Tax Bulletin No. 39

We share our Tax Bulletin No. 39, from September 2021, in which you can find, among other topics, a relevant Case Law related to omitted assets and the project of decrees through which the tax reform recently approved by Congress will be regulated.

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.

Regulation issued by the National Government regarding tax issues 

Tax Rulings

Can a company of the orange economy request the tax discount for investments in science, technology and innovation projects?

By means of Tax Ruling No. 989 of July 2nd of 2021, the Colombian Tax Authority pointed out that it is not possible for an orange economy company to request the tax discount for investments in science, technology and innovation projects, since article 1.8.2.4.13 of Decree 1011 of 2020, through which the tax discount is regulated, expressly prohibits the concurrence of this benefit with other benefits enshrined in the tax law.  

See here the complete document of Tax Ruling No. 989 of 2021. 

How should a national company recognize the withholding tax on dividends of article 241-1 of the Colombian Tax Code?

 Through Tax Ruling No. 1030 of July 9th of 2021, the Colombian Tax Authority indicated that, bearing in mind that the Colombian Tax regulations have not defined the tax treatment to the WHT on dividends when the beneficiary is a national company, it is necessary to apply the accounting provision that has been made for this purpose.

 In this sense, the WHT on dividends discounted from a national company that are attributable to Colombian residents or investor residing abroad, must be presented as an item within the equity of the company beneficiary of the dividends, indicating it as lower equity value. 

Case Law of the Constitutional Court and Council of State 

Sanction of asset omission and the undue estimate of their equity value 

Through Judgments of August12th of 2021 (File No. 24856, CP Milton Chaves García), the Council of State carried out a detailed analysis of the application of article 239-1 of the Colombian Tax Code, referring to taxable liquid income for omitted assets or non-existent liabilities, in the undue estimation of the equity value of the assets in non-reviewable periods. 

The Council of State concludes that, article 239-1 necessarily implies that the omission of assets or the inclusion of non-existent liabilities entails the concealment of income, the registration of false costs and deductions and the effect on the determination of the presumptive income. Thus, the undue validation of the equity cannot be understood as an omission of assets capable of being added as taxable liquid income for the taxpayer. 

Viability of the deduction in the occasional income tax of occasional loss in the sale of shares, different from family companies. 

Through ruling of August 19th, 2021, the Fourth Section of the State Council analyzed the deductibility of the occasional loss obtained from the sale of shares, subject to occasional income tax. The State Council pointed out that for calculating occasional profit on the sale of shares, the fiscal cost of these assets will be determined according to the rules provided in Book I of the Tax Code. In this respect, if from the sale of shares the transferor obtains an occasional loss, it may be computed as a loss in the occasional tax. 

The aforementioned ruling makes clear that, although it is prohibited to deduct losses in the sale of shares, this is only accepted to settle income tax and not the occasional gain. 

Projects of Decrees and Resolutions  

Ministry of Finance and Public Credit presented for comments a draft decree of the normalization tax. 

On September 23rd, the Ministry of Finance and Public Credit submitted for comments the draft of decree through which it is intended to regulate the normalization tax introduced in Law 2155 of 2021. 

Among the points that are intended to be regulated are the following:

1. The passive subjection of the tax is given by the criterion of economic, potential or real use of the omitted assets abroad. 
2. Repatriation of omitted resources with vocation of permanence: the taxable base of the normalization tax corresponds to 50% of the value of the omitted resources that are effectively repatriated, as long as they comply with the totality of certain conditions. 
3. The assets subject to reorganization are those that are part of the taxpayer´s gross assets, subject to the normalization tax enshrined in the past laws and are declared as of December 31st, 2021 in the income tax for a lower value than the market value, provided the comply with certain conditions at the time of the reorganization. 
4. The deadlines to be observed by the taxpayers who decide to avail themselves of the normalization tax for the payments of an advance of 50% of its value are established. 

The draft decree is available for public comment until October 8th of this year.

See here the complete document of the draft decree. 

The draft regulatory decree on the provision of special terminations contained in Law 2155 of 2021 

The Ministry of Finance and Public Credit, after the issuance of Law 2155 of 2021, on September 29th presented for comments the draft decree by virtue of which it seeks to regulate the provisions relating to contentious-administrative conciliation, termination by mutual agreement and the favorability principle. 

Among the provisions of the draft decree, we highlight the following: 

• It seeks to create Special Conciliation and Termination Committees by Mutual Agreement in the Operational Directorate of Large Taxpayers, who together with the Judicial Conciliation and Defense Committee will have the competence to agree and sign the conciliatory formulas and termination acts by mutual agreement.
• Likewise, the Conciliation and Judicial Defense Committee will have the competence to hear the requests for conciliation and termination by mutual agreement contentious-administrative processes in tax, customs and exchange matters.
• Taxpayers, withholding agents and those responsible for national taxes, joint debtors or guarantors of the obligor, customs users and the exchange regime, who have filed a claim for nullity and re-establishment of law before the administrative contentious jurisdiction, may request before the Colombian Tax Authority, the conciliation of the contentious administrative tax, customs and exchange processes. 
• In the same way, the requirements for the termination by mutual agreement are indicated, as well as the rules that must be observed for the purposes of your request.
• In relation to the application of the principle of favorability, the draft decree indicates that said principle will be applied within the collection process, a request from the taxpayer, responsible party, declarant, withholding agent, joint debtor, subsidiary debtor or guarantor, provided that comply with the requirements indicated in the decree.

See here the complete content of the draft decree on special terminations.