Doing Business 2020 Venezuela, RB Economy Profile Venezuela, RB Page 1 Doing Business 2020 Venezuela, RB Economy Profile of Venezuela, RB Doing Business 2020 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as postfiling processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Employing workers Flexibility in employment regulation and redundancy cost Page 2 Doing Business 2020 Venezuela, RB About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of employing workers. Although Doing Business does not present rankings of economies on the employing workers indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational studies, which exhaustively cover business regulation and reform in different cities and regions within a nation. These studies provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business study, published in 2003, covered 5 indicator sets and 133 economies. This year’s study covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. To learn more about Doing Business please visit doingbusiness.org Page 3 Doing Business 2020 Venezuela, RB Ease of Doing Business in Region Latin America & Caribbean DB RANK DB SCORE Venezuela, RB Income Category Upper middle income Population 28,870,195 30.2 188 City Covered Caracas Rankings on Doing Business topics - Venezuela, RB 132 145 150 165 174 170 175 190 189 188 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Topic Scores 25.0 46.5 39.8 50.3 40.0 24.0 11.4 0.0 46.9 18.5 Starting a Business (rank) 190 Getting Credit (rank) 132 Trading across Borders (rank) 188 Score of starting a business (0-100) 25.0 Score of getting credit (0-100) 40.0 Score of trading across borders (0-100) 0.0 Procedures (number) 20 Strength of legal rights index (0-12) 1 Time to export Time (days) 230 Depth of credit information index (0-8) 7 Documentary compliance (hours) No Practice Cost (number) 211.8 Credit registry coverage (% of adults) 0.0 Border compliance (hours) No Practice Paid-in min. capital (% of income per capita) 0.0 Credit bureau coverage (% of adults) 40.7 Cost to export Documentary compliance (USD) No Practice Dealing with Construction Permits (rank) 175 Protecting Minority Investors (rank) 170 Border compliance (USD) No Practice Score of dealing with construction permits (0-100) 46.5 Score of protecting minority investors (0-100) 24.0 Time to export Procedures (number) 11 Extent of disclosure index (0-10) 3.0 Documentary compliance (hours) No Practice Time (days) 434 Extent of director liability index (0-10) 2.0 Border compliance (hours) No Practice Cost (% of warehouse value) 12.0 Ease of shareholder suits index (0-10) 3.0 Cost to export Building quality control index (0-15) 10.5 Extent of shareholder rights index (0-6) 1.0 Documentary compliance (USD) No Practice Extent of ownership and control index (0-7) 2.0 Border compliance (USD) No Practice Getting Electricity (rank) 174 Extent of corporate transparency index (0-7) 1.0 Score of getting electricity (0-100) 39.8 Enforcing Contracts (rank) 150 Procedures (number) 6 Paying Taxes (rank) 189 Score of enforcing contracts (0-100) 46.9 Time (days) 208 Score of paying taxes (0-100) 11.4 Time (days) 720 Cost (% of income per capita) 650.7 Payments (number per year) 99 Cost (% of claim value) 43.7 Reliability of supply and transparency of tariff index (0-8) 0 Time (hours per year) 920 Quality of judicial processes index (0-18) 7.0 Total tax and contribution rate (% of profit) 73.3 Registering Property (rank) 145 Postfiling index (0-100) 19.7 Resolving Insolvency (rank) 165 Score of registering property (0-100) 50.3 Score of resolving insolvency (0-100) 18.5 Procedures (number) 10 Recovery rate (cents on the dollar) 5.3 Time (days) 53 Time (years) 4.0 Cost (% of property value) 2.6 Cost (% of estate) 38.0 Quality of the land administration index (0-30) 5.5 Outcome (0 as piecemeal sale and 1 as going 0 concern) Strength of insolvency framework index (0-16) 5.0 Page 4 Doing Business 2020 Venezuela, RB Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate a company To make the data comparable across economies, several assumptions about the business and the (number) procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business city -Is a limited liability company (or its legal equivalent). If there is more than one type of limited • Postregistration (for example, social security registration, liability company in the economy, the limited liability form most common among domestic firms is company seal) chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office. • Obtaining approval from spouse to start a business or to leave -Operates in the economy’s largest business city. For 11 economies the data are also collected for the home to register the company the second largest business city. • Obtaining any gender specific document for company -Performs general industrial or commercial activities such as the production or sale to the public of registration and operation or national identification card goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily Time required to complete each procedure (calendar days) polluting production processes. • Does not include time spent gathering information -Does not qualify for investment incentives or any special benefits. -Is 100% domestically owned. • Each procedure starts on a separate day (2 procedures cannot -Has five business owners, none of whom is a legal entity. One business owner holds 30% of the start on the same day) company shares, two owners have 20% of shares each, and two owners have 15% of shares • Procedures fully completed online are recorded as ½ day each. -Is managed by one local director. • Procedure is considered completed once final document is -Has between 10 and 50 employees one month after the commencement of operations, all of them received domestic nationals. • No prior contact with officials -Has start-up capital of 10 times income per capita. -Has an estimated turnover of at least 100 times income per capita. Cost required to complete each procedure (% of income per -Leases the commercial plant or offices and is not a proprietor of real estate. capita) -Has an annual lease for the office space equivalent to one income per capita. • Official costs only, no bribes -Is in an office space of approximately 929 square meters (10,000 square feet). -Has a company deed that is 10 pages long. • No professional fees unless services required by law or commonly used in practice The owners: Paid-in minimum capital (% of income per capita) -Have reached the legal age of majority and are capable of making decisions as an adult. If there • Funds deposited in a bank or with third party before registration is no legal age of majority, they are assumed to be 30 years old. or up to 3 months after incorporation -Are in good health and have no criminal record. -Are married, the marriage is monogamous and registered with the authorities. -Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Page 5 Doing Business 2020 Venezuela, RB Starting a Business - Venezuela, RB Standardized Company Legal form Sociedad Anónima (SA) Paid-in minimum capital requirement No minimum City Covered Caracas Indicator Venezuela, RB Latin America & OECD high Best Regulatory Caribbean income Performance Procedure – Men (number) 20 8.1 4.9 1 (2 Economies) Time – Men (days) 230 28.8 9.2 0.5 (New Zealand) Cost – Men (% of income per capita) 211.8 31.4 3.0 0.0 (2 Economies) Procedure – Women (number) 20 8.1 4.9 1 (2 Economies) Time – Women (days) 230 28.8 9.2 0.5 (New Zealand) Cost – Women (% of income per capita) 211.8 31.4 3.0 0.0 (2 Economies) Paid-in min. capital (% of income per capita) 0.0 0.4 7.6 0.0 (120 Economies) Figure – Starting a Business in Venezuela, RB – Score 0.0 0.0 0.0 100.0 Procedures Time Cost Paid-in min. capital Figure – Starting a Business in Venezuela, RB and comparator economies – Ranking and Score DB 2020 Starting a Business Score 0 100 85.6: Guyana (Rank: 111) 85.4: Dominican Republic (Rank: 112) 81.3: Brazil (Rank: 138) 79.6: Regional Average (Latin America & Caribbean) 69.4: Bolivia (Rank: 175) 25.0: Venezuela, RB (Rank: 190) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2020 Venezuela, RB Figure – Starting a Business in Venezuela, RB – Procedure, Time and Cost Time (days) Cost (% of income per capita) 200 200 Cost (% of income per capita) 150 150 Time (days) 100 100 50 50 0 0 1 2 3 4 5 *6 *7 8 9 10 * 11 * 12 13 14 * 15 * 16 * 17 * 18 * 19 * 20 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2020 Venezuela, RB Details – Starting a Business in Venezuela, RB – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Reserve company name 4 days VES 50 (1 UT name Agency : Commercial Registry search) + VES 100 (2 UT To reserve a company name, founders must buy the name search form (busqueda de la name reservation) denominación) at the Registry. The cost for the name search is 1 UT and the cost for the name reservation is 2 UT. As of March 2019, the new value of the U.T. increased to VES 50 (Official Gazette N° 41.597). 2 Obtain an approval of the company name 3 days no charge Agency : Commercial Registry After reserving the company name, the applicant must pay the cited fee at a bank and later return to the Registry to show the bank deposit slip and obtain the company name approval. 3 Have the company’s constitutive documents and social statutes prepared and legalized by 5 days VES 600,000 to VES a lawyer 1,550,000 Agency : Lawyer Legal assessment is required in the procurement of the company incorporation documents; the assessment must follow all formalities cited in Articles 211 to 215 of the Code of Commerce. 4 Open a bank account 1 day no charge Agency : Bank The Mercantile Registry requires evidence of a bank account. Although founders commonly deposit 20% of declared capital, there is no minimum amount; by law, the Registrar determines the required amount. 5 Register at the local mercantile registry (Registro Mercantil) 34 days 1% of the capital + VES Agency : Commercial Registry 300 (6 UT for a fixed fee) + Founders must register with the local mercantile registry. This procedure must be done within 30 VES 250 (5 UT for the days of name reservation. The employer must fill out and submit a registration (derechos fiscal rights) + VES 25 registrales) form. (0.05 UT per page of the articles of association) + VES 30 (per page stamp tax for original document, registry copy and company copy). 6 Publish articles in a local newspaper (Gaceta Forense del Registro Mercantil) 3 days (simultaneous VES 4000 Agency : Local Newspaper with previous procedure) The company's articles of association must be published in a local newspaper. 7 Register company books 1 day (simultaneous with VES 20000 per each book Agency : Commercial Registry previous procedure) + VES 1.5 (0.06 UT) fixed Companies must purchase the books and register corporate books (Shareholders' Book, fee + 5 VES (0.0003 UT Shareholders’ Meeting Minutes Book and, if applicable, Board of Directors Minutes Book) and per page per registration, accounting books (Inventory Book, Daily Book and Ledger). each book has 100 pages) 8 Register at the Tax Authorities (Servicio Nacional Integrado de Administración Aduanera y 1 day no charge Tributaria, SENIAT) to obtain a fiscal number (Registro Unico de Información Fiscal, RIF) Agency : Tax Authority (SENIAT) The entrepreneur must register at the Registro Unico de Información Fiscal (RIF) to obtain a fiscal number, within SENIAT, the National Integrated Service of Customs and Tax Administration. The company must file an electronic form which is downloaded from SENIAT’s Web page (www.seniat.gov.ve). Such form must be signed by the legal representative and be filed before SENIAT, along with the required documentation, to issue the tax information registry number. 9 Obtain a tax clearance certificate at municipal level (Instituto Municipal de Aseo Urbano) 1 day VES 10 (0.2 UT) Agency : Municipal Institute for Urban Cleaning (Instituto Municipal de Aseo Urbano) A tax clearance certificate must be obtained. 10 Register at the Social Security Institute 130 days no charge Agency : Social Security Institute (IVSS) Since 2015, applicants must register online at http://registro.ivss.gob.ve:28085/RegistroSolicitudTiuna/home.htm. The application must then be filed in person at the Social Security Institute along with the following required attachments. (i) Registration form 14-01 issued by the online system; (ii) tax identification number (RIF); (iii) commercial registry of the company; (iv) information of the legal representative of the company (identity card); (iv) any public service payment receipt where the compnay's commercial address is indicated (electricity, telephone, or other). Once registered online, the entrepreneur needs to file the original documents in person at the social security office. This could take up to 6 months. Page 8 Doing Business 2020 Venezuela, RB 11 Register at National Bank for Housing and Habitat - Banco Nacional de Vivienda y Habitat 1 day (simultaneous with no charge (BANAVIH) previous procedure) Agency : Bank for Housing and Habitat (BANAVIH) The employers must register online http://faovel.banavih.gob.ve/index.php/empleador_login/selectUsuario. The application must then be filed in person at BANAVIH along with the required attachments, to obtain a user identification and password in order to access the employer's BANAVIH online account. After completing the online application, the following documents must be submitted at the National Bank for Housing and Habitat: (i) tax identification number (RIF); (ii) commercial registry of the company; and (iii) information of the legal representative of the company (identity card). Employers must verify their list of employees monthly and pay the contribution. Register at the National Institute of Socialist Cooperation & Education 1 day (simultaneous with no charge 12 Agency : National Institute of Socialist Cooperation & Education previous procedure) Employers with a minimum of five employees must register at the National Educational Co- operation Institute; the employees’ social security numbers are required. Register must be done online at http://www.inces.gob.ve/ 13 Register with the Ministry of Labor 1 day no charge Agency : Ministry of Labor The company and the company employees have to register with the Ministry of Labor. The Registration also includes the Statistics Register and the Department of Hygiene and Safety. The applicants can register online at www.mintra.gob.ve. The application must then be filed in person before the Ministry of Labor along with the required attachments. 14 Go through a labor inspection (by the Labor Inspectorate) 14 days VES 5 (0.1 UT stamp cost) Agency : Labor Inspector Office The Labor Inspectorate inspects the business premises. Obtain fire approval and undergo an inspection 28 days (simultaneous no charge 15 Agency : Fire Department with previous procedure) It is necessary to obtain an approval from the Firefighters' Department. It takes 8 days for assignment of an operating inspector and 15–20 days for a response to be provided. Once the inspector is assigned, he/she will perform an inspection at the place of business to establish whether all security requirements are met. After inspection, an approval from the Agency will be obtained if all the requirements are met. Obtain conformity of use certificate (zoning permit) 15 days (simultaneous VES 250 (5 UT) + VES 1 16 Agency : Municipality with previous procedure) (0.02 UT) stamp A conformity of use certificate must be obtained. Documents required are the mercantile registration, external building maps, and a photo of the premises. Obtain industrial or commercial license from competent municipality 50 days (simultaneous VES 500 (10 UT) + VES 1 17 Agency : Municipality with previous procedure) (0.02 UT) To obtain an industrial or commercial license from a competent municipality, the founders must file copies of registration, a sanitation certificate, the list of the premises, the latest balance sheet and a declaration of the number of employees. The fees depend on the Municipality in which the company will execute its commercial activities. Register at the National Commission for People with Disabilities 1 day No charge 18 Agency : National Council for People with Disabilities (CONAPDIS) In order to register companies must complete the form provided on line at http://sistemaspruebas.conapdis.gob.ve/publico/deseo_registrarme_empresa. In order to access the website, companies need to obtain a login and username. Once that is done, registration is done immediately. Register at the National Superintendence for the Defense of Socioeconomic Rights 1 day No charge 19 (SUNDDE) Agency : National Superintendence for the Defense of Socio-Economic Rights (SUNDDE) It is necessary to register at the Sole Registry of Venezuelan Individuals and Legal Entities who Develop Economic and Commercial Activities in Venezuela (Registro Unico de Personas Que Desarollan Actividades Economicas, RUPDAE), a registry created by the Organic Law of Fair Prices (November, 2014). RUPDAE is part of the Superintendence of Fair Prices (Superintendencia de Precios Justos), within the National Superintendence for the Defense of Socioe conomic Rights (SUNDDE). The registration can be done online at the following site: http://rupdae.superintendenciadepreciosjustos.gob.ve/usuarios/inscripcion or in person. The majority of companies go in person to agency to register. Page 9 Doing Business 2020 Venezuela, RB Register at the National Institute of Prevention, Occupational Health and Safety 1 day No charge 20 (INPSASEL) Agency : National Institute of Prevention, Occupational Health and Safety (INPSASEL) Companies must register online at the following site. http://usuarios.inpsasel.gob.ve/login/registro The procedures provides a registration number which companies will use in further interactions with government after it starts operations. Takes place simultaneously with previous procedure. Page 10 Doing Business 2020 Venezuela, RB Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates The construction company (BuildCo): • Submitting all required notifications and receiving all necessary - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest inspections business city. For 11 economies the data are also collected for the second largest business city. • Obtaining utility connections for water and sewerage - Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects • Registering and selling the warehouse after its completion or engineers. BuildCo is not assumed to have any other employees who are technical or licensed Time required to complete each procedure (calendar days) experts, such as geological or topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse upon its • Does not include time spent gathering information completion. • Each procedure starts on a separate day—though procedures The warehouse: that can be fully completed online are an exception to this rule - Will be used for general storage activities, such as storage of books or stationery. • Procedure is considered completed once final document is received - Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be • No prior contact with officials located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita. Cost required to complete each procedure (% of income per - Will have complete architectural and technical plans prepared by a licensed architect. If capita) preparation of the plans requires such steps as obtaining further documentation or getting prior • Official costs only, no bribes approvals from external agencies, these are counted as procedures. - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory Building quality control index (0-15) requirements). • Quality of building regulations (0-2) The water and sewerage connections: • Quality control before construction (0-1) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water • Quality control during construction (0-3) delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage infrastructure, a septic tank in the smallest size available will be installed or built. • Quality control after construction (0-3) - Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow • Liability and insurance regimes (0-2) of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and • Professional certifications (0-4) a peak wastewater flow of 1,136 liters (300 gallons) a day. - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 11 Doing Business 2020 Venezuela, RB Dealing with Construction Permits - Venezuela, RB Standardized Warehouse Estimated value of warehouse VES 29,281,529.10 City Covered Caracas Indicator Venezuela, RB Latin America & OECD high Best Regulatory Caribbean income Performance Procedures (number) 11 15.5 12.7 None in 2018/19 Time (days) 434 191.2 152.3 None in 2018/19 Cost (% of warehouse value) 12.0 3.6 1.5 None in 2018/19 Building quality control index (0-15) 10.5 9.0 11.6 15.0 (6 Economies) Figure – Dealing with Construction Permits in Venezuela, RB – Score 76.0 0.0 39.8 70.0 Procedures Time Cost Building quality control index Figure – Dealing with Construction Permits in Venezuela, RB and comparator economies – Ranking and Score DB 2020 Dealing with Construction Permits Score 0 100 70.7: Dominican Republic (Rank: 80) 63.2: Regional Average (Latin America & Caribbean) 60.0: Bolivia (Rank: 139) 52.5: Guyana (Rank: 167) 51.9: Brazil (Rank: 170) 46.5: Venezuela, RB (Rank: 175) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Page 12 Doing Business 2020 Venezuela, RB Figure – Dealing with Construction Permits in Venezuela, RB – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 4 400 3.5 Cost (% of warehouse value) 350 3 300 Time (days) 2.5 250 2 200 1.5 150 100 1 50 0.5 0 0 1 *2 *3 *4 5 *6 7 8 9 * 10 * 11 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 13 Doing Business 2020 Venezuela, RB Figure – Dealing with Construction Permits in Venezuela, RB and comparator economies – Measure of Quality 14 13.0 12 10.5 Index score 10 8.4 9.0 8 7.0 6 4.0 4 2 0 Venezuela, Bolivia Brazil Dominican Guyana Latin RB Republic America & Caribbean Details – Dealing with Construction Permits in Venezuela, RB – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Request and obtain the assignment of the basic urban variables for land development 171 days USD 3 Agency : Dirección de Desarrollo Urbano y Catastro del Municipio BuildCo must request assignment of the Basic Urban Variables, as stipulated by the Organic Law for Urban Development. Alternatively, a preliminary consultation or an architectural draft is prepared in order to assess compliance with the Basic Urban Variables for Buildings. 2 Request and obtain a certificate from the Zoning and Road Construction Division 144 days USD 3,000 Agency : Zoning and Road Construction Division BuildCo must also obtain a certificate stating that the new project is compatible with the existing or planned roads from the Zoning and Road Construction Division in order to obtain a certificate of compliance with basic urban variables for buildings. 3 Request and obtain a Soil Test 20 days USD 10,000 Agency : Private Enterprise - Laboratory A soil test is listed by "Norma Venezolana COVENIN 1618-98" as a requirement to obtain a building permit and other procedures. In practice, contractors ask for a soil test to ensure that the foundation of the building is solid. The engineer must understand the suitability of the soil for the proposed construction work. A soil test is essential to build a solid foundation and prevent structures from being damaged, collapsed or leaned. 4 Obtain a topographical map 15 days USD 3,000 Agency : Private engineer or qualified topographer A topographic survey is required by Chapter H-15 of "Norma Venezolana COVENIN 1618-98". Moreover, in practice, contractors will need a topographical survey to draw the site plan. 5 Request and obtain a certificate of compliance with basic urban variables for buildings 48 days no charge Agency : Dirección de Desarrollo Urbano y Catastro del Municipio The certificate of compliance with Basic Urban Variables is required to begin the construction. 6 Pay the corresponding fees at the bank 1 day USD 4,000 Agency : Commercial Bank Municipal taxes and fees are paid at any commercial bank at which the municipality has an account. 7 Notify intention to begin construction to Municipality 1 day no charge Agency : Dirección de Desarrollo Urbano y Catastro del Municipio After the payment has been made, BuildCo. notifies the Municipality its intent to begin the warehouse construction. 8 Request and receive a fire inspection 1 day USD 2,000 Agency : Fire Department Once construction has started, BuildCo. requests this inspection at the municipal fire station. The fire inspection approval certificate is delivered by the Fire Department the day after the inspection is performed, provided that the building complies with the Fire Department Regulations and the Commission for Industrial Standards (COVENIN) standards. If the building does not comply with these regulations, the Fire Department draws up a report stating that the inspection has not been approved and detailing those aspects that must be corrected in the building in order to pass the fire inspection. Page 14 Doing Business 2020 Venezuela, RB 9 Request and connect to water supply and sewage service 213 days USD 3,000 Agency : Hidrocapital Water supply is obtained through connection to the sector’s main pipeline, following a request to the corresponding company, which, in this case, is Hidrocapital. In some cases, buildings have their own groundwater well, making it unnecessary to request water supply services from Hidrocapital. Connection to the sewage system depends on whether this service exists in the sector where the building is located. If there is no sewage system, the Zoning and Road Construction Division (Dirección de Desarrollo Urbano y Catastro) requires the installation of septic tanks or waste treatment plants for wastes to be treated before being discharged into the environment. Depending on the size of the building and its intended use, the appropriate permits must be requested at the Ministry of People's Power for Environment (changed in 2007 from the Ministry of the Environment and Natural Resources), because such wastes might have a negative impact on the environment. Due to a backlog and a massive number of applications, this takes on average 6 months. Receive final inspection and obtain construction completion certificate 16 days no charge 10 Agency : Dirección de Desarrollo Urbano y Catastro del Municipio Once the construction has been completed, and installations made, BuildCo. can obtain a construction completion certificate. To obtain the permit, the Fire Department certificate is mandatory, as is compliance with all applicable regulations. 11 Register the building at the Subordinate Registry (Registro Subalterno) 16 days USD 10,000 Agency : Subordinate Registry (Registro Subalterno) After the water supply and sewage services are instaleld, BuildCo. can register the new warehouse at the Subordinate Registry (Registro Subalterno) during or after construction. The title to the land on which the building is constructed and building plans must be submitted so Registry officials can calculate the building registration fee. Takes place simultaneously with previous procedure. Page 15 Doing Business 2020 Venezuela, RB Details – Dealing with Construction Permits in Venezuela, RB – Measure of Quality Answer Score Building quality control index (0-15) 10.5 Quality of building regulations index (0-2) 1.5 How accessible are building laws and regulations in your economy? (0-1) Free of charge; In 0.5 official gazette; Not easily accessible. Which requirements for obtaining a building permit are clearly specified in the building regulations or on any List of required 1.0 accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in compliance with existing Licensed architect; 1.0 building regulations? (0-1) Licensed engineer. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during construction? (0-2) Inspections by in- 1.0 house engineer. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance with the approved Yes, final inspection 2.0 plans and regulations? (0-2) is done by government agency. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 1.0 Which parties (if any) are held liable by law for structural flaws or problems in the building once it is in use Architect or engineer; 1.0 (Latent Defect Liability or Decennial Liability)? (0-1) Professional in charge of the supervision; Construction company; Owner or investor. Which parties (if any) are required by law to obtain an insurance policy to cover possible structural flaws or No party is required 0.0 problems in the building once it is in use (Latent Defect Liability Insurance or Decennial Insurance)? (0-1) by law to obtain insurance . Professional certifications index (0-4) 2.0 What are the qualification requirements for the professional responsible for verifying that the architectural plans University degree in 1.0 or drawings are in compliance with existing building regulations? (0-2) architecture or engineering; Being a registered architect or engineer. What are the qualification requirements for the professional who supervises the construction on the ground? (0- University degree in 1.0 2) engineering, construction or construction management; Being a registered architect or engineer. Page 16 Doing Business 2020 Venezuela, RB Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection (number) To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining all necessary clearances and permits The warehouse: • Completing all required notifications and receiving all necessary - Is owned by a local entrepreneur and is used for storage of goods. inspections - Is located in the economy’s largest business city. For 11 economies the data are also collected for • Obtaining external installation works and possibly purchasing the second largest business city. material for these works - Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway. • Concluding any necessary supply contract and obtaining final - Is a new construction and is being connected to electricity for the first time. supply - Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square Time required to complete each procedure (calendar days) feet). The plot of land on which it is built is 929 square meters (10,000 square feet). • Is at least 1 calendar day The electricity connection: • Each procedure starts on a separate day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- • Does not include time spent gathering information kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW). - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution • Reflects the time spent in practice, with little follow-up and no network and is either overhead or underground, whichever is more common in the area where the prior contact with officials warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other Cost required to complete each procedure (% of income per owners’ private property because the warehouse has access to a road. capita) - Does not require work to install the internal wiring of the warehouse. This has already been • Official costs only, no bribes completed up to and including the customer’s service panel or switchboard and the meter base. • Value added tax excluded The monthly consumption: The reliability of supply and transparency of tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours • Duration and frequency of power outages (0–3) a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours • Tools to monitor power outages (0–1) (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier. - Tariffs effective in January of the current year are used for calculation of the price of electricity for • Regulatory monitoring of utilities’ performance (0–1) the warehouse. Although January has 31 days, for calculation purposes only 30 days are used. • Financial deterrents limiting outages (0–1) • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor in the ranking on the ease of getting electricity. Page 17 Doing Business 2020 Venezuela, RB Getting Electricity - Venezuela, RB Standardized Connection Name of utility Corpoelec Price of electricity (US cents per kWh) 123.8 City Covered Caracas Indicator Venezuela, RB Latin America & OECD high Best Regulatory Caribbean income Performance Procedures (number) 6 5.5 4.4 3 (28 Economies) Time (days) 208 66.8 74.8 18 (3 Economies) Cost (% of income per capita) 650.7 407.2 61.0 0.0 (3 Economies) Reliability of supply and transparency of tariff index (0-8) 0 4.4 7.4 8 (26 Economies) Figure – Getting Electricity in Venezuela, RB – Score 50.0 17.4 92.0 0.0 Procedures Time Cost Reliability of supply and transparency of tariff index Figure – Getting Electricity in Venezuela, RB and comparator economies – Ranking and Score DB 2020 Getting Electricity Score 0 100 73.2: Bolivia (Rank: 96) 72.8: Brazil (Rank: 98) 71.7: Regional Average (Latin America & Caribbean) 68.0: Dominican Republic (Rank: 116) 45.9: Guyana (Rank: 170) 39.8: Venezuela, RB (Rank: 174) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Figure – Getting Electricity in Venezuela, RB – Procedure, Time and Cost Time (days) Cost (% of income per capita) 700 200 600 Cost (% of income per capita) 150 500 Time (days) 400 100 300 200 50 100 0 0 1 *2 3 4 *5 6 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures Page 18 Doing Business 2020 Venezuela, RB reflected here, see the summary below. Figure – Getting Electricity in Venezuela, RB and comparator economies – Measure of Quality 7 6 6 6 5 Index score 5 4.4 4 3 2 1 0 0 0 Venezuela, Bolivia Brazil Dominican Guyana Latin RB Republic America & Caribbean Page 19 Doing Business 2020 Venezuela, RB Details – Getting Electricity in Venezuela, RB – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Hire certified electrician to prepare design and submit application to Corpoelec 85 calendar days USD 500 Agency : Corpoelec The application must be submitted with legal property titles, ID of the client and a draft design of the connection made by a certified electrician ("electricista colegiado"). 2 Receive external inspection by Corpoelec 1 calendar day USD 0 Agency : Corpoelec Corpoelec carries out an external inspection to determine the connections works to be carried out and if an expansion or extension of the network is needed. It is not compulsory although recommended that the client and/or the client's electrician be present during the inspection. A cost estimate is then sent to the client. The estimate must be paid at the premises of Corpoelec with a check at the headquarters of Corpoelec in San Bernardino. A connection of less than 36 KvA does not need a project if the distance to the network is less than 12 meters for underground connections and 30 meters for overhead. 3 Obtain excavation permit from municipality 90 calendar days USD 10 Agency : Municipality The client must obtain an excavation permit for the underground connection from the Municipality. In other cases, for an overhead connection a permit is not necessary but this must be explicitly indicated in the design of the connection submitted by the applicant to the utility. 4 Pay estimate and await completion of external works by electrician 30 calendar days USD 37,330 Agency : Electrician Once the estimate has been paid, Corpoelec ires a team to carry out the external works. As a public enterprise, Corpoelec has to comply with public procurement rules when hiring the team, which can take around 8 months. Corpoelec offers the possibility of the "mandato" in which the client can hire himself an electrician to carry out the external works. Corpoelec appoints an inspector who will watch the progress of the works and will sign the certificate ("finiquito de obra") approving that the works meet the standards of Corpoelec. Under the "mandato", the client pays the market price, thus the cost is higher than when Corpoelec carries out the works, but reduces the time to obtain a connection. 5 Receive final inspection by Corpoelec 1 calendar day USD 0 Agency : Corpoelec When the client opts for the "mandato", Corpoelec carries out a final inspection and delivers a certificate of conformity of the works ("finiquito de obra"). 6 Sign supply contract with Corpoelec 3 calendar days USD 0 Agency : Corpoelec The client signs a supply contract with Corpoelec and can be exempted from the payment of the security deposit if a bank account or credit card is registered to cover the monthly bill payment. This can be done in any of the commercial offices of Corpoelec of Caracas. Takes place simultaneously with previous procedure. Page 20 Doing Business 2020 Venezuela, RB Details – Getting Electricity in Venezuela, RB – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 0 Total duration and frequency of outages per customer a year (0-3) 0 System average interruption duration index (SAIDI) .. System average interruption frequency index (SAIFI) .. What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI N/A Mechanisms for monitoring outages (0-1) 0 Does the distribution utility use automated tools to monitor outages? No Mechanisms for restoring service (0-1) 0 Does the distribution utility use automated tools to restore service? No Regulatory monitoring (0-1) 0 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of supply? No Financial deterrents aimed at limiting outages (0-1) 0 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages exceed a certain cap? No Communication of tariffs and tariff changes (0-1) 0 Are effective tariffs available online? No Link to the website, if available online n.a Are customers notified of a change in tariff ahead of the billing cycle? No Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 21 Doing Business 2020 Venezuela, RB Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on immovable property To make the data comparable across economies, several assumptions about the parties to the (number) transaction, the property and the procedures are used. • Preregistration procedures (for example, checking for liens, The parties (buyer and seller): notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). • Registration procedures in the economy's largest business city. - Are located in the periurban (that is, on the outskirts of the city but still within its official limits) • Postregistration procedures (for example, filling title with area of the economy’s largest business city. For 11 economies the data are also collected for the municipality) second largest business city. - Are 100% domestically and privately owned. Time required to complete each procedure (calendar days) - Perform general commercial activities. • Does not include time spent gathering information The property (fully owned by the seller): • Each procedure starts on a separate day - though procedures - Has a value of 50 times income per capita, which equals the sale price. that can be fully completed online are an exception to this rule - Is fully owned by the seller. • Procedure is considered completed once final document is - Has no mortgages attached and has been under the same ownership for the past 10 years. received - Is registered in the land registry or cadastre, or both, and is free of title disputes. • No prior contact with officials - Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required. Cost required to complete each procedure (% of property - Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- value) story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, • Official costs only (such as administrative fees, duties and building codes and legal requirements. The property, consisting of land and building, will be taxes). transferred in its entirety. • Value Added Tax, Capital Gains Tax and illicit payments are - Will not be subject to renovations or additional construction following the purchase. excluded - Has no trees, natural water sources, natural reserves or historical monuments of any kind. - Will not be used for special purposes, and no special permits, such as for residential use, Quality of land administration index (0-30) industrial plants, waste storage or certain types of agricultural activities, are required. - Has no occupants, and no other party holds a legal interest in it. • Reliability of infrastructure index (0-8) • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 22 Doing Business 2020 Venezuela, RB Registering Property - Venezuela, RB Indicator Venezuela, RB Latin America & OECD high Best Regulatory Caribbean income Performance Procedures (number) 10 7.4 4.7 1 (5 Economies) Time (days) 53 63.7 23.6 1 (2 Economies) Cost (% of property value) 2.6 5.9 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 5.5 12.0 23.2 None in 2018/19 Figure – Registering Property in Venezuela, RB – Score 25.0 75.1 82.6 18.3 Procedures Time Cost Quality of the land administration index Figure – Registering Property in Venezuela, RB and comparator economies – Ranking and Score DB 2020 Registering Property Score 0 100 67.2: Dominican Republic (Rank: 74) 55.7: Guyana (Rank: 128) 54.9: Regional Average (Latin America & Caribbean) 54.1: Brazil (Rank: 133) 50.3: Venezuela, RB (Rank: 145) 49.9: Bolivia (Rank: 148) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Page 23 Doing Business 2020 Venezuela, RB Figure – Registering Property in Venezuela, RB – Procedure, Time and Cost Time (days) Cost (% of property value) 1.6 50 1.4 Cost (% of property value) 40 1.2 Time (days) 1 30 0.8 20 0.6 0.4 10 0.2 0 0 1 *2 *3 *4 *5 6 7 8 9 10 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 24 Doing Business 2020 Venezuela, RB Figure – Registering Property in Venezuela, RB and comparator economies – Measure of Quality 18 16.3 16 14.5 14 Index score 12.0 12 10 7.0 7.5 8 5.5 6 4 2 0 Venezuela, Bolivia Brazil Dominican Guyana Latin RB Republic America & Caribbean Details – Registering Property in Venezuela, RB – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain a cadastral certificate (ficha/cédula catastral) 20 days VES 50; (From 0.5 to 1.5 Agency : Cadaster office of the Municipality Tax Unit (Tax unit by Obtaining a cadastral certificate is a requirement for conducting a property transaction. This has March 2019: VES 50)) the purpose of keeping an updated record of the ownership, the value and the physical characteristics of the property. This procedure is regulated by the Geography, Cartography, and Cadastral Law of March 28, 2000 (Chapter III, regarding the link between the Cadaster and the Public Registry) and Resolution N°019 of the Ministry of Popular Power for the Interior, Justice and Peace published on January 13, 2014 (Official Gazette N°40,332, regarding the requirements for processing and registering transactions at the Public Registries). Caracas is made up of five municipalities: Libertador, Chacao, Baruta, Sucre, and El Hatillo. The time and cost (from 0.5 to 1.5 Venezuelan Tax Unit) to complete this procedure varies depending on the municipality that has the territorial jurisdiction to issue the cadastral certificate. 2 Obtain a certificate of solvency from the Venezuelan Institute of Social Security (IVSS) Less than one day, No cost Agency : Venezuelan Social Security Institute ("IVSS") online Registration with the Social Security Institute is mandatory in Venezuela. This certificate of solvency can be obtained online through the IVSS website, by providing the company's IVSS number. If the company is already registered with the IVSS, the certificate will be issued online immediately. 3 Obtain the Municipal Solvency Certificate at the Municipality 3 days VES 65; (1 Tax Unit for Agency : Municipality administrative fees + 0,3 The Municipal Solvency Certificate (“Certificado de Solvencia Municipal”) ascertains whether a Tax Units (Tax unit by Property has any outstanding debts with the corresponding Tax administration. It must be obtained March 2019: VES 50)) at the pertinent tax authority of the municipality where the immovable property is located. For this, the seller must request the statement of account of the immovable property that it wishes to dispose of and proceed to the pertinent payment. 4 Obtain a certificate of solvency from the water company 3 days VES 15; (0.3 Tax Units Agency : Water Company (Tax unit by March 2019: The seller presents his latest water bill that he has paid in order to obtain a certificate of solvency VES 50)) ("solvencia de servicio") from the water company (Hidrocapital is the main supplier in the municipalities that conform Caracas). The Certificate is valid for 30 days. 5 Obtain a non-encumbrance certificate for the last 10 years from Registry 3 days VES 420; (3 Tax Units for Agency : Public Registry the first year + 0.6 Tax The certificate of encumbrances is not legally required, but it is usually obtained in practice (and Units for each additional requested by the purchaser). This example is a case of a title that covers the last ten years of the year (10 years needed)) property. Page 25 Doing Business 2020 Venezuela, RB 6 Sales agreement is drafted by lawyer 2 days VES 439,222.94; Agency : Lawyer (Lawyer’s fees according According to the “Ley de Abogados” and the Public Registry Law (Article 22), all documents that to the following cumulative are presented to the Registry have to be approved by a lawyer. In practice, the lawyer also drafts schedule included in the sales agreement. The lawyer’s fees were estimated according to the “Reglamento de article 4 Honorario Mínimo”. However, these guidelines are not binding for lawyers in Caracas. a) Up to Bs. 100.000,oo: Bs. 30.000,oo b) From Bs. 100.001,oo to Bs. 2.000.000,oo: 2.5% c) From Bs. 2.000.001,oo to Bs. 5.000.000,oo: 2% d) From Bs. 5.000.001,oo onwards: 1,5% The above schedule translates into the following in VEF: Property value (in VEF) : Lawyer fees - Under 100: VEF 30 - From 101 to 2,000: 2.5% of contract value - From 2,000 to 5,000: 2.0% of contract value - Over 5,000: 1.5% of contract value Due to the last currency conversion from Bolivar fuerte (VEF) to Bolivar Soverano (VES), in August 2018, and the lack of applicability of the contract values established by law, it's widely used in practice to apply a rate of 1.5% of the contract value.) 7 The sale agreement is presented to the Registry Office for its revision and taxes and fees 1 day No cost are liquidated Agency : Public Registry The sale agreement is presented to the local office of SAREN (Servicio Autónomo de Registros y Notarías) for the calculation of the following taxes and fees: a) SAREN's fees, which amount to 0.6% of the property value, according to the Law of Public Registries and Notaries of 2014 (the fee provisions entered into force on May 2015), and must be paid within 60 days of assessment. b) Municipal tax, which amounts to 5 Tax Units. An internal order of SAREN of 2008 established a "Previous Revision" procedure at the time of the assessment of the SAREN fees. This procedure was established to review the substance of the property transaction before the parties paid the applicable taxes and proceeded to present all documents for registration. Previous Revision procedures can add up to 5 days to the property transfer process, but do not guarantee that the registration application will be approved after the payment of taxes. Not all SAREN offices have taken up this procedure, since ultimately it is not established by law, and seems to contradict the legally established celerity principle that governs registration procedures in Venezuela. 8 Payment of taxes at a private commercial bank 1 day VES 322,346.82; (0.6% of Agency : Commercial Bank purchase price (SAREN After the presentation of the sale agreement to the Public Registry, the fees due to SAREN are fee) + 0.5% of purchase paid in a private bank. The Income Tax must also be paid at the same private bank (0.5% of price (advance payment of purchase price). Finally, a fee equivalent to 5 Tax Units has to be paid to the corresponding Income Tax) + 5 Tax Unit "Hacienda Pública Municipal" on its account at the bank. for Municipal Tax) Page 26 Doing Business 2020 Venezuela, RB 9 Present all the documents to the Registry 28 days no charge Agency : Public Registry The user must go to the “Departamento de Presentaciones” in the Registry’s office and present the following documents: - sale document (obtained in procedure 6); - receipt of payments; - Municipal Solvency Certificate (obtained in procedure 3); - Cadastral certificate (obtained in procedure 1); - Solvency certificate from the water company (obtained in procedure 4); - Solvency certificate from the IVSS (obtained in procedure 2); - Copy of the means of payment for the transaction (check or bank transfer); This list of the required documents is regulated by Resolution N°019 of the Ministry of Popular Power for the Interior, Justice and Peace published on January 13, 2014 (Official Gazette N°40,332). The documentation is reviewed carefully by the Revision Department, verifying the identity of the owners, boundaries, the fulfillment of judicial decisions related to the property, and other information. The date for the signature by the registrar is set and parties must come back on that day for the final step. Since 2005, staff at the Registry is inclined to use discretion ("jurisprudencia") in dealing with cases and may ask the clients two times for extra documents, thus delaying this procedure. The documentation shall include copy of RIF ("Registro de Información Fiscal" or Fiscal Information Register) of both buyer and seller. If there is any authorization by the meetings of the pertinent companies, copies of those authorizing the sale of the immovable must be included. If acting through an attorney-in-fact, a copy of his/her identity card and a copy of the power-of-attorney is required. The sale document is signed by the Registrar under the presence of the parties and two witnesses. 10 Seller must inform the Municipality of the change of ownership 1 day no charge Agency : Municipality (Cadaster) According to Gaceta Oficial N° 37.002 chapter II, article 31 the owners of properties, as well as the officials responsible for the administration of real estate belonging to the State, are obliged with the cadastre to register the property in the respective municipal cadastre office. Properties that are not registered in the Cadastre office may be sanctioned with a fine of 5 to 200 Tax Units. Takes place simultaneously with previous procedure. Page 27 Doing Business 2020 Venezuela, RB Details – Registering Property in Venezuela, RB – Measure of Quality Answer Score Quality of the land administration index (0-30) 5.5 Reliability of infrastructure index (0-8) 0.0 Type of land registration system in the economy: Title Registration System What is the institution in charge of immovable property registration? Public Registry, a dependent Agency of the Servicio Autónomo de Registros y Notarías ("SAREN") In what format are past and newly issued land records kept at the immovable property registry of the largest Paper 0.0 business city of the economy —in a paper format or in a computerized format (scanned or fully digital)? Is there a comprehensive and functional electronic database for checking for encumbrances (liens, mortgages, No 0.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: El Instituto Geográfico de Venezuela Simón Bolívar ("IGVSB") In what format are past and newly issued cadastral plans kept at the mapping agency of the largest business Paper 0.0 city of the economy—in a paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information No 0.0 (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral or mapping agency Separate databases 0.0 kept in a single database, in different but linked databases or in separate databases? Do the immovable property registration agency and cadastral or mapping agency use the same identification No 0.0 number for properties? Transparency of information index (0–6) 1.5 Who is able to obtain information on land ownership at the agency in charge of immovable property registration Freely accessible by 1.0 in the largest business city? anyone Is the list of documents that are required to complete any type of property transaction made publicly available– Yes, in person 0.0 and if so, how? Link for online access: Is the applicable fee schedule for any type of property transaction at the agency in charge of immovable Yes, in person 0.0 property registration in the largest business city made publicly available–and if so, how? Link for online access: Does the agency in charge of immovable property registration agency formally commit to deliver a legally No 0.0 binding document that proves property ownership within a specific timeframe –and if so, how does it communicate the service standard? Link for online access: Is there a specific and independent mechanism for filing complaints about a problem that occurred at the agency No 0.0 in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the immovable property No 0.0 registration agency? Number of property transfers in the largest business city in 2018: Who is able to consult maps of land plots in the largest business city? Anyone who pays the 0.5 official fee Is the applicable fee schedule for accessing maps of land plots made publicly available—and if so, how? Yes, in person 0.0 Link for online access: Page 28 Doing Business 2020 Venezuela, RB Does the cadastral/mapping agency formally specifies the timeframe to deliver an updated cadastral plan—and Yes, in person 0.0 if so, how does it communicate the service standard? Link for online access: Is there a specific and independent mechanism for filing complaints about a problem that occurred at the No 0.0 cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 0.0 Are all privately held land plots in the largest business city formally registered at the immovable property No 0.0 registry? Are all privately held land plots in the economy formally registered at the immovable property registry? No 0.0 Are all privately held land plots in the largest business city mapped? No 0.0 Are all privately held land plots in the economy mapped? No 0.0 Land dispute resolution index (0–8) 4.0 Does the law require that all property sale transactions be registered at the immovable property registry to make Yes 1.5 them opposable to third parties? Legal basis: Civil Code (Código Civil Venezolano), Part XXII, Article 1920 Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Type of guarantee: State guarantee Legal basis: Article 9 of the "Ley de Registro Público y del Notariado", published in the "Gaceta Oficial Extraordinaria" No. 6.156 of 19 November 2014 Is there a is a specific, out-of-court compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Legal basis: Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., Yes 0.5 checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Notary; Lawyer; Does the legal system require verification of the identity of the parties to a property transaction? Yes 0.5 If yes, who is responsible for verifying the identity of the parties? Registrar; Notary; Lawyer; Is there a national database to verify the accuracy of government issued identity documents? Yes 1.0 What is the Court of first instance in charge of a case involving a standard land dispute between two local Tribunales de businesses over tenure rights for a property worth 50 times gross national income (GNI) per capita and located Primera Instancia en in the largest business city? lo civil, mercantil, tránsito y bancario del Area Metropolitana de Caracas How long does it take on average to obtain a decision from the first-instance court for such a case (without More than 3 years 0.0 appeal)? Are there publicly available statistics on the number of land disputes at the economy level in the first instance No 0.0 court? Number of land disputes in the economy in 2018: Page 29 Doing Business 2020 Venezuela, RB Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 30 Doing Business 2020 Venezuela, RB Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit • Rights of borrowers and lenders through collateral laws (0-10) information index measures rules and practices affecting the coverage, scope and accessibility of • Protection of secured creditors’ rights through bankruptcy laws credit information available through a credit registry or a credit bureau. The strength of legal rights (0-2) index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary Depth of credit information index (0–8) secured transactions system exists. Then two case scenarios, case A and case B, are used to • Scope and accessibility of credit information distributed by determine how a nonpossessory security interest is created, publicized and enforced according to credit bureaus and credit registries (0-8) the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest credit bureau In some economies the legal framework for secured transactions will allow only case A or case B as a percentage of adult population (not both) to apply. Both cases examine the same set of legal provisions relating to the use of movable collateral. Credit registry coverage (% of adults) • Number of individuals and firms listed in credit registry as a Several assumptions about the secured borrower (ABC) and lender (BizBank) are used: percentage of adult population - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 31 Doing Business 2020 Venezuela, RB Getting Credit - Venezuela, RB Indicator Venezuela, RB Latin America & OECD high Best Regulatory Caribbean income Performance Strength of legal rights index (0-12) 1 5.3 6.1 12 (5 Economies) Depth of credit information index (0-8) 7 5.1 6.8 8 (53 Economies) Credit registry coverage (% of adults) 0.0 14.6 24.4 100.0 (2 Economies) Credit bureau coverage (% of adults) 40.7 47.6 66.7 100.0 (14 Economies) Figure – Getting Credit in Venezuela, RB – Score 40.0 Score - Getting Credit Figure – Getting Credit in Venezuela, RB and comparator economies – Ranking and Score DB 2020 Getting Credit Score 0 100 55.0: Guyana (Rank: 94) 52.0: Regional Average (Latin America & Caribbean) 50.0: Brazil (Rank: 104) 45.0: Dominican Republic (Rank: 119) 40.0: Venezuela, RB (Rank: 132) 35.0: Bolivia (Rank: 144) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Page 32 Doing Business 2020 Venezuela, RB Figure – Legal Rights in Venezuela, RB and comparator economies 6 5.3 5 Index Score 4 3 3 2 2 1 1 1 0 0 Venezuela, Bolivia Brazil Dominican Guyana Latin RB Republic America & Caribbean Page 33 Doing Business 2020 Venezuela, RB Details – Legal Rights in Venezuela, RB Strength of legal rights index (0-12) 1 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents No to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description No of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of Yes collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the No original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; No and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an No electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third No party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? No Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? No Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell No the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Venezuela, RB and comparator economies 9 8 8 8 8 7 7 7 Index Score 6 5.1 5 4 3 2 1 0 Venezuela, Bolivia Brazil Dominican Guyana Latin RB Republic America & Caribbean Page 34 Doing Business 2020 Venezuela, RB Details – Credit Information in Venezuela, RB Depth of credit information index (0-8) Credit bureau Credit registry Score Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and No No 0 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes No 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes No 1 By law, do borrowers have the right to access their data in the credit bureau or Yes No 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes No 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help Yes No 1 banks and financial institutions assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 7,658,345 0 Number of firms 81,490 0 Total 7,739,835 0 Percentage of adult population 40.7 0.0 Page 35 Doing Business 2020 Venezuela, RB Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Disclosure, review, and To make the data comparable across economies, a case study uses several assumptions about approval requirements for related-party transactions the business and the transaction. • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for The business (Buyer): prejudicial related-party transactions; Available legal - Is a publicly traded corporation listed on the economy’s most important stock exchange. remedies (damages, disgorgement of profits, disqualification - Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of from managerial position(s) for one year or more, rescission of Buyer where permitted, even if this is not specifically required by law. the transaction) - Has a supervisory board in economies with a two-tier board system on which Mr. James appointed 60% of the shareholder-elected members. • Ease of shareholder suits index (0–10): Access to internal - Has not adopted bylaws or articles of association that go beyond the minimum requirements. corporate documents; Evidence obtainable during trial and allocation of legal expenses Does not follow codes, principles, recommendations or guidelines that are not mandatory. - Is a manufacturing company with its own distribution network. • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder suits indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to • Extent of shareholder rights index (0-6): Shareholders’ rights Buyer’s five-member board. and role in major corporate decisions - Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-7): Governance - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s safeguards protecting shareholders from undue board control distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of and entrenchment Buyer’s assets and is higher than the market value. • Extent of corporate transparency index (0-7): Corporate - The proposed transaction is part of the company’s principal activity and is not outside the transparency on ownership stakes, compensation, audits and authority of the company. financial prospects - Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made—that is, the transaction was not entered into fraudulently. • Extent of shareholder governance index (0–20): Sum of the - The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and extent of shareholders rights, extent of ownership and control directors that approved the transaction. and extent of corporate transparency indices • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices Page 36 Doing Business 2020 Venezuela, RB Protecting Minority Investors - Venezuela, RB Stock exchange information Stock exchange Bolsa de Valores de Caracas Stock exchange URL http://www.bolsadecaracas.com Listed firms with equity securities 51 City Covered Caracas Indicator Venezuela, RB Latin America & OECD high Best Regulatory Caribbean income Performance Extent of disclosure index (0-10) 3.0 4.1 6.5 10 (13 Economies) Extent of director liability index (0-10) 2.0 5.2 5.3 10 (3 Economies) Ease of shareholder suits index (0-10) 3.0 6.7 7.3 10 (Djibouti) Extent of shareholder rights index (0-6) 1.0 3.0 4.7 6 (19 Economies) Extent of ownership and control index (0-7) 2.0 2.3 4.5 7 (9 Economies) Extent of corporate transparency index (0-7) 1.0 2.3 5.7 7 (13 Economies) Figure – Protecting Minority in Venezuela, RB – Score 24.0 Score - Protecting Minority Investors Figure – Protecting Minority Investors in Venezuela, RB and comparator economies – Ranking and Score DB 2020 Protecting Minority Investors Score 0 100 62.0: Brazil (Rank: 61) 56.0: Guyana (Rank: 88) 47.3: Regional Average (Latin America & Caribbean) 38.0: Bolivia (Rank: 136) 34.0: Dominican Republic (Rank: 143) 24.0: Venezuela, RB (Rank: 170) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Page 37 Doing Business 2020 Venezuela, RB Figure – Protecting Minority Investors in Venezuela, RB and comparator economies – Measure of Quality the República Bolivariana de Venezuela1 2 3 2 1 3 Bolivia 2 5 1 1 4 6 Brazil 6 8 5 4 4 4 Dominican Republic 0 4 5 0 8 Guyana 4 5 5 2 4 8 OECD high income 5.6 5.6 6.6 4.3 4.5 7.4 Latin America & Caribbean 2.5 5.4 4.4 2.5 3.2 6.5 0 5 10 15 20 25 30 35 40 Sub-Indicator Score Extent of corporate transparency index (0-7) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-7) Extent of shareholder rights index (0-6) Ease of shareholder suits index (0-10) Page 38 Doing Business 2020 Venezuela, RB Details – Protecting Minority Investors in Venezuela, RB – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-30) Extent of disclosure index (0-10) 3.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Board of directors 2.0 excluding interested members Must an external body review the terms of the transaction before it takes place? (0-1) No 0.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) Existence of a conflict 1.0 without any specifics Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) No disclosure 0.0 obligation Must Buyer immediately disclose the transaction to the public? (0-2) No disclosure 0.0 obligation Extent of director liability index (0-10) 2.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to Yes 1.0 Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Not liable 0.0 Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2) Liable if negligent 1.0 Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) No 0.0 Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1) No 0.0 Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Only in case of fraud 0.0 or bad faith Ease of shareholder suits index (0-10) 3.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents? No 0.0 (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) No 0.0 Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1) No 0.0 Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Yes 2.0 Is the level of proof required for civil suits lower than that of criminal cases? (0-1) No 0.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-20) Extent of shareholder rights index (0-6) 1.0 Does the sale of 51% of Buyer's assets require shareholder approval? No 0.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? No 0.0 Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new shares? No 0.0 Do shareholders elect and dismiss the external auditor? No 0.0 Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? No 0.0 Extent of ownership and control index (0-7) 2.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? No 0.0 Must the board of directors include independent and nonexecutive board members? No 0.0 Page 39 Doing Business 2020 Venezuela, RB Can shareholders remove members of the board of directors without cause before the end of their term? Yes 1.0 Must the board of directors include a separate audit committee exclusively comprising board members? Yes 1.0 Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? No 0.0 Must Buyer pay declared dividends within a maximum period set by law? No 0.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? No 0.0 Extent of corporate transparency index (0-7) 1.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? No 0.0 Must Buyer disclose information about board members’ primary employment and directorships in other No 0.0 companies? Must Buyer disclose the compensation of individual managers? No 0.0 Must a detailed notice of general meeting be sent 21 days before the meeting? No 0.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda? No 0.0 Must Buyer's annual financial statements be audited by an external auditor? No 0.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Page 40 Doing Business 2020 Venezuela, RB Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in 2018 (number Using a case scenario, Doing Business records taxes and mandatory contributions a medium size per year adjusted for electronic and joint filing and payment) company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of • Total number of taxes and contributions paid or withheld, filing and payments, time taken to comply with tax laws, time taken to comply with the including consumption taxes (value added tax, sales tax or requirements of postfiling processes and time waiting. goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces Time required to comply with 3 major taxes (hours per year) ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the second year of operation (calendar year 2018). Taxes and mandatory contributions are measured • Collecting information, computing tax payable at all levels of government. • Preparing separate tax accounting books, if required • Completing tax return, filing with agencies The VAT refund process: - In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times • Arranging payment or withholding income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income Total tax and contribution rate (% of commercial profits) per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred • Profit or corporate income tax in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will exceed Output • Social contributions, labor taxes paid by employer VAT in June 2018. • Property and property transfer taxes The corporate income tax audit process: • Dividend, capital gains, financial transactions taxes - An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, • Waste collection, vehicle, road and other taxes or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the Postfiling Index tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax • Time to comply with VAT refund (hours) liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. • Time to obtain VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 41 Doing Business 2020 Venezuela, RB Paying Taxes - Venezuela, RB Indicator Venezuela, RB Latin America & OECD high Best Regulatory Caribbean income Performance Payments (number per year) 99 28.2 10.3 3 (2 Economies) Time (hours per year) 920 317.1 158.8 49 (3 Economies) Total tax and contribution rate (% of profit) 73.3 47.0 39.9 26.1 (33 Economies) Postfiling index (0-100) 19.7 47.5 86.7 None in 2018/19 Figure – Paying Taxes in Venezuela, RB – Score 0.0 0.0 25.9 19.7 Payments Time Total tax and contribution rate Postfiling index Figure – Paying Taxes in Venezuela, RB and comparator economies – Ranking and Score DB 2020 Paying Taxes Score 0 100 65.7: Guyana (Rank: 122) 60.5: Regional Average (Latin America & Caribbean) 57.4: Dominican Republic (Rank: 150) 34.4: Brazil (Rank: 184) 21.6: Bolivia (Rank: 186) 11.4: Venezuela, RB (Rank: 189) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Page 42 Doing Business 2020 Venezuela, RB Figure – Paying Taxes in Venezuela, RB and comparator economies – Measure of Quality 60 54.2 50.0 47.5 50 Index score 40 30 19.7 20 10.7 10 7.8 0 Venezuela, Bolivia Brazil Dominican Guyana Latin RB Republic America & Caribbean Page 43 Doing Business 2020 Venezuela, RB Details – Paying Taxes in Venezuela, RB Tax or Payments Notes on Time (hours) Statutory tax Tax base Total tax and Notes on TTCR mandatory (number) Payments rate contribution contribution rate (% of profit) Municipal 1.0 1.6% turnover 28.28 business tax Employer paid - 12.0 288.0 10% gross salaries 11.38 Social security contributions Science 1.0 0.5% annual gross 8.84 technology and income innovation tax Tax on Great 1.0 From 1% to 2% Every banking 8.59 Financial transaction Transactions Corporate 13.0 120.0 15%-34% taxable income 7.75 income tax (progressive scale) Employer paid - 12.0 2% gross salaries 2.28 Housing contribution Employer paid - 0.0 jointly 2% gross salaries 2.28 Unemployment relief benefit contribution Employer paid - 4.0 2% gross salaries 2.26 Training tax Anti-drug tax 1.0 1% annual 1.65 operational earnings Employee paid - 0.0 jointly 1% gross salaries 0.00 withheld Housing contribution Employee paid - 0.0 jointly 5.5% gross salaries 0.00 withheld Social security contributions Employee paid - 0.0 jointly 0.5% gross salaries 0.00 withheld Unemployment relief benefit Fuel tax 1.0 30%-50% fuel consumption 0.00 Property tax 12.0 0.48% building value 0.00 Stamp duty 1.0 various rates 0.00 small amount Value added tax 40.0 512.0 16% value added 0.00 not included (VAT) Totals 99 920 73.3 Page 44 Doing Business 2020 Venezuela, RB Details – Paying Taxes in Venezuela, RB – Tax by Type Taxes by type Answer Profit tax (% of profit) 9.4 Labor tax and contributions (% of profit) 18.2 Other taxes (% of profit) 45.7 Page 45 Doing Business 2020 Venezuela, RB Details – Paying Taxes in Venezuela, RB – Measure of Quality Answer Score Postfiling index (0-100) 19.7 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? No Restrictions on VAT refund process none Percentage of cases exposed to a VAT audit (%) Not applicable Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) No VAT refund per 0.0 case study scenario Time to obtain VAT refund (weeks) No VAT refund per 0.0 case study scenario Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 25% - 49% Time to comply with a corporate income tax correction (hours) 13.0 78.9 Time to complete a corporate income tax correction (weeks) 32.3 0.0 Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 46 Doing Business 2020 Venezuela, RB Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as origin economy 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, • Obtaining, preparing and submitting documents required by suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and destination economy and any transit economies can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours. • Covers all documents required by law and in practice, including electronic submissions of information Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the Border compliance costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. • Customs clearance and inspections Contributors are private sector experts in international trade logistics and are informed about • Inspections by other agencies (if applied to more than 20% of exchange rates. shipments) Assumptions of the case study: • Handling and inspections that take place at the economy’s port - For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in or border the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy. Domestic transport - It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from • Loading or unloading of the shipment at the warehouse or its natural import partner—the economy from which it imports the largest value (price times port/border quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is • Transport between warehouse and port/border the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while shipment is en - The mode of transport is the one most widely used for the chosen export or import product and route the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 47 Doing Business 2020 Venezuela, RB Trading across Borders - Venezuela, RB Indicator Venezuela, RB Latin America & OECD high Best Regulatory Caribbean income Performance Time to export: Border compliance (hours) No Practice 55.3 12.7 1 (19 Economies) Cost to export: Border compliance (USD) No Practice 516.3 136.8 0 (19 Economies) Time to export: Documentary compliance (hours) No Practice 35.7 2.3 1 (26 Economies) Cost to export: Documentary compliance (USD) No Practice 100.3 33.4 0 (20 Economies) Time to import: Border compliance (hours) No Practice 55.6 8.5 1 (25 Economies) Cost to import: Border compliance (USD) No Practice 628.4 98.1 0 (28 Economies) Time to import: Documentary compliance (hours) No Practice 43.2 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) No Practice 107.3 23.5 0 (30 Economies) Figure – Trading across Borders in Venezuela, RB – Score 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Time Cost Time Cost Time Cost Time Cost to to to to to to to to export: export: export: export: import: import: import: import: Border Border Documentary Documentary Border Border Documentary Documentary compliance compliance compliance compliance compliance compliance compliance compliance Figure – Trading across Borders in Venezuela, RB and comparator economies – Ranking and Score DB 2020 Trading Across Borders Score 0 100 83.5: Dominican Republic (Rank: 66) 71.6: Bolivia (Rank: 100) 69.9: Brazil (Rank: 108) 69.1: Regional Average (Latin America & Caribbean) 58.3: Guyana (Rank: 151) 0.0: Venezuela, RB (Rank: 188) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Page 48 Doing Business 2020 Venezuela, RB Figure – Trading across Borders in Venezuela, RB – Time and Cost Time (hours) Cost (USD) 1.2 1.2 1 1 Time (hours) Cost (USD) 0.8 0.8 0.6 0.6 0.4 0.4 0.2 0.2 0 0 No No No No Practice Practice Practice Practice Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 49 Doing Business 2020 Venezuela, RB Details – Trading across Borders in Venezuela, RB Characteristics Export Import Product HS 72 : Iron and steel HS 8708: Parts and accessories of motor vehicles Trade partner Colombia United States Border Puerto Cabello port Puerto Cabello port Distance (km) 221 221 Domestic transport time (hours) No practice No practice Domestic transport cost (USD) No practice No practice Details – Trading across Borders in Venezuela, RB – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required by No practice No practice customs authorities Export: Clearance and inspections required by No practice No practice agencies other than customs Export: Port or border handling No practice No practice Import: Clearance and inspections required by No practice No practice customs authorities Import: Clearance and inspections required by No practice No practice agencies other than customs Import: Port or border handling No practice No practice Page 50 Doing Business 2020 Venezuela, RB Details – Trading across Borders in Venezuela, RB – Trade Documents Page 51 Doing Business 2020 Venezuela, RB Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the courts The dispute in the case study involves the breach of a sales contract between two domestic (calendar days) businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. • Time to file and serve the case • Time for trial and to obtain the judgment To make the data on the time and comparable across economies, several assumptions about the case are used: • Time to enforce the judgment - The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both Cost required to enforce a contract through the courts (% of located in the economy’s largest business city. For 11 economies the data are also collected for the claim value) second largest business city. - The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of • Average attorney fees adequate quality. - The value of the dispute is 200% of the income per capita or the equivalent in local currency of • Court costs USD 5,000, whichever is greater. • Enforcement costs - The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater. Quality of judicial processes index (0-18) - The Seller requests the pretrial attachment of the defendant’s movable assets to secure the • Court structure and proceedings (-1-5) claim. - The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods • Case management (0-6) was not adequate. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. - The Seller enforces the judgment through a public sale of the Buyer’s movable assets. • Alternative dispute resolution (0-3) Page 52 Doing Business 2020 Venezuela, RB Enforcing Contracts - Venezuela, RB Standardized Case Claim value VES 162,236 Court name Caracas Municipal Court City Covered Caracas Indicator Venezuela, RB Latin America & OECD high Best Regulatory Caribbean income Performance Time (days) 720 774.2 589.6 120 (Singapore) Cost (% of claim value) 43.7 32.0 21.5 0.1 (Bhutan) Quality of judicial processes index (0-18) 7.0 8.8 11.7 None in 2018/19 Figure – Enforcing Contracts in Venezuela, RB – Score 50.8 51.0 38.9 Time Cost Quality of judicial processes index Figure – Enforcing Contracts in Venezuela, RB and comparator economies – Ranking and Score DB 2020 Enforcing Contracts Score 0 100 64.1: Brazil (Rank: 58) 57.9: Guyana (Rank: 92) 55.6: Bolivia (Rank: 109) 53.5: Regional Average (Latin America & Caribbean) 50.6: Dominican Republic (Rank: 133) 46.9: Venezuela, RB (Rank: 150) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Page 53 Doing Business 2020 Venezuela, RB Figure – Enforcing Contracts in Venezuela, RB – Time and Cost Time (days) Cost (% of claim value) 900 50 Cost (% of claim value) 801 774.2 43.7 800 40.9 720 700 40 Time (days) 591 590 581 32.0 589.6 600 27.0 30 500 25.0 22.0 21.5 400 20 300 200 10 100 0 0 Bolivia Brazil Dominican Guyana Latin OECD Venezuela, Republic America high RB & income Caribbean Page 54 Doing Business 2020 Venezuela, RB Figure – Enforcing Contracts in Venezuela, RB and comparator economies – Measure of Quality the República Bolivariana de Venezuela 2 0.5 1 3.5 Bolivia 2.5 1.5 0 2 Brazil 3 3 3 4.1 Dominican Republic 2.5 0.5 0 3.5 Guyana 2 1.5 0 4 OECD high income 2.5 3.2 2.4 3.6 Latin America & Caribbean 2.4 2.2 1 3.6 0 2 4 6 8 10 12 14 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Venezuela, RB Indicator Time (days) 720 Filing and service 150 Trial and judgment 420 Enforcement of judgment 150 Cost (% of claim value) 43.7 Attorney fees 21.5 Court fees 7.2 Enforcement fees 15 Quality of judicial processes index (0-18) 7.0 Court structure and proceedings (-1-5) 3.5 Case management (0-6) 0.5 Court automation (0-4) 1.0 Alternative dispute resolution (0-3) 2.0 Page 55 Doing Business 2020 Venezuela, RB Details – Enforcing Contracts in Venezuela, RB – Measure of Quality Answer Score Quality of judicial processes index (0-18) 7.0 Court structure and proceedings (-1-5) 3.5 1. Is there a court or division of a court dedicated solely to hearing commercial cases? No 0.0 2. Small claims court 1.5 2.a. Is there a small claims court or a fast-track procedure for small claims? Yes 2.b. If yes, is self-representation allowed? Yes 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, automatic 1.0 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 0.5 1. Time standards 0.5 1.a. Are there laws setting overall time standards for key court events in a civil case? Yes 1.b. If yes, are the time standards set for at least three court events? Yes 1.c. Are these time standards respected in more than 50% of cases? No 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be granted? No 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) No 0.0 clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the competent court? No 0.0 5. Are there any electronic case management tools in place within the competent court for use by judges? No 0.0 6. Are there any electronic case management tools in place within the competent court for use by lawyers? No 0.0 Court automation (0-4) 1.0 1. Can the initial complaint be filed electronically through a dedicated platform within the competent court? No 0.0 2. Is it possible to carry out service of process electronically for claims filed before the competent court? No 0.0 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 1.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public Yes through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made Yes available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.0 1. Arbitration 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— No that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes Page 56 Doing Business 2020 Venezuela, RB 2. Mediation/Conciliation 0.5 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or No section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or No conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 57 Doing Business 2020 Venezuela, RB Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s estate) - The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater. • Measured as percentage of estate value - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. • Court fees The hotel cannot pay back the loan, but makes enough money to operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to judicial • Lawyers’ fees liquidation and reorganization proceedings and the extent to which best insolvency practices have been implemented in each economy covered. • Assessors’ and auctioneers’ fees • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 58 Doing Business 2020 Venezuela, RB Resolving Insolvency - Venezuela, RB Indicator Venezuela, RB Latin America & OECD high Best Regulatory Caribbean income Performance Recovery rate (cents on the dollar) 5.3 31.2 70.2 92.9 (Norway) Time (years) 4.0 2.9 1.7 0.4 (Ireland) Cost (% of estate) 38.0 16.8 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going concern) 0 .. .. .. Strength of insolvency framework index (0-16) 5.0 7.2 11.9 None in 2018/19 Figure – Resolving Insolvency in Venezuela, RB – Score 5.8 31.3 Recovery rate Strength of insolvency framework index Figure – Resolving Insolvency in Venezuela, RB and comparator economies – Ranking and Score DB 2020 Resolving Insolvency Score 0 100 50.4: Brazil (Rank: 77) 42.3: Bolivia (Rank: 103) 39.2: Regional Average (Latin America & Caribbean) 38.0: Dominican Republic (Rank: 124) 22.4: Guyana (Rank: 163) 18.5: Venezuela, RB (Rank: 165) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Page 59 Doing Business 2020 Venezuela, RB Figure – Resolving Insolvency in Venezuela, RB – Time and Cost Time (years) Cost (% of estate) 4.5 38.0 38.0 40 4.0 4.0 4 35 Cost (% of estate) 3.5 3.5 28.5 30 Time (years) 3.0 2.9 3 25 2.5 1.8 16.8 20 2 14.5 1.7 12.0 15 1.5 9.3 1 10 0.5 5 0 0 Bolivia Brazil Dominican Guyana Latin OECD Venezuela, Republic America high RB & income Caribbean Page 60 Doing Business 2020 Venezuela, RB Figure – Resolving Insolvency in Venezuela, RB and comparator economies – Measure of Quality the República Bolivariana de Venezuela 2 2 1 0 Bolivia 3 2.5 0 1 Brazil 5.5 2.5 3 2 Dominican Republic 5.5 2.5 2 0.5 Guyana 2 2 0 OECD high income 5.3 2.8 2.1 1.9 Latin America & Caribbean 3.7 2.4 1.9 0.8 0 2 4 6 8 10 12 14 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Venezuela, RB and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 45 40.8 40 35 31.2 30 25 20 18.2 18.4 15 9.6 10 5.3 5 0 Venezuela, RB Bolivia Brazil Dominican Republic Guyana Latin America & Caribbean Page 61 Doing Business 2020 Venezuela, RB Details – Resolving Insolvency in Venezuela, RB Indicator Answer Score Proceeding liquidation (after an Bizbank would initiate a foreclosure procedure. Once the lawsuit filed, there would be preliminary hearings, which attempt at would be followed by the formal declaration of bankruptcy of Mirage by the court, turning the process into a liquidation foreclosure) proceeding. Subsequently, the judge would appoint the liquidator / administrator of the bankruptcy. The procedure would be supervised judicially, and after the list of Mirage creditors is drawn up by the administrator, the public auction of its assets and the distribution of the profits of the sale among the creditors would be carried out. Outcome piecemeal sale Once the bankruptcy is declared, the administrator / liquidator will administer the debtor's assets, who must sell Mirage's assets, and distribute the proceeds among the creditors according to the legal priority order. There is no possibility that the company will continue to operate once the bankruptcy has been declared. Time (in years) 4.0 It would take about 4 years for a liquidation proceeding after an attempt at foreclosure similar to the one described in the case study. The procedure would be initiated by the Bank filing for foreclosure. The Court will declare the bankruptcy of the debtor converting the foreclosure procedure into a liquidation proceeding. This stage would take approximately 6 months. Afterwards, a liquidator will be appointed and the list of creditors’ claims will be issued. This stage will take from 1 to 2 years. The sale of the debtor’s assets would take up to 2 years. Cost (% of estate) 38.0 The costs would amount to approximately 38% of the value of Mirage’s estate. The main component are the attorney’s fees (20%). The rest will be service fees, and cost associated with the auction and fees of the liquidator. Recovery rate 5.3 (cents on the dollar) Page 62 Doing Business 2020 Venezuela, RB Details – Resolving Insolvency in Venezuela, RB – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 5.0 Commencement of proceedings index (0-3) 2.0 What procedures are available to a DEBTOR when commencing insolvency proceedings? (b) Debtor may file for 0.5 liquidation only Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (b) Yes, but a creditor 0.5 may file for liquidation only What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) (a) Debtor is 1.0 Debtor is generally unable to pay its debts as they mature (b) The value of debtor's liabilities exceeds the value generally unable to of its assets pay its debts as they mature Management of debtor's assets index (0-6) 2.0 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the No 0.0 debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? No 0.0 Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of No 0.0 insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (c) No priority is 0.0 assigned to post- commencement creditors Reorganization proceedings index (0-3) 0.0 Which creditors vote on the proposed reorganization plan? N/A 0.0 Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as No 0.0 what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote No 0.0 separately and are creditors in the same class treated equally? Creditor participation index (0-4) 1.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency No 0.0 representative? Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0 Does the insolvency framework provide that a creditor has the right to request information from the insolvency No 0.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting Yes 1.0 creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 63 Doing Business 2020 Venezuela, RB Employing Workers Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the worker and the (i) whether fixed-term contracts are prohibited for permanent business are used. tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the maximum probationary period; (iv) minimum The worker: wage;(v) ratio of minimum wage to the average value added per - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. worker. - Is a full-time employee. - Is not a member of the labor union, unless membership is mandatory. Working hours (i) maximum number of working days allowed per week; (ii) The business: premiums for work: at night, on a weekly rest day and overtime; - Is a limited liability company (or the equivalent in the economy). (iii) whether there are restrictions on work at night, work on a - Operates a supermarket or grocery store in the economy’s largest business city. For 11 weekly rest day and for overtime work; (iv) length of paid annual economies the data are also collected for the second largest business city. leave. - Has 60 employees. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the Redundancy rules food retail sector and they apply even to firms that are not party to them. (i) whether redundancy can be basis for terminating workers; (ii) - Abides by every law and regulation but does not grant workers more benefits than those whether employer needs to notify and/or get approval from third mandated by law, regulation or (if applicable) collective bargaining agreements. party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected. Page 64 Doing Business 2020 Venezuela, RB Employing Workers - Venezuela, RB Details – Employing Workers in Venezuela, RB Answer Hiring Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single fixed-term contract (months) 12.0 Maximum length of fixed-term contracts, including renewals (months) 24.0 Minimum wage applicable to the worker assumed in the case study (US$/month) .. Ratio of minimum wage to value added per worker .. Maximum length of probationary period (months) 1.0 Working hours Standard workday 8.0 Maximum number of working days per week 5.0 Premium for night work (% of hourly pay) 30.0 Premium for work on weekly rest day (% of hourly pay) 50.0 Premium for overtime work (% of hourly pay) 50.0 Restrictions on night work? Yes Restrictions on weekly holiday? Yes Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 15.0 Paid annual leave for a worker with 5 years of tenure (working days) 19.0 Paid annual leave for a worker with 10 years of tenure (working days) 24.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 19.3 Redundancy rules Dismissal due to redundancy allowed by law? No Third-party notification if one worker is dismissed? n.a. Third-party approval if one worker is dismissed? n.a. Third-party notification if nine workers are dismissed? n.a. Third-party approval if nine workers are dismissed? n.a. Retraining or reassignment obligation before redundancy? n.a. Priority rules for redundancies? n.a. Priority rules for reemployment? n.a. Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) N/A Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) N/A Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) N/A Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) N/A Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) N/A Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) N/A Page 65 Doing Business 2020 Venezuela, RB Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) N/A Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) N/A Unemployment protection after one year of employment? Yes Page 66 Doing Business 2020 Venezuela, RB Business Reforms in Venezuela, RB From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. =Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2018 Starting a Business: República Bolivariana de Venezuela made starting a business more expensive by raising several fees charged during the business registration process. Lawyer fees and publication costs were also increased. Paying Taxes: Venezuela, RB made paying taxes more costly by introducing a new tax called the Tax on Great Financial Transactions. DB2017 Starting a Business: The República Bolivariana de Venezuela made starting a business more expensive by raising the value of the tributary unit and lawyers’ fees. It also made the process more time consuming by limiting the work schedule of the public sector. DB2016 Starting a Business: República Bolivariana de Venezuela made starting a business more difficult by increasing incorporation costs. It also made starting a business more difficult by making the registration at the Venezuelan Social Security Institute (IVSS), the National Bank for Housing and Habitat (BANAVIH) and the National Institute of Socialist Cooperation & Education (INCES) prerequisites for the Ministry of Labor (Minpptrass) registration. DB2015 Starting a Business: República Bolivariana de Venezuela made starting a business more difficult by increasing incorporation costs and by requiring companies to register within the Superintendence for Socioeconomic Rights (SUNDEE). DB2014 Starting a Business: República Bolivariana de Venezuela made starting a business more costly by increasing the company registration fees. Getting Credit: República Bolivariana de Venezuela improved access to credit information by starting to collect data on firms from financial institutions. DB2013 Starting a Business: República Bolivariana de Venezuela made starting a business more difficult by increasing the cost of company incorporation. Paying Taxes: República Bolivariana de Venezuela made paying taxes more costly and difficult for companies by introducing a sports, physical activities and physical education tax. Employing Workers: República Bolivariana de Venezuela introduced a new Labor Code that prohibits redundancy dismissals. DB2012 Paying Taxes: República Bolivariana de Venezuela made paying taxes costlier for firms by doubling the municipal economic activities tax (sales tax). DB2011 Starting a Business: República Bolivariana de Venezuela made starting a business more difficult by introducing a new procedure for registering a company. Getting Credit: República Bolivariana de Venezuela improved access to credit information by creating a private credit bureau. Paying Taxes: República Bolivariana de Venezuela abolished the tax on financial transactions. DB2010 Paying Taxes: República Bolivariana de Venezuela made paying taxes more costly for companies by introducing 2 new taxes. DB2009 Paying Taxes: República Bolivariana de Venezuela made paying taxes more costly for companies by levying a financial transactions tax on payments made to third parties. Page 67 Doing Business 2020 Venezuela, RB DB2008 Registering Property: República Bolivariana de Venezuela reduced the time needed for registering property by implementing time limits at several agencies. Paying Taxes: República Bolivariana de Venezuela made paying taxes more difficult for companies by introducing 3 new taxes. Trading across Borders: República Bolivariana de Venezuela made exporting more difficult by introducing new requirements for registration of export transactions. Page 68 Doing Business 2020 Venezuela, RB Page 69