Accounting and Tax Treatment of the Deductibility of Foreign Exchange Loss Expenses in Light of Venezuela's Economic Reality and the Exclusion of Special Taxpayers From Inflation Adjustments

Abstract

This article analyzes the deductibility of foreign exchange losses in Venezuela under the current Income Tax Law, with a particular focus on Special Taxpayers, who are excluded from the fiscal inflation adjustment system. It examines the nature of these losses as monetary assets and liabilities, distinguishing them from the integral inflation adjustment system. Through an analysis of the legal framework (DLISLR 2015), international standards (IAS 21 and IAS 12), and key case law, this work argues that foreign exchange expenses are deductible based on their accrual and their necessity for preserving the source of income. Finally, it concludes that disallowing this deduction would result in a taxable fictitious income, contravening both economic reality and the taxpayer's ability to pay.