Venezuela’s New Hydrocarbons Fiscal Framework

Regulations and Implementing Resolutions

The publication of the Regulations to Venezuela’s Organic Hydrocarbons Law (the “Regulations”) together with the ministerial implementing resolutions governing Royalties and the Integrated Hydrocarbons Tax (“IHT”) completes the first phase of implementation of Venezuela’s new hydrocarbons fiscal framework introduced by the 2026 Reform to the Organic Hydrocarbons Law (the “Law” or the “Reform”).

As discussed in our previous Legal Alert addressing the principal tax aspects of the 2026 Reform, the Law fundamentally reshaped the fiscal architecture applicable to upstream hydrocarbon activities by introducing a more flexible framework designed to accommodate the technical and economic characteristics of individual projects. The Regulations now provide the general principles and operational mechanisms necessary to implement the new legal framework, while the implementing resolutions establish the rules governing the assessment, reporting, payment and administration of Royalties and the IHT.

Taken together, these instruments constitute the initial regulatory framework for implementing Venezuela’s new hydrocarbons fiscal regime. The following summarizes some of the most relevant tax developments.

I. The Regulations provide the operational framework for the new fiscal regime.

The principal contribution of the Regulations is the development of the mechanisms required to implement the economic framework established by the Law.

Among other matters, the Regulations govern the determination of project-specific economic conditions, develop the principle of economic and financial equilibrium, establish the procedure for requesting reductions to the Income Tax rate contemplated by the Law, and regulate the mechanisms available to review fiscal terms where legal, tax, regulatory or contractual changes materially affect the economics of a project.

The Regulations focus on implementing the operational framework necessary for applying the fiscal regime established under the Reform.

II. The Aggregated Rate introduces a new approach to determining Government Take.

One of the most significant innovations introduced by the Regulations is the creation of the Aggregated Rate, which combines Royalties and the IHT into a single fiscal benchmark for upstream projects.

As the initial reference point for determining project-specific fiscal conditions, the Regulations establish the following Aggregated Rates:

The Regulations also contemplate reductions under specific circumstances, including offshore developments and projects integrated with upgrading, refining or transformation activities.

The specific Royalty and IHT rates applicable to each project will subsequently be determined pursuant to implementing rules to be issued by the Ministry with jurisdiction over hydrocarbons.

This represents a significant departure from Venezuela’s previous fiscal model by adopting a more integrated approach to determining the State’s overall participation in each project’s economic returns.

III. Project Economics and Economic Equilibrium become central to the new framework.

The Regulations confirm a framework in which fiscal terms are no longer determined solely through general statutory parameters, but instead rely on the individual economic characteristics of each project.

In this regard, the criteria established by the Law—including the nature of the project, capital investment requirements, project economics and international competitiveness—become central to determining the fiscal conditions applicable to each investment.

As a result, the Business Plan assumes a strategic role as the principal technical, financial and economic document supporting both the initial determination and any subsequent review of project-specific fiscal terms.

The Regulations also strengthen the principle of economic and financial equilibrium, allowing for the review of fiscal conditions where legal, tax, regulatory or contractual changes materially affect a project’s economic balance.

In addition, the Regulations implement the procedure contemplated by the Law for requesting reductions to the applicable Income Tax rate. For Greenfield projects, the Regulations establish a specific Income Tax rate of 34%, together with the possibility of applying accelerated depreciation for up to 7 years, providing additional flexibility during the early stages of project development.

IV. The Implementing Resolutions establish the operational tax rules.

Alongside the Regulations, the Ministry issued a series of implementing resolutions governing the assessment, reporting, payment and administration of Royalties and the IHT.

Among other matters, these resolutions regulate:

• the determination of gross revenues subject to Royalties and the IHT;
• filing and periodic payment procedures;
• payment in cash or in kind;
• valuation methodologies for hydrocarbon production; and
• reporting and supporting documentation requirements applicable to taxpayers.

The implementing resolutions also establish a mechanism through which operators falling within the scope of the Second and Third Transitional Provisions of the Law may request the application of the new Aggregated Rate framework when introducing new investments through amendments to their Business Plans.

Accordingly, the implementing resolutions complement the Regulations by providing the operational rules necessary to administer the principal fiscal obligations established under the new legal framework.

V.The new fiscal framework also extends to downstream activities.

The Regulations also develop the fiscal regime applicable to downstream activities, including upgrading, refining, industrialization, commercialization and specialized oilfield services.

These activities are subject to the IHT pursuant to the Law and the implementing rules to be issued by the Ministry of Hydrocarbons. At the same time, the Regulations expressly confirm that these activities benefit from the parafiscal exemptions established under Article 59 of the Law, including, among others, contributions otherwise payable under Venezuela’s legislation relating to science and technology (LOCTI), sports, anti-drug programs, pensions and the High Net Worth Tax.

As a result, the scope of the new fiscal framework extends beyond upstream exploration and production, reaching multiple segments of Venezuela’s hydrocarbon value chain.

VI. Key Takeaways.

From a practical standpoint, the new regulatory framework highlights several issues that are likely to become increasingly relevant during the structuring and development of hydrocarbon investments in Venezuela.

• The Aggregated Rate becomes the primary reference point for determining the Government Take applicable to upstream projects.
• The implementing resolutions complement the Regulations by establishing the operational framework governing the assessment, reporting, payment and administration of Royalties and the IHT.
• Existing operators covered by the Law’s transitional provisions should evaluate whether future investments may justify seeking the application of the new Aggregated Rate framework through amendments to their Business Plans.
• The new framework is relevant not only to Greenfield developments, but also to Brownfield projects and to downstream activities, including upgrading, refining, industrialization, commercialization and specialized oilfield services.

The implementation of this new framework will require an integrated assessment of each project’s fiscal, economic and contractual implications, particularly during the early stages of project structuring, investment planning and negotiations.