Disclaimer: We are neither attorneys nor accountants, and do not intend this presentation to substitute in any way for the advice of your chosen professionals, either here or in the U.S. The material which follows is merely intended as a guide to a process, not as a legal or accounting opinion, which we freely admit we are not qualified to give.

Please do not act in reliance on any of this material. Consult your attorney and/or accountant as required.

Most owners and Captains are aware that it is illegal for foreign flag vessels to offer charters in Venezuelan waters. Although we are working with the Venezuelan Government to attempt to convince them to adopt a system of temporary permits similar to the one used in Mexico, we can offer no guarantees that we will be successful in this effort.

But the rules have changed (several times, in fact) over the last several years, and it is possible for you to legally accept charters with just a few changes in your operations.

Here are the requirements for operating a legal charter business in Venezuela:

1. The charter vessel must fly a Venezuelan flag.
2. The legal owner of the vessel must be a Venezuelan, or a Venezuelan corporation in good standing. Most owners will want to have the vessel owned by a corporation (rather than personally.)
3. The vessel must have a licensed Venezuelan Captain on board. He (or she) is in charge of the vessel at all times.
4. The vessel must carry liability insurance.
5. The owner must secure a TTAC ("Transporte Turistico Acquatico Comercial") permit from the MIC ("Ministério de Industria y Comércio", which has assumed the functions of the former "Corpoturismo") in order to legally carry passengers "for hire."

This may sound like a lot of trouble, but we can assure you that – while it takes some time to arrange all of this – there is no real difficulty with any of it. The whole procedure is very similar to forming a Delaware corporation to own a U.S. flag vessel, and applying for "Business Licenses" in the legal jurisdictions in which you wish to book charters.

We have been through this process several times, for our own boat and for customers, so we can help you at every stage of this perilous journey through the Venezuelan bureaucratic maze if you like. Let us lead you through the steps, one by one, so that you can see what is involved:

First, you must hire a local attorney. Unfortunately this is unavoidable (we belive in what Mark Twain said) as you will see from what follows.

Your attorney's first task will be to ask you to choose the name for the corporation. Many people just use the name of the vessel, plus the words "TurÍsmo C.A." (C.A. stands for "CompanÍa AnonÍma," which is the same as "Incorporated" in English.) For example, TurÍsmo Exile, C.A.

Once a name has been reserved, your attorney will then ask you to open a bank account here in the name of the company (he will, of course, offer to do this for you). Generally speaking, you must deposit enough money in a local bank to show that your new corporation is solvent. We suggest an initial capitalization of $5,000.00 (which will be converted to bolivares when it is deposited here.)

At the same time your attorney will draft the Articles of Incorporation, which will be crafted to permit the corporation to do anything legal which involves maritime activities, but nothing else (unless you would like to pursue some other business here using the same corporate structure.)

The Articles will provide for the number of shares to be issued (usually 100 or 1,000, as you like), and will specify the ownership. There must be at least two shareholders, one of whom is a Venezuelan citizen. (This is so there will be at least one person who can be the Designated Agent for Service of Process, if needed. Delaware has a similar rule, except that the Designated Agent does not have to be a shareholder.) The US shareholder could be an individual or a US Corporation.

In most cases, the Designated Agent shareholder will be your Venezuelan attorney. We do not recommend that you make your local Captain or Mate a shareholder, as it might be difficult to disentangle things if you decided you needed to change your crew for whatever reason. Most owners who pursue this course elect to have a "side letter" with their Designated Agent shareholder which provides that the principal Owner can at any time elect to repurchase at a minimal cost the one share held by the Agent shareholder.

Once the Articles of Incorporation are completed to your (and your attorney's) satisfaction, they must be filed with and accepted by the "Registro Mercantil", which is similar to the Secretary of Corporations in most U.S. States.

Then, with your approved and filed Articles and your bank account number, you can and must obtain a R.I.F., which is the Venezuelan equivalent of an EID number for a U.S. Corporation. Your attorney will also "register" you and your new Corporation with SIEX, which is a necessary step so that you can legally bring U.S. dollars into Venezuela and later repatriate any profits you may earn (and your original investment) back to the U.S.

O.K., you have your Venezuelan corporation all set up, your bank account is working, and you have your RIF. Now you can have the Corporation purchase your boat from the existing U.S. owner (whether individual or corporate makes no difference.) Generally speaking, the purchase will be for a minimum value determined by the Captain of the Port (using the current B.U.C. value, if there is one available) or by survey here in Venezuela . Normally a very small portion (say $1,000) of the purchase price will be paid in bolivars (from your new bank account) and the balance would be secured by a Promissory Note (commonly called a "letra de cambio" here) from the new Venezuelan Corporation to the former owner.

Once your attorney has prepared the Bill of Sale, and the seller (you or your U.S. Corporation) and the buyer (the new Venezuelan Corporation you now own) have executed it, your attorney will apply to the Capitan de Puerto de La Guaira for a new "Matricula" (which is the Venezuelan name for what is called a "Document" by the U.S. Coast Guard.) This will be the new "registration" for your vessel. The hull number and U.S. document number will remain the same, but you will be issued a new Venezuelan Matricula number (nowadays in the La Guaira area the number has the form of AGSI-XXXX where the Xs are numerals.) The number must be painted (or "decal-ed") on both sides of the bow of the boat. And the home port on the transom will need to be changed to La Guaira (or Caraballeda, should you choose to base your operations here at Marina Portofino, which we fervently hope you will do or we would not go to all of the trouble to explain this whole process!)

When you receive your Matricula, you must surrender your U.S. document to the U.S. Coast Guard and request that they cancel it, with the simple explanation that you have transferred ownership of the vessel in question to a Venezuelan corporation.The Coast Guard will need a copy of the Bill of Sale, and your old document – nothing more. You may not keep your U.S. document, for fear of problems later if and when you wish to repatriate your boat to the U.S. (see below.)

O.K., so now you own a Venezuelan Corporation, and the Corporation owns your boat. Let's go fishing! Book a whole bunch of charters!

But we're not quite finished yet.

Yes, you can of course go fishing. But to complete the "legalization" process and to accept charters legally, your attorney needs to do a few more things:

1. Your new Corporation needs to apply for a business license (called a "patente" here). This is issued by the Municipailty.
2. Your attorney needs to go to MIC to request a TTAC permit be issued for your new charter business. MIC will require the following:

• proof of liability insurance – so you must secure an insurance policy here (which will probably require a survey even if you have not had to do one already as explained above.)
• evidence that the General Manager of the Corporation has had sufficient experience running a tourism-related business
• all of the above legal stuff (Venezuelan ownership of the vessel, proper matricula, etc.)

Once the TTAC permit is issued, you will receive a number (in the form of TTAC-XXXX), which you will affix with decals to the sides of the flying bridge.

Now, you can finally take charters! Legal at last!

If all of this seems too much to bother with, remember that you have (probably) been through all of this already in the U.S., and the steps (if you are indeed operating legally in U.S. waters) are really the same.

So what does all of this cost? Your attorney's fees should be between $3,000.00 and $5,000.00. Your bank deposit should be $5,000.00 (or more, if you like, to pay your local expenses for crew, fuel, bait, ice, etc.) There are various fees (there's a fee for reserving the name, there's a fee (and tax stamps) for filing the Articles of Incorporation, there's a fee for nearly everything here in Venezuela, it seems, but the total of the fees should be less than $1,000.00 And then there's the survey cost (if necessary), which should also be less than $1,000.00 (unless your vessel is very, very large.) So plan on a budget of about $10,000.00 for the whole process.

Tax stamps, you say? What about taxes?

We have lots of taxes here in Venezuela. But probably no more than in the U.S.A.

There are several levels of taxation, as in most countries. The most visible tax bills have two flavors:

• the Value Added Tax (legally the "Impuesto al Valor Agregado" or "IVA") which is currently 14.5% of your sales revenue. The IVA system here works the same way the VAT does in Europe: you pay a tax on everything you sell, but you get a credit against your future taxes for everything you buy. So it really is a "value added" tax. Here in Venezuela most business build the IVA and the Tourist Tax (see below) into their pricing structure rather than itemizing the tax on their bills. But you can handle it either way.
• the "Fondo Turismo" tax, which is currently 1% (and hopefully will be abolished soon.) This "tourism fund" tax applies to all sales which are tourist-related, so all bar and restaurant bills, hotel rooms and, sadly, charters are included in this program. (This money goes into a fund which will boost tourism in Venezuela,we hope.)
• the other taxes your corporation will be subject to are:
  • an Inventory Tax on the assets of the business (called "Impuesto del Activos Empresariales" here) currently 1%. This is why we want to recommend you keep the survey value of your boat as low as possible, since the boat is and presumeably will be the major asset of the Corporation. Any amount you pay on this tax bill is deductioble on your Venezuelan Income Tax.
  • an Income Tax (c alled the "Impuesto de las Rentas"), currently 20% maximum for corporations.

The good news is that any and all taxes you pay in Venezuela are deductible on your (or your U.S. corporation's) U.S. tax return. So there is no double taxation (for a change.) The other really good news is that there are no (none = zero) customs duties, VAT taxes, luxury taxes or other tax foolishness on the transfer of your boat to Venezuelan ownership. This is a big change from prior years. We had to pay a fortune in taxes to legally register Courtesan here 6 years ago. Today, the transfer would be free.

What about the additional costs of doing business here? Well, there are some:

• Your Patente needs to be renewed every year.
• Your Matricula and TTAC permit need to be renewed annually as well.
• Your attorney will need to handle these renewals, to be sure they are done correctly and on time, so you will have to pay him for these services and the attendant fees.
• You will have to file a local tax return,so you will need an accountant to handle (with your attorney) all of the attendant paperwork, including monthly filings of IVA tax returns,etc.
• There are some legal "niceties" you must follow regarding your Venezuelan employees, and even a few cases where you need to "withhold" taxes from vendors who are providing you with services (rather than goods.) We won't burden you with the details at the moment, but will be happy to lay them all out for you if you wish to proceed.

That's about it for the extra on-going costs. The "silver lining" is that the "property and casualty" insurance premium for your boat should be considerably lower than it is now in the U.S., as we are conveniently located below the high-risk "hurricane belt." Unless, of course, you want to travel to hurricane-prone regions during the "season."

Two other points which need to be covered:

• What if you want to "undo" all of this and return your vessel to its former ownership, or sell the boat to a new owner who wants to register it in the U.S.? Fortunately there is no problem; we have done this too. You simply have your Venezuelan corporation sell the boat to a U.S. citizen (or Corporation), have the Capitan de Puerto here cancel your Matricula, and apply to the U.S. Coast Guard for a new document with a copy of your Venezuelan Bill of Sale. There's nothing to it. You can do it yourself, or have a documentation company do it for you.
• What if you want to take your boat to St. Thomas, or Panama, or the Bahamas, and fish in those waters? Will the Venezuelan flag and ownership cause any problems? The simple answer is "No." You can fish anywhere you want under the Venezuelan flag and, to the best of our knowledge, you can accept charters in U.S. or foreign waters with no problem whatsoever. We assume for this purpose that your vessel was built in the U.S. – the Jones Act has some funny rules about doing business in U.S. waters with a vessel build outside of the U.S., so you must consult your attorney to clarify these issues if they apply to you.

We've reviewed the costs (and inconvenience) of this process, but not the benefits. Why should I go through all of this? If you have bothered to read this far at all, here the reasons we decided to go through this process ourselves:

• As you know, the Litoral Central is blessed with the best year-round billfishing in the world. We moved our business here from St. Thomas six years ago because we got tired of "commuting" back and forth twice a year, and because almost every day (even on the slowest days) the fishing is better here than most of the best days anywhere else in the world. Here was my reasoning for the move: if we're going to spend all of this money fishing, why not do it in the best place? It's no more difficult for our customers to come here than to go to St. Thomas. And the fishing is so much better here!
• You will now be able to advertise and promote your charter business around the world, in print and on the Internet. We can help – you are reading this on our web site. We would be delighted to promote your boat and your crew as part of our marketing efforts for the Marina, if you can legally accept charters.
• We can handle much of the annoying paperwork for you. We can invoice your customers, accept credit card payments for you, pay your taxes when due, even pay your employees (with your money, of course!) etc. Customer satisfaction is our prime objective. So, depending on your needs and desires, we would be happy to craft a custom "Customer Support Plan" for your business. We can provide any level of support you would like, up to and including a full-service "turnkey" operation – you will have to give us the name of the new Corporation and the name or names of the shareholders and their respective ownership (and some money of course) and then we can handle all of the details for you.

Whether or not you decide to pursue this opportunity is subject, of course, to the advice and counsel of your attorney and accountant. If you decide to proceed, please let us know how we can help.

Just be glad you don't have to obtain a liquor license here – which is another whole can of worms!

Disclaimer: We are neither attorneys nor accountants, and do not intend this presentation to substitute in any way for the advice of your chosen professionals, either here or in the U.S. This material is merely intended as a guide to a process, not as a legal or accounting opinion, which we freely admit we are not qualified to give.

Please do not act in reliance on any of this material. Consult your attorney and/or accountant as required.

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