Tax Bulletin No. 45

We are pleased to present Tax Bulletin No. 44, where you will find the most relevant news on tax matters for the month of March 2022. Among other topics, we inform on the signing of the Agreement to Eliminate Double Taxation between Colombia and the Netherlands, we summarize the modifications made to the Resolution that regulated the Ultimate Beneficial Owner Registry, and we recapitulate the Decree which established the reduction of the Customs Duty on some products that make up most of the household consumption.

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.

Colombia and the Netherlands sign Agreement to Eliminate Double Taxation

In mid-February of 2022, President Iván Duque, and the Netherlands’ Prime Minister Mark Rutte, signed an agreement to eliminate double taxation with respect to income taxes, in order to avoid tax avoidance and evasion. Thus, income earned by any taxpayer will be treated as income of a resident of a contracting state. 

This agreement applies to residents of one or both contracting states, considering the income taxes required by the state, regardless of the way in which they are taxed. Within the original text, the taxes to which this agreement applies are specified. Likewise, these provisions shall be applicable to taxes similar in nature or with identical purposes that are subsequently required by each state.  

Regulations issued by the National Government regarding tax matters

The Customs Duty for the importation of products that make up most of the household consumption is partially modified

Due to the increase in the cost of agricultural inputs, there was a substantial rise in the prices of several food products for basic household consumption (annual inflation of 19.94%). Additionally, the monthly variation of the Consumer Price Index (CPI) recorded in January 2022 is the highest since data for this index is available (year 2000).

Because of the foregoing, on March 3^A, Decree 307 of 2022 was issued, establishing a zero percent (0%) customs duty during the next 6 months for 165 subheadings corresponding to agricultural inputs and supplies.

Tax Rulings and Resolutions of the Colombian Tax Authority

The exchange of electronic information applicable to public service docks for the import of merchandise is restructured

Resolution No. 36 of March 17^th, 2022, establishes the technical specifications that allow the sending of information, through the electronic means of the Colombian Tax Authority, to the ports and/or docks. The above, for the documents called ARIM and TARJA, which are essential for the importation of goods into the national customs territory. The ARIM refers to the authorization of entry of goods at the port, while TARJA is the document that indicates the detailed information and characteristics of the goods. These documents are issued by the port/dock that provides public services. The purpose of these regulations is to improve the quality of customs communications and controls.

The resolution that regulated the Single Registry of Beneficial Owners ("RUB", per its acronym in Spanish) is amended.

In December 2021 the Colombian Tax Authority issued Resolution 164 of 2021, which regulates articles 631-5 and 631-6 of the Colombian Tax Code and establishes the obligation of legal entities and unincorporated structures to inform the Colombian Tax Authority the natural person who is their Ultimate Beneficial Owner, according to certain criteria.

On March 17^th, Resolution 37 of 2022 was issued, modifying the previous Resolution in the following points:

1. The previous regulation established that foreign companies had to inform the Colombian authorities who is their beneficial owner, if 50% or more of their total assets were in Colombia. Now, with the entry into force of the new Resolution, foreign legal entities will have this obligation when the totality of their investment in Colombia is NOT made in corporations, permanent establishments and/or unincorporated or similar structures obliged to provide information in the RUB.
2. Previously, companies incorporated before January 15^th 2022 had to provide information in the RUB no later than September 30^th, 2022; now, companies incorporated prior to September 30 will have until December 31^st to comply with this obligation. Entities incorporated after this date must report the information within 2 months of registration in the Single Tax Registry (“RUT” per its acronym in Spanish).
3. Likewise, the deadlines were extended for structures with no legal status that are not required to register in the RUT, to register in the System for Identification of Unincorporated Structures ("SIESPJ", for its acronym in Spanish).

As a rule, all companies and even other entities with tax residence in Colombia are required to comply with the new obligation to provide information regarding their Ultimate Beneficial Owner in the RUB, so it is relevant to consider the new deadlines provided.

The electronic payroll document must include the vacation report for its deductibility in the Income Tax Return

According to the provisions of the Colombian Tax Authority (DIAN), through Official Letter No. 100208192-213 of February 17^th, 2022, the concept of vacations or any other that is part of the remuneration made by the employer to the employee and that arises from the labor relationship, must be included in the generation of the electronic payroll document for each employee, in accordance with the qualities of each obligated subject.

Case Law of the Constitutional Court and Council of State

Returns of contributions to the Social Security System filed before December 26, 2012 are subject to the finality term established in Article 714 of the Colombian Tax Code

The Council of State, in Ruling No. 25539, concluded that prior to December 26^th, 2012, date of enforcement of Law 1607 of 2012, there was no specific regulation regarding the finality of self-assessments of contributions to the Social Security System, so that in accordance with the remission made by Article 156 of Law 1151 of 2007, the provisions of Article 714 of the Colombian Tax Code are applicable.

In this sense, the Pension and Parafiscal Management Unit (“UGPP” per its acronym in Spanish) has two years from the expiration of the deadline for filing the return, (or from the filing of the return in the case of an extemporaneous return) to initiate the applicable audit process.

To normalize omitted assets, through the Normalization Tax, it is not necessary that the asset has been possessed for more than two years

Last November 18^th, 2021, Section Four of the Council of State, Ruling No. 25115, annulled numeral 3 of Article 1.5.7.5. of Decree 1625 of 2016, which established a time limit for the possession of the assets that can be subject to the Normalization Tax. This decision was taken since the Council of State considered that the executive branch of the government was overstepping its legislative authority.

The Court established that the essentials elements of the Normalization Tax don´t include a time limit for the possession of assets subject to the tax (assets that have been omitted in past returns).

Projects of Decrees and Resolutions   

Most important aspects of the new mechanism for invoicing income tax and complementary taxes are  regulated.

Through this draft resolution, the Directorate of Taxes and Customs establishes that the invoice of income tax and complementary taxes referred to in article 616-5 of the Tax Statute is an administrative act of official determination of the tax, which is issued by the Special Administrative Unit of the Directorate of National Taxes and Customs -DIAN. In addition, this act is considered as a clear and express obligation that can be enforceable and, therefore, allows the coercive collection of the income tax and complementary taxes. It should be noted that the invoice includes the determination of the amount to be paid for income tax and complementary taxes, which does not exclude the obligation to liquidate and pay penalties or interest in accordance with tax regulations.   

However, the taxpayer who voluntarily declares within the term established by law for the filing of the income and complementary tax return, will not be required to apply the provisions of this resolution.