Tax Bulletin No. 36

1.Regulation issued by the National Government regarding tax issues

The UPME broadens the scope of efficient energy management projects eligible for tax benefits.

The Mining and Energy Planning Unit (the “UPME”) issued External Circular No. 000019 of 2021, through which it considered pertinent to include the elements, equipment and / or machinery related to the land transport sector of official, private or public service, as well as the aerial cable transport system. In the same way, the scope of the projects susceptible to benefits increases the acquisition of equipment for power systems, air conditioning, refrigeration, lighting, and direct and indirect heat, among others.

If you want to know in detail the efficient energy management projects on which tax benefits can be applied, click here.

The National Government modifies the deadline for the payment of income tax for micro and small-sized enterprises.

Due to the public order events and the Sanitary Emergency that have affected the normal development of the economic activities in Colombia, the National Government issued Decree 612 of 2021 on June 4^th, in which micro and small companies are given more time to pay income tax, leaving established a single installment which will take place between November 9^th and 23^th, depending on the last digit of the Tax Identification Number of each taxpayer, as follows:

This new deadline for the payment of income tax only applies to those companies that, in accordance with the articles 2.2.1.13.2.2 and 2.2.1.13.2.3 of Decree 1074 of 2015, are considered as micro or small companies, depending on the income they annually receive.

If you want to know in detail the decree 612 of 2021, and the deadlines for the payment of the income tax for micro and small sized enterprise, click here.

2. Tax Rulings

Tax treatment regarding income tax of dividends or profits distributed from the Controlled Foreign Company 

By means of Tax Rulling No. 675 of May 7^th, 2021, the Tax Authority pointed out that the non-constitutive income treatment that article 843 of the Colombian Tax Code (“CTC”) grants to dividends or benefits and remnants distributed at the liquidation by the Controlled Foreign Company (in Spanish “ECE”), is limited up to the limit to the amount of profits that were subject to taxation in terms of articles 886, 887, 888 and 889 of the CTC. 

In this sense, the above means that the difference between the passive income realized and reported by the taxpayer´s income tax return and the value of the dividend effectively distributed by the Controlled Foreign Company, cannot be considered as a non-constitutive income or capital gain.

See here the complete document of Tax Rulling No. 675 of 2021.

3. Case Law of the Council of State and Constitutional Court

Ineffectiveness of VAT returns filed without full payment by foreign service providers.

Through Judgment C-203 of 2021, the Constitutional Court declared the constitutionally of the ineffectiveness of VAT returns filed without full payment by foreign service providers. The above bearing in mind that, the ineffectiveness guarantees compliance with the duty to collect and pay the VAT that is caused in the provision of services from abroad by foreign service providers and also guarantees the correct VAT payment by those individuals. In others words, this legal provision obliges service providers from abroad to submit their VAT returns with full payment.  

See here the document of Judgment C-203 of 2021

Imputation of credit balance whose refund request was rejected by the Tax Authority. 

By means of Case Law No. 23335 of April 22^th of 2021, the Council of State pointed out that the Tax Authority decision to reject a request for the return of a credit balance does not have the potential to extinguish said balance, insofar as it is entirely possible that, after rejection by the tax authority, the taxpayer may choose another imputation mechanism for credit balance provided by the tax legislation. Therefore, the Council of State sets forth that is contrary to law for the Tax Authority to deny the return of the entire credit balance under the justification that it was previously rejected.

Ideal documents to support liabilities in a controversy with the Tax Authority

Through Case Law No. 24318 of November 19^th of 2020, the Council of State set forth that the ideal documents for a taxpayer to support liabilities in a controversy with the Tax Authority must be an external support, such as an accounting record of the third party, or a security, or a certificate from the accountant, fiscal auditor or legal representative of the third party, or any document issued by the third party in which the obligation is established.

The above to fulfill what is enshrined in article 770 of the Colombian Tax Code regarding the documents that those obliged to keep accounts must provide to support their liabilities.

4. Projects of Decrees and Resolutions 

Prescription of the form by means of which the taxpayers of the SIMPLE tax regime fulfill their formal obligation to declare.

The Tax Authority submitted a draft of resolution, which seeks the prescription of the “Consolidated annual return” intended to fulfillment of the obligation to declare by the taxpayers of the unified tax under the taxation regimen -SIMPLE for fiscal tear 2020 and/or fraction of the fiscal year 2021. For this purpose, the Colombian tax authority set forth that, in order to comply with the formal obligation to declare, the taxpayers must employ the computer services, using the Electronic Signature -FE authorized by the authority.

See here the complete document of the draft of resolution.