Tax Bulletin No. 41

We share our Tax Bulletin No. 41, from November 2021, in which you can find, among other topics, the Tax Value Unit (TVU) for the 2022, as well as a summary of a ruling issued by the Council of State through which is established how VAT withholding should be practiced by suppliers of international trading companies.

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.

Relevant topics to consider for the closing of the Fiscal Year.

Taxpayers will have until December 31, 2021, to benefit from reducing penalties and interest rates for late payment.

Considering article 45 of Law 2155 of 2021, those who have debts with the DIAN or with the territorial entities may access a transitory reduction of penalties and late payment interest provided that the obligations gave rise to the penalties, and interest has c before June 30, 2021. Their non-compliance has been caused or aggravated because of COVID-19. 

The deadline for companies with 11 to 100 employees to transmit the Electronic Payroll Supporting Document is coming soon. 

Companies with 11 to 100 employees will have until December 10, 2021, to transmit the Electronic Payroll Payment Support Document.

Regulation issued by the National Government regarding tax issues

Colombia and Uruguay signed a Double Taxation Avoidance Treaty (DTAA)

Currently, Colombia has already signed several treaties to avoid double taxation, among them the treaty with Italy, Spain, Czech Republic, India, Korea, Chile, among others; to the previous treaties, we can add the treaty with Uruguay to eliminate double taxation on Income and Wealth Taxes. This agreement also contains mechanisms that will allow Colombia and Uruguay to combat tax evasion and avoidance more effectively, avoid the treaty's abusive use, and strengthen cooperation between tax administrations.

Ministry of Finance issued a Decree that regulates the tax exemption of sporting events. 

The Ministry of Finance issued Decree 1532. They determine exemptions of VAT, income tax, and occasional supplementary gains and the tax on financial movements ("GMF") applicable to the performance of sporting events in Colombia between 2021 and 2022. It is crucial to establish that the Ministry of Sports will recognize the quality of beneficiary of this tax exemption with the issuance of a certificate. 

Tax Rulings

The Colombian Tax Authority established the value of the “UVT” for 2022

Considering the annual readjustment to be made in the accumulated variation of the Official Colombian Consumer Price Index (“IPC”), the Tax Administration established the value of the Tax Value Unit (“UVT”) at thirty-eight thousand four Colombian pesos (COP 38.004), which will apply during 2022. 

The Tax Value Unit (UVT for its Spanish acronym) should be understood as that measuring unit equivalent to Colombian pesos used to determine of tax obligations, facilitating their determination and compliance. These obligations include, for example, penalties, income limits to be liable for VAT, minimum amounts of withholding tax, among others.

Voluntary contributions to pensions are not part of the basis to apply withholding at source.

According to Concept 1263 of 2021 issued by the DIAN, it is reiterated that workers who voluntarily deposit money from their labor income to voluntary pension funds will have a tax benefit (Art. 126-1 of the Tax Statute) consisting in the fact that such money will not be part of the basis for withholding at the source since it will be considered as exempt income.

Case Law of the Constitutional Court and Council of State 

Law 2010 of 2019 did not repeal the VAT exclusion for raw materials required to produce medicines. 

Through Case Law of November 11th, 2021, the Council of State void Tax Ruling 100208221-000207 February 20th and 100202208-0431 of June 8th issued by the Tax Administration, according to which the exclusion from VAT of raw materials required in the production of medicines was repealed by Law 2010 of 2019. 

The Council of State pointed out that such interpretation is incorrect because it does not consider that the legislator intended to eliminate the VAT exclusion only for finished goods classified under tariff headings 29.36, 29.41, 30.01, 30.02, 30.03, 30.04 and 30.06, but not for raw materials and inputs for their production. 

The Council of State reiterates that when the rejection or abandonment of the request for refund of credit balances occurs, issuing the particular requirement is not extended. The term of the finality of the returns is not modified. 

Through the Ruling of August 19, 2021, the Fourth Section of the Council of State clarified - through jurisprudential reiteration - the counting of the term of the finality of the tax returns with rejected or withdrawn the request for refund of credit balance, established in articles 854 and 857 of the Tax Statute. 

The Fourth Section recalled that the finality of the returns against which there is rejection or withdrawal of the request for credit balance, as it occurred in the case in question, will not extend the terms to initiate an examination by special requirement. 

The suppliers of international trading companies will only be obliged to withhold VAT when making sales or rendering services that qualify as exempt with the right to tax refund.

Through the Ruling of September 30, 2021 (Case No. 23398, C.P. Julio Roberto Piza Rodríguez), the Fourth Section of the Council of State clarified the special regime using which it conditioned the origin of the requests for refund and/or compensation of balances in favor of the Sales Tax formulated by suppliers of International Sales Companies.

Projects of Decrees and Resolutions  

Ministry of Finance and Public Credit presented a draft Decree to modify the thresholds for yarns, fabrics, fibers, clothing, and footwear imports. 

On November 26, the Ministry of Finance issued a draft decree which intends to modify Article 3 of Decree 2218 of 2017, modified by Article 1 of Decree 436 of 2018. The above strengthens the fight against customs fraud management and control system of importing products under yarns, fibers, fabrics, clothing, and footwear tax codes. The Government issued this Decree after a technical study. They identified low prices for each tax code to determine a threshold that would allow the customs authority to control under-invoicing and smuggling imports of these products.