Tax Bulletin No. 51

We are pleased to share the Tax Bulletin with the most relevant regulations and decisions issued in tax matters during September 2022. Among other topics, we briefly summarize the progress and changes in the Tax Reform project; we report on the DIAN Resolution that updates the International Standard Industrial Classification, as well as the tax concept that clarifies the instructions for invoicing samples without commercial value.

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.

Further progress regarding the Tax Reform Proyect

According to the proposed text of the tax reform bill, some modifications have been discussed. One of these changes refers to the new tax on oil, coal and gold exports at a rate of 10%, a tax that was finally decided to apply only to gold exports, based on the illegality that exists in this market. Likewise, the government has decided to leave in place the days without VAT that had been taking place, however, these discounts would only apply to products of national origin and will take place twice a year. On the other hand, the Minister of Finance agreed that dividends would no longer have the general income tax treatment up to 39% for individuals but would be taxed separately at a maximum rate of 20%. Regarding the supplementary tax on occasional gains, it was proposed that this tax be maintained at a single rate of 15% on inheritances, donations and disposals of assets, as its maximum rate was previously 10%.  On raffles and lotteries, a rate of 35% is established, which are currently taxed at only 20%.  

Tax Rulings and Resolutions of the Colombian Tax Authority

Resolution 001240 of 2022 extends the terms for the provision of information in the beneficial owners and their single registry and the registration of legal entities, unincorporated structures or similar in the Unincorporated Structures Identification System.

Resolution 00164 of 2021 regulates articles 631-5 and 631-6 of the Tax Statute related to beneficial owners and their single registry (“RUB, for its acronym in Spanish). Articles 10 and 13 of this regulation disposes the opportunity to provide information in the RUB and the registration in the Unincorporated Structures Identification System (“SIESPJ”, for its acronym in Spanish) respectively. Now, Technical Annex 1 defines the characteristics and content of the file through which the Beneficial Owners are reported.  

Considering the large number of concerns and requests submitted by the obligors, the Dirección de Impuestos y Aduanas  (“DIAN”), by means of Resolution 001240 of 2022, modified the deadlines for them to provide the information as follows: (i) entities incorporated, created and/or obligated as of May 31, 2021, must make the initial provision of information in the RUB no later than July 31, 2023; ii) entities incorporated, created and/or obliged as of June 1, 2023, must make the initial provision of information in the RUB no later than within two months following the registration in the RUT or in the SIESPJ and; iii) entities created as of May 31, 2023, which are not obliged to register in the RUT must do so no later than July 31, 2023.

Resolution 001232 of 2022 updates the International Standard Industrial Classification (ISIC).

Resolution 001232, the National Tax and Customs Directorate (for its acronym in Spanish “DIAN”) partially modified article 1 of Resolution 00114 of December 21, 2020, whereby the ISIC revision 4 was adapted for Colombia.  With this resolution, the disaggregation of the economic activities modified in Resolution 1505 of 2021 issued by the National Administrative Department of Statistics (“DANE”, for its acronym in Spanish) is added, as those related to Group 103 of Division 10 of Section C, concerning the processing of oils and fats of vegetable and animal origin. Consequently, taxpayers that develop any of the economic activities subject to modification, will have until April 1, 2023 to update the (” RUT”, for its acronym in Spanish) .

Guidelines on the taxable base for VAT on goods exported from Free Trade Zones 

DIAN Official Ruling No. 100208192-1129 of 2022 refers to the various foreign trade operations that are carried out through a Free Trade Zone. The definitive export, for example, is that which is carried out from the production of a final good composed of national raw materials acquired by the industrial user, in order to export them to other countries or sell them to the National Customs Territory ("TAN"). This operation, in accordance with article 481 of the Tax Statute, has the benefit of VAT exemption with the right to a refund. It should be clarified that the products imported to the TAN that are then exported to a Free Trade Zone, may also apply such exemption, provided that the requirement that the national or imported goods are incorporated in the production process of the final goods is met, considering the VAT of the national products that has already been paid and the liquidation of the customs duties included in the import declaration submitted.  In that sense, in those cases in which it is the buyer customer within the TAN who has the import declaration, the VAT taxable base must be liquidated according to the invoice and adding the amount of the corresponding tariff. 

The grounds for seizure and confiscation of vehicles with foreign plates are clarified. 

DIAN Tax Ruling No. 1127 of 2022 establishes the guidelines that vehicles with foreign plates must comply with in order to be imported in accordance with current regulations. In this way, it is established that when the vehicle coming from a neighboring country has authorization for registration in the Special Border Transport Unit (for its acronym in Spanish “UEDF”), but enters the country through an unauthorized place, it will be framed within a cause for seizure and confiscation in accordance with numeral 1 of article 647 of Decree 1165 of the year 2019. Likewise, it is clarified that in these cases the seizure and confiscation does not only occur on the merchandise but also on the means of transport (vehicle, ship, aircraft, railroad, trailers, among others) that was transiting through an unauthorized place. 

The DIAN rules on electronic invoicing of samples without commercial value.  

DIAN tax ruling No. 1137 of 2022, has established that, according to the Unified Concept No. 0106 of 2022, issuing invoice regarding inventory withdrawals on samples with no commercial value is considered mandatory. In that sense, it is clear that the guidelines to be followed to generate electronic sales invoice on free samples is as follows: in the field "LineExtensionAmount" the total value of the line must be included, which being a sample without commercial value this data will be filled in zero (0) in accordance with the rule of the "ID "FAW03"", on the Element "PriceAmount" where it is indicated that this corresponds to the value of the reference price of the item that is given as a sample or gift without commercial value, which must exist taking into account the characteristics of the market, since this segment may not be left empty or stipulate that its value is zero (0). Thus, the invoicing party must first fill in the value corresponding to zero (0) to clarify that it is a sample with no commercial value, and then the reference value of the merchandise must be included. 

Case Law of the Council of State

Constitutional Court rules on the enforceability of the income tax invoice issued by the DIAN.

The Constitutional Ruling C-305 of the year 2022 declared the conditional enforceability of the following paragraph of Article 616-5 of the Tax Statute which provides as follows: "in order for the income tax invoice to lose enforceability, and consequently no appeal may be filed, the taxpayer's return must include, at least, the values reported in the electronic invoicing system". In this way, the Court seeks to clarify that the income tax invoice will lose its enforceability to be able to demand a coercive collection only when the taxpayer has timely filed its private return, according to the data that conforms to its economic reality included in the electronic invoicing system. The foregoing does not prevent the DIAN from exercising its inspection powers with respect to the taxpayer's return.

Prior registration in the RUT of the natural person belonging to the simplified tax regime as a requirement for the deduction of payments made to foreigners without domicile in the country.

In judgment 25546 of September 2022, the Council of State stated that, as from July 1, 2005, prior registration in the RUT of the individuals belonging to the simplified tax regime to whom payments are made for VAT taxed operations is an indispensable requirement and the conservation of this document for the purposes of recognition of the deduction, in accordance with the provisions of articles 177-2 of the Colombian Tax Code and 20 of Decree 2788 of 2004.  In relation to the criteria to determine who are those non-resident individuals, article 10 of the ET (for its acronym in Spanish), in its version in force at the time of the facts, indicated a continuous permanence in the country for more than six months in the taxable period in order to be considered a tax resident.

Additionally, in accordance with article 5 of Decree 3050 of 1997, and for VAT deduction purposes for those persons who do not comply with such status, it is necessary to prove the contract entered with the foreigners with the respective withholding at source, since this corresponds to the supporting document for tax purposes, equivalent to the invoice required in article 771-2 of the ET for the deduction to be applicable. In this contract, in addition, the value of the sales tax generated must be discriminated, which will be subject to withholding by the contracting party (art. 12 Regulatory Decree 1165 of 1996). Therefore, the Court concludes that, in order to be able to deduct the VAT taxed operations, it is mandatory the prior registration of the RUT of those residents in Colombia for tax purposes as responsible for the simplified tax regime. However, the Court specifies that, if they do not comply with the criteria established in the ET to have the quality of tax residents, the contract signed - as equivalent support - with the discrimination of the value of the VAT must be proved in order to obtain the deduction.

Projects of Decrees and Resolutions 

New conditions regarding goods subject to quotas and controls in the Special Customs Regime zone of Maicao, Uribia and Manaure.

By means of the Draft Resolution, DIAN will modify numeral 4 and paragraph 3 of article 128 of Resolution 000046 of 2019 related to the entry of goods subject sanitary and agricultural quotas and controls for this Customs Regime Zone.

The purpose of this project corresponds to the expansion of the established quotas for the import of certain tariff subheadings, classified within headings 6106, 6204, 6205, 6206 because, due to the rise of the dollar, the quotas for these products were limited to only 49 tariff subheadings since 2012, referring to the import of textiles and apparel to the Special Customs Regime Zone of Maicao, Uribia and Manaure. Now, it is necessary that they be expanded again considering the growth of the market. Likewise, it is expected to improve controls over the arrival of agricultural products in these zones and the review by the health authorities, which have concluded that this type of goods must enter through other jurisdictions.

Draft Resolution seeks to modify the distribution of the Fund for Rehabilitation, Social Investment and the Fight against Organized Crime (for its acronym in Spanish “FRISCO”) resources 

The draft Resolution dated September 07, 2022 from the Ministry of Finance and Public Credit proposes that, in order to strengthen public entities such as the Financial Information and Analysis Unit (for its acronym in spanish "UIAF"), 35%of the FRISCO resources be redistributed and regulated in favor of the National Government, as stipulated by Article 91 of Law 1708 of 2014. This percentage expects to be distributed as follows: 10% for prison infrastructure administered by the National Treasury and the Penitentiary and Prison Services Unit. 5% for the expenses derived from the administration of the assets retained and inventoried by the FARC-EP (Farc Guerrilla group) , as well as the costs of the autonomous patrimony where they are located. 5% for the UIAF in order to develop projects for the prevention of money laundering and other similar projects. And, finally, 15% for special projects determined by the government, which will be executed by the administrative department of the presidency of the republic.