We share our Tax Bulletin No. 26 from August 2020, with the latest decisions and opinions released by the Ministry of Finance and Public Credit, the Council of State, the Constitutional Court 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.Normativity issued by the National Government regarding tax issues in August 2020
The National Government ruled the indirect sales
Through Decree 1103 of August 10, 2020, The Ministry of Finance and Public Credit regulated the article 90-3 of the Colombian Tax Code (CTC), which provides the definition of indirect sales. In addition, the decree adds the articles 220.127.116.11.1 to 18.104.22.168.23 to the Decree 1625 of 2016.
The following definitions are established in the aforementioned Decree 1103 of 2020:
|Foreign entities |
It includes any investment vehicle.
|Underlying asset||Any asset located in Colombia owned by a foreign entity or a non-resident in Colombia.|
|Sale Price||The commercial value of the underlying asset, as established in article 90 of the CTC.|
|Disposal Value ||The commercial value of the underlying asset, as established in article 90 of the CTC.|
|Related parties ||Anyone that meets the linkage criterions set forth in article 260-1 of the CTC.|
|Beneficial Owner ||Individual who fulfills the requirements established in article 23-1 of the CTC.|
|Stock Exchange recognized by a government authority |
Stock Exchange recognized in article 1 of the Resolution 00057 of 2016, issued by the Colombian Tax Authority.
|First point of contact |
Assets owned directly in Colombia by a non-resident (individual or foreign entity).
|Subordinate ||Are subordinate the entities that meet the requirements established in numeral 1 of the article 260 - 1 of the CTC.|
Regulation of the origin and preferential tariff treatment commitments made in the Free Trade Agreement between the State of Israel and the Republic of Colombia
Through decree 1100 of August 10th,2020, the Ministry of Commerce, Industry and Tourism regulated the origin and preferential tariff treatment commitments assumed by Colombia and Israel in the Free Trade Agreement signed on September 30th, 2013.
- The establishment of a Free Trade Area between Colombia and Israel is confirmed.
- Imports of goods coming from the State of Israel will have a preferential tariff treatment.
- The temporary re-import of goods sent to be repaired or modified in Israel will be exempted of tariff change.
- The temporary admission of goods coming from Israel to be repaired or modified in Colombia will be exempt from tariff charge.
Industrial goods tariffs:
- A schedule for the gradual tariff relief is established.
- Customs duties get completely eliminated for the import of industrial goods originating in Israel and listed in Section B – Chapter 2.
Agricultural goods tariffs:
- A schedule for the gradual tariff relief is established.
- Customs duties get completely eliminated for the import of agricultural goods originating in Israel and listed in Section B – Chapter 3.
Requirements to issue supporting documents in acquisitions made to taxpayers not obliged to issue an invoice or equivalent documents
Through press communication No. 55 of July 21st, 2020, the Colombian Tax Authority informed that as of August 15th, 2020, the electronic computer numbering service will be available to the taxpayers who are not obliged to issue an invoice or equivalent document. The electronic computer numbering service will allow them to request numbering ranges of the supporting documents in the acquisitions made.
Regulation of the contentious-administrative conciliation, termination by mutual agreement of tax procedures and of the principle of favorability in collection procedures initiated by the Tax Authority.
With the issuance of the Decree 1014 of July 2020, the National Government regulated articles 118, 119 and 120 of Law 2010 of 2019, which refer to the contentious-administrative conciliation, termination by mutual agreement and the application of the principle of favorability in the collection procedures initiated by the Tax Authority. Considering the above, the National Government determined some special rules regarding each one of the aforementioned topics, all of them, mentioned in the Decree 1014 of 2020.
Electronic invoices can circulate as a security once they have been accepted by the purchaser
By means of Decree 1154 of August 20th, 2020, the Ministry of Commerce, Industry and Tourism modified the Decree 1074 of 2015, regarding the circulation of electronic invoices as a security. In the aforementioned decree, some terms are defined in order to give a clear interpretation of the circulation of the electronic invoice. Additionally, the decree determines that the electronic invoice is understood to be irrevocably accepted by the purchaser when, by electronic methods, he expressly accepts its content or, when within three days following the date of the receipt of the product or service, he does not manifest a claim against it.
2. Tax Rulings
Withholding tax applicable to operations made with debit and credit cards for taxpayers of the Simple Tax Regime
Through tax ruling No. 966 of August 5th, 2020, the Colombian Tax Authority specified that, in accordance with the provisions set forth in Article 911 of the CTC, the Colombian Taxpayers of the Simple Tax Regime are not subject to withholding tax on the revenues received by means of debit or credit cards. Furthermore, if these taxpayers are subject to withholding tax on the revenues received by this payment method, the provisions established in article 22.214.171.124 of the Decree 1625 of 2016 must be applied.
Deadline for requesting termination by mutual agreement
Through Tax Ruling No. 897 of August 23rd, 2020, the Colombian Tax Authority indicated that, in accordance with the provisions set forth in article 1 of the Decree 1014 of 2020, the deadline to subscribe the payments agreements for the contentious-administrative conciliations and the terminations by mutual agreements of the tax, customs and administrative procedures will be November 30, 2020.
The Colombian Customs Authority analyzed the application of VAT to Plan Vallejo Programs
In tax ruling No. 804 of July 3rd, 2020, the Colombian Tax and Customs Authority pointed out that, from the interpretation of Decree 285 of 2020 business associations can access Plan Vallejo Programs, that lead to total or partial VAT exemptions in their imports, if regulatory guidelines are met. When business associations have an approved Plan Vallejo Program, their enterprises can import supplies without being responsible for VAT if these are used in the production of exportable goods. However, when two companies which are part of a business association intend to sell imported supplies between one another, indicating that the buyer is the one in charge of exporting, it cannot be concluded that this sale will not generate VAT.
Nevertheless, if this operation is expressly classified as indirect through a contract and approved within the framework of the Plan Vallejo Program, then regarding this operation, these companies will not be responsible for VAT. Worth noting that this contract must contain the terms, conditions and responsibilities that each part of the contract assumes within the development of the operation and it must be attached when applying to Plan Vallejo program along with the format. Therefore, if there is no contract classifying internal sale of supplies between companies which are part of business association as an indirect operation, it will be seen as an ordinary sale which must be invoiced with VAT, after modifying the temporary import declaration to ordinary assuming the corresponding customs duties.
3. Case Law of the Council of State and Constitutional Court
The balances in favor rejected in refund requests can be offset in the return of the same tax of the immediately following period
Through Case Law of May 2020, the Council of State indicated that when the Tax Administration rejects the refund presented by the taxpayer, the balance in favor is not necessarily extinguished. Because of the above, the taxpayer may dispose the aforementioned balance, thorough the mechanisms that the tax legislation provides for this purpose, among which is the option of offsetting it in the return of the same tax of the following period.
The Constitutional Court declared that articles 1 and 3 of the Legislative Decree 530 of 2020 are constitutional
The Constitutional Court determined that articles 1 and 3 of the Legislative Decree 530 of 2020 are constitutional, except the expression “for as long as the causes that led to the declaration of the State of Economic, Social and Ecological Emergency in question persist” which is declared as conditionally constitutional, on the understanding that this expression will be in force until the end of the next fiscal period, this means, until December 31st, 2020.
4. Projects of Decrees
Electronic submission of petitions, appeals and other writings
The Tax Authority has published the draft of resolution by means of which the electronic submission of petitions, appeals and other writings that must be submitted to the Colombian Tax Authority is implemented. The above, in compliance with the provisions set forth in article 559 of the CTC.