Concheso

I. NEWS

This section highlights excerpts of relevant press releases and brief comments on our views regarding such.

«US enforces sanctions on carriage of local crude oil»

The US Treasury Department sanctioned the following shipping companies which were carrying oil from Venezuela to Cuba: (1) Caroil Transport Marine Ltd, established in Cyprus, and its 3 managed vessels: Carlota C, Sandino and Petion, (2) Trocana World Inc., established in Panama, owner of Petion, (3) Tovase Development Corp, estalished in Panama, owner of Sandino, and (4) Bluelane Overseas S.A, established in Panama and owner of the chemical tanker Giralt. These vessels were also identified as blocked properties by OFAC, since such are controlled by the sanctioned shipping companies. The action blocks the assets, property and interests of these companies.
http://www.eluniversal.com/economia/51689/eeuuimpone-sanciones-a-transporte-de-crudo-local

“PDVSA had to suspend PetroPiar production due to storage limitations”

Bernhard Schulte Shipmanagement (BSM) has taken actions to legally arrest three of PDVSA’s tankers: Arita in Singapour, Río Arauca and El Parnaso in Portugal; in order to collect a debt for services rendered to the state-owned company. BSM redelivered 4 vessels to PDVSA and had plans to return another nine in June.

https://lta.reuters.com/articulo/idLTAKCN1ST2FT

“Citgo Petroleum Negotiates with Aruba for Refinery Contract”

The overload of Petropiar’s storage capacity forced the State owned company, PDVSA, to suspend its production of mixed crude. Given the sanctions imposed by the United States, the entity has been mixing the extra-heavy Orinoco crude oil with the light domestic Mesa and Santa Barbara to obtain a 16degree API oil, traditionally chosen by Indian and Chinese refineries.

https://www.elnacional.com/economia/pdvsasuspende-produccion-de-petropiar-por-limitacionesde-almacenamiento/

“The National Institute of Aquatic Spaces guarantees compliance with the international regulations issued by the IMO on the replacement of courses 1.28 and 1.29”

The Maritime Authority (INEA), in order to ensure the safety of life and to comply with the requirements from the International Maritime Organization (IMO), reports on the replacement of the 1.28 Crowd Management, Passenger Safety and Training for personnel Serving Passengers on Board of passenger vessels and 1.29 course on Proficiency in Crisis Management and Human Behavior training.
The aforementioned courses will be replaced by 1.41 Crowd Management, as well as 1.42 Proficiency in Crisis Management and Human Behavior training and 1.44 Passenger Safety and Training for personnel Serving Passengers and cargo on Board of passenger vessels, and Hull’s Integrity.
http://www.inea.gob.ve/action/noticia?id=140

“China’s oil company maintains Venezuelan oil cargo suspension”

China National Petroleum Corp., announced that they will maintain the suspension of Venezuelan oil cargo issued on September, to avoid any restrictions by the United States. This is the second time that the oil company is forced to take this action since the US froze the assets of the Venezuelan government and warned other countries about making business with the State-owned oil company PDVSA.
https://www.elnacional.com/economia/cnpc-mantienesuspension-de-carga-de-crudo-venezolano-enseptiembre/

“Guaidó’s General Attorney reduced debt with ConocoPhillips”

The World Bank reduced the debt of Venezuela with ConocoPhillips from 8.700 million dollars to 8.500. The reduction was accomplished by José Ignacio Hernández, General Attorney of Venezuela designated by Interim President Juan Guaidó which corresponds to the claim for damages that ConocoPhillips undertook against Venezuela.
https://www.elnacional.com/economia/procuraduriade-guaido-redujo-deuda-con-conocophillips/

“PDVSA negotiates a recovery with Sulzer refinery”

The Swiss-Russian company Sulzer will provide the means for the recovery of Venezuela’s refining complex, for which it will carry out conditioning tasks that will satisfy the domestic gasoline market. In exchange, Sulzer will receive products such as asphalt, coke and fuel oil. Sulzer AG will be joining Wison Engineering Services Co., a Shanghai-based company that has also been developing recovery plans for the refineries.
http://www.eluniversal.com/economia/48054/pdvsanegocia-con-sulzer-recuperacion-de-refinerias

“Guaidó appointed Carlos Jordá as director of Citgo”

Juan Guaidó, appointed Carlos Jordá as director of Citgo. Carlos is a recognized chemical engineer, with vast experience in oil matters. The decision took place to ensure and protect these Venezuelan’s assets.
https://www.elnacional.com/economia/guaidodesigno-a-carlos-jorda-como-director-de-citgo/

“PDVSA expands their production capacity in response to Trump’s Executive Order”

The heavy oil company Sinovensa, which has a joint venture with PDVSA and the Chinese state-owned CNPC, started a new mixing industrial unit that will increase their production capacity to 165,000 barrels of oil per day from the current 110,000. The company is located in the Orinoco and produces Merey type crude, which is highly claimed by Asians given its commercial value.
https://www.elnacional.com/economia/petroleo/pdvsaexpande-capacidad-de-produccion-ante-ordenejecutiva-de-trump/

“Government exempts taxes on Russian oil company Rosneft in schist gas exploitation”

Russia and Venezuela amended their 2009 cooperation agreement to provide favorable conditions to Rosneft. The parties decided to exempt the Russian company from national taxes, as well as its suppliers and its subcontractors in the exploitation of the Patao and Mejillones gas deposits in the Caribbean Sea.
http://www.eluniversal.com/economia/47528/gobierno -exonera-de-impuestos-a-petrolera-rusa-rosneft-en-laexplotacion-de-gas-de-esquisto

«US Court ruled that Crystallex takes Citgo“

An appeals Court in the United States allowed the Canadian company Crystallex to take over Citgo assets to collect the debt of 1.4 billion from Venezuela. This decision compensates for the expropriation of Crystallex in 2008. The Venezuelan opposition made a payment in May of interests for up to $71 million, it an attempt to avoid a seizure, but there is still another payment of 913 million that will expire on October 27th. The rest of the assets, were offered by the government to Rosneft as guarantee to a loan of 1.5 billion to the State oil company PDVSA.
http://www.eluniversal.com/economia/46717/corte-deeeuu-dictamino-que-crystallex-tome-citgo

“US authorizes Chevron to continue operating in Venezuela”

The US Department of the Treasury extended until October 25th the authorization provided to a reduced group of oil companies, including Chevron, to continue operating in Venezuela despite the sanctions against PDVSA. The decision also allowed Halliburton, Schlumberger, Baker Hughes, Weatherford International and Chevron to continue fulfilling their contractual operations with PDVSA until the said date.
http://www.ultimasnoticias.com.ve/noticias/economia/ eeuu-autoriza-a-chevron-a-seguir-operando-envenezuela/

II. CASE LAW

This section comments on relevant case law during the corresponding quarter and our brief comments to it.

Decision by the Political and Administrative Chamber of the Supreme Court of Justice of July 17, 2019 in the matter of National Integrated Service of Customs and Tax Administration (SENIAT).

The Administrative Political Chamber ruled in reference to the 75% reduction on income tax for new investments in the merchant or naval industry

The Chamber in accordance to article 120 of the Organic Law of Aquatic Spaces, claimed that the reduction is exclusively intended for those taxpayers who develop new investments in the following economic activities: (i) Acquisition or lease of new ships or existing navigation accessories; (ii) Acquisition of new equipment or technologies regarding maritime safety; (iii) Expansion, improvement and equipment of existing ships and navigation accessories; (iv) Incorporation of commercial companies or acquisition of shares thereof; and (v) Training for their workers.

http://boletinlegalve.blogspot.com/2019/07/rebaja-deimpuestos-por-enriquecimiento.html

III. LEGISLATION

This section expands on National and International Legislation adopted in the country and relevant to the industry.

Constitutional Law that applies Tax on Large Assets dated August 16, 2019.

The Law sustains an obligation to pay additional taxes when either a natural or legal entity, holds assets of equal value or greater than one hundred and fifty million tax units (150,000,000 TU). The person or legal entity must first be qualified as special taxpayer, as per the terms and conditions of SENIAT.
The Law states that the taxable obligation is born on September 30th of each year and that the tax will be caused annually on the value of net assets. To determine the value of property located abroad, the Authorities will chose the one that is higher among the fiscal rules of the country where they are located or alternatively the current market price as of September 30th of each year. The tax base will be the result of adding the total value of the assets and rights.
The Law also includes some exclusions, such as real state established as main property and goods belonging to diplomatic missions.

* This Law was enacted by the Constitutional National Assembly.

National Decree N° 3.980 dated September 7, 2019.

The National Executive declared once again State of Exception and Economic Emergency, throughout the national territory, given the extraordinary circumstances that still affect the social, economic and political field and the security of the Nation.

National Decree N° 3.977 dated August 27, 2019.

Mr. Cesar Alberto Salazar Coll was appointed President of Petroquímica de Venezuela, S.A (PEQUIVEN).

National Decree N° 3.965 dated August 19, 2019.

Mr. Juan Carlos Caraballo was appointed President of the Port Authority, BOLIPUERTOS.

Provision N° SNAT/2019/00213 issued by the National Integrated Customs and Tax Administration Services (SENIAT) dated August 19, 2019

This provision defines the rules in force for updating the value of goods and rights, as well as to any requirement thereof for the payment of the Tax on Large Assets. For the purposes of this Law, Municipalities must keep updated the cadaster value of the properties located in their jurisdiction. The rules of valuation of property will be published on the website of SENIAT and payment must be made between October 1st and November 30th of each year.
Taxpayers governed by this Law, must keep available to the tax authorities, the documents, records, market value and cadastral value up to date for the declaration.

National Decree N° 3.935 dated August 2, 2019.

The National Executive authorized the construction and operation of two intermodal dry port terminals, with their corresponding port infrastructure. The terminals will be called Intermodal Dry Port Terminal of Palavecino and Intermodal Dry Port Terminal of Barquisimeto, both located in the State of Lara, and they will be connected by rail and land with other ports and airports in the country.

National Decree N° 3.923 dated July 22, 2019

Mr. David Alberto Pedreañez Sanchéz was appointed President of the General Mining Company of Venezuela C.A. (MINERVEN).

National Decree N° 3.920 dated July 19, 2019

Any person registered as a beneficiary before the Office of Statistics and Customs and Tax Economic Studies of SENIAT will be exempted from the payment of Income Tax, for the net enrichments resulting from the primary exploitation of agricultural activities. This Decree will be in force from January 1, 2019 until December 31, 2023.

IV. BILLS

This section lists draft regulations/bills being proposed to and/or discussed in Congress or relevant institutions.

There are no bills to report on this quarter.

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