On June 14, 2017, the Constitutional Court granted a lawsuit against Paragraph 1 of Article 100 of Law 1819 of 2016 (Structural Tax Reform). The lawsuit was filed by Mr. Gustavo Adolfo Toro Velasquez, president of COTELCO (Asociación Hotelera y Turística de Colombia) claiming that the rule violated articles 58, 83, 338 and 363 of the Colombian Constitution, in breach of the principles of good faith, legitimate trust and non-retroactivity of tax law by taxing income relating to hotel services with 9%, even though these rents were exempted from said tax by Law 788 of 2002.
According to ruling C-255 of May 29th of 2019, the Court recognized that there is an omission in the application of the principle of non-retroactivity of tax law, as that legal entities that would have benefited from the exemptions would lose these profits. Thus, affecting their acquired rights in consolidated legal situations. Similarly, it considered that the principle of good faith was violated insofar as taxpayers had confidence in the exemption rules and organized their investments accordingly.
On the other hand, the Court dismissed a possible impact on the principle of legitimate trust, as it considered that any individual or entity benefiting from the exemption who never materialized their legal status (with the completion of at least 61% of the establishment during the legal period), where not affected by amendments made by the legislature and therefore should not be granted constitutional relief.
In that regard, the Court decided to declare the rule as constitutional, however, specified that all taxpayers who had benefited from the exemptions from Law 788 of 2002 before the promulgation of law 1819, could continue to enjoy those tax benefits for as long as Law 788 indicates.
