We share our Tax Bulletin No. 31 from January 2021, with the latest laws, decisions and opinions released by the National Government, 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.
Law of the Trade Agreement between the United Kingdom and the countries of the Andean Community.
Law 2067 of 2020 ratify and preserve the rights and obligations between the United Kingdom and Northern Ireland in one hand, and the Andean Community Members countries on the other, in the Trade Agreement between the European Union and the Andean countries after the exit of the UK from the European Community. The Agreement sets forth several provisions for merchandise trade, such as:
- Trade defense measures
- A schedule is established with the elimination of tariffs in Colombia for merchandise originating in the United Kingdom, and the elimination of tariffs in the United Kingdom for merchandise originating in Colombia.
- Remarks regarding the definition of originating product
2.Communications issued by the Ministry of Finance and Public Credit and Local Tax Administrations
2.1. Through Resolution Number SDH – 000593 of 29th of December 2020, the local Tax Authority of Bogotá modified the dates for the declaration and payment of the Industry and Commerce tax and vehicles tax in Bogotá.
2.2. By means of Resolution no. 016 of 2021, the local Tax Authority of Bogota postponed to March 19th, 2021, the due date for the payment of the Industry and Commerce Tax of the Common Regime with annual declaration.
2.3. The local Tax Authority of Bogotá suspended the terms in the administrative processes carried out by the tax departments, from January 8th, 2021, to January 21st, of the same year. The Administrative Act issued by the District Authority, covers the actions of management processes, inspections, determinations, discussions, returns, and collection of taxes. The rights of petitions presented within these processes are also included. However, the measure does not apply to the deadlines for filing and paying district taxes.
3. Tax Rulings and communications issued by the Colombian Tax Authority
3.1. Tax Ruling Number 1404 issued by Colombian Tax Authority on October 30th, 2020.
In accordance with Tax Ruling No. 1404, the Colombian Tax Authority indicated that taxpayers which as of January 1st, 2020 fulfils the requirements set forth in section 292 – 2 the Colombian Tax Code are obliged to pay equity tax for fiscal year 2021. This, even though for fiscal year 2021 the taxpayer does not have any equity in the country.
3.2. Tax Ruling Number 1414 issued by Colombian Tax Authority on November 3rd, 2020.
The Colombian Tax Authority explained, trough Tax Ruling Number 1414 the scope of the term "guaranteed return" used in collaboration agreements. According with the Tax Authority, the aforementioned term takes place when a party in the agreement receives a fix payment regardless of the profits or losses generated within the economic activity.
3.3. Tax ruling Number 1409 issued by Colombian Tax Authority on October 30th, 2020.
In terms of the Tax Ruling Number 28569, the Tax Authority indicated that taxpayers which perform economic activities through a trust are not obliged to include in their VAT return, the revenues generated by the trust. The above, bearing in mind that under Colombian tax legislation, trust are responsible of VAT, and if the activities are performed by such vehicle, he is the one obliged to file the VAT return.
3.4. Tax ruling Number 1396 issued by Colombian Tax Authority on October 29th, 2020.
By means of the Tax Ruling Number 1396, the Colombian Tax Authority (DIAN) pointed out that foreign companies with place of effective management in Colombia are obliged to have a statutory auditor for the fulfillment of their tax duties. In addition, the DIAN indicated that this obligation does only applies for tax purposes, given that under section 12 -1, foreign companies are not deemed national companies for other legal effects.
4.Case law of the Council of State
4.1. In the case law of November 5th, 2020, the Council of State pointed out several rules that must be follow in operations performed by related parties subject to transfer pricing rules. According to the aforementioned case law, when the Colombian Tax Authority evidence omissions related to the range of profits, it will be entitled to perform the required adjustments in order for the operation to fall within the ranges usually agreed in operations executed by non-related parties. Furthermore, the transfers pricing documentation must be supported by additional documentation, such as financial statements, in order to allow the review of cost and expenses allocated to the revenues arisen in the operation under control.
4.2. In the case of law of October 27th, 2020, the Council of State indicated that damages insurance indemnities do not constitute income or capital gains. In accordance with the arguments provided in the aforementioned judgment, the Council of State mentioned that, according to the Tax Statute, an income is defined as resources made in a taxable year period capable of increasing the assets at the time of collection and that they have not been expressly excepted, situation that does not take place when receiving insurance indemnities, bearing in mind that those revenues do increase the taxpayer equity.
5. Projects of Decrees and Resolutions
5.1. The Colombian Tax Authority issued a draft of resolution aimed to regulate the implementation of the electronic payroll. In this sense, according to the draft of resolution, as of April 30th, 2021, legal entities must submit to the Colombian Tax Authority by means of an electronic procedure a report detailing the different labor payments made to its employees.