We share our Tax Bulletin No. 14 from August 2019, with the latest decisions and opinions released by the Council of State and the Tax Authority, in connection with national and local taxes, and tax procedure.
The complete Bulletin is found only in Spanish in the below PDF, because of many domestic tax terms we are unable to translate for you. However, please find below the main subjects we will be speaking of in the Bulletin. If you are interested to find out more information, do not hesitate to contact us.
1.1. On august 13th of 2019, the Ministry of Finance and Public Credit issued Decree 1468 of 2019, which regulates the Simple Tax Regime introduced by Law 1943 of 2018. In addition, it is important to note that, through the issuance of the regulatory decree, the deadline to benefit from the Simple Tax Regime was extended until 16 September 2019.
1.2. On august 1st 2019, the Tax Authority issued Resolution 49 of 2019, by means of which it established the procedure for electronic or digital service providers from abroad, who voluntarily desire to adhere to the alternative system for the payment of the value added tax (VAT). In accordance with section 1 of the Resolution, foreign service providers who choose to benefit from the withholding tax system introduced by Law 1943 of 2018, must file a request to the Tax Authority through the channels available for such purpose.
1.3. By Resolution 5707 of August 5th of 2019, the Tax Authority set forth the requirements to be met by individuals and legal entities interested in obtaining authorization to operate as self-withholding agents for income or capital gains tax purposes.
1.4. On August 20th, 2019, Colombian President enacted Law 1995 of 2019, which establishes cadastral and tax rules for real state. The Law, which will have an application of 5 years after its issuance, establishes a limitation in the increase of the real estate tax according to which, in the following year, the increase in the real estate tax may not exceed the consumer price index (CPI) plus 8 percentage points.
1.5. By Resolution 51 of August 6th, 2019, the Tax Authority defined the requirements to be met by individuals and legal entities interested in obtaining the status of VAT withholding agents.
1.6. On August 6th, 2019, the Ministry of Finance and Public Credit issued Decree 1422 of 2019, which regulates the mechanism for the return or repayment of balances in favor of income tax and VAT.
2. Tax Rulings
2.1. Tax Ruling No. 14495 issued by Colombian Tax Authority on June 14th, 2019
In accordance with Tax Ruling No. 14495, the distribution of shares or quotas out of profits are revenues not deemed income for tax purposes, as long as the profits eligible for distribution are determined by the procedure provided for in articles 48 and 49 of Colombian Tax Code (CTC). However, such distribution is subject to the dividend taxation rates set forth in sections 242, 242 – 1 and 245 of CTC.
2.2. Tax Ruling No. 4851 issued by Colombian Tax Authority on February 27th, 2019
By means of Tax Ruling No. 4851, the Colombian Tax Authority pointed out, the obligation to file an income tax return for the indirect disposal of underlying assets located in Colombia. In this regard, sellers who indirectly dispose of assets located in Colombia, must file an income tax return within one month following the date of disposal, unless the seller is a Colombian tax resident. The form to file the income tax return will be 150.
2.3. Tax ruling No. 8169 issued by Colombian Tax Authority on April 5th, 2019
The Colombian Tax Authority explained, trough Tax Ruling No. 8169, that income received by foreign entities during the provision of advertising services, is not taxed with income tax, given that such income is not considered a national source income. The above, bearing in mind that if the internet advertising service is provided from outside the Colombian territory, the foreign entity does not carry out any activity in the country. Therefore, provisions set forth in article 406 of Colombian Tax Code shall not apply.
2.4. Tax ruling No. 10462 issued by Colombian Tax Authority on May 3rd, 2019
In terms of Tax Ruling No. 10462, payment of Industry and Commerce Tax can be treated by tax payers in two different ways: (i) fully deductible in the income tax return or; (ii) as a tax credit. In this case, only 50% of the Industry and Commerce Tax paid by the taxpayer can be taken as a tax credit.
2.5. Tax ruling No. 10313 issued by Colombian Tax Authority on May 2nd, 2019
By means of Tax Ruling No. 10313, the Colombian Tax Authority stated that, the withholding tax rate applicable in the sale of immovable property between legal entities is 2.5%. In addition, bearing in mind that the law does not differentiate between the nature of the assets disposed of, the 2.5% rate shall apply, without distinction, in the sale of fixed or movable assets which are considered real estate.
2.6. Tax ruling No. 10329 issued by Colombian Tax Authority on May 2nd, 2019
Through Tax Ruling No. 10329, the Colombian Tax Authority established that the net income attributable to the recovery of deductions, such as depreciations and amortizations, is a special income that does not allow the detraction of costs and expenses.
3. Projects of Decrees and Resolutions
The Colombian Ministry of Finance and Public Credit issued a draft of decree that aims to regulate article 235 – 2 of Colombian Tax Code (“CTC”), related with the exempt income for companies involved in the promotion of creatives industries in Colombia; the so-called orange business.