Tax Bulletin No. 56

We are pleased to share our new version of the Tax Bulletin with the most recent regulations and doctrine on tax matters. In this opportunity, we would like to present the clarifications on the tax procedure due to the changes of the latest Tax Reform – Law 2277 of 2022 and the new position set by the DIAN reconsidering the low amount deposits and ordinary deposits as a payment method susceptible to be considered as a cost, deduction, expense, or deductible taxes.

Tax Rulings and Resolutions of the Colombian Tax Authority    

Low amount deposits and ordinary deposits accounts are considered as payment methods for tax purposes, which can be accepted as costs, deductions, liabilities, and deductibles taxes.

Under the Tax Ruling No. 176 of 2023, the Tax Authority (hereinafter, the “DIAN”) reconsidered its position previously established in the Tax Ruling No. 365 of 2023, where it pointed out that payments made through low amount deposits such as “Nequi or Daviplata” cannot be treated as a payment method susceptible to be considered as a cost, deduction, expense, or deductible taxes, according to article 771-5 of the Tax Code.

In this new opportunity, the DIAN specified that the low amount deposits and the ordinary deposits can be considered as a payment method because they have a transactional nature. Also, they mentioned that these payment methods were created to achieve a greater financial inclusion and promote the financial formalization among Colombian population. Consequently, these methods comply with the purpose of the article 771-5 of the Tax Code, where payment methods – different from cash – imply a deposit contract with financial entities subject of legal regulation, which also allows the guarantee of the traceability, control and efficiency sought by this regulation. 

Clarifications on the tax procedure due to the changes of the latest Tax Reform – Law 2277 of 2022.

Under a General Tax Ruling, the DIAN clarifies different interpretations regarding the application of the new regulation of the Tax Reform related to the tax procedure, specifically, to the procedure applied to the taxes administered by the DIAN.

Towards this, the DIAN indicated that the transitory paragraph 2 of article 580-1 of the Tax Code applies to the withholding tax returns which are awarded ineffective due to the lack of full payment, which have been filed until December 13, 2022 – date on which the Tax Reform was enacted – and whose value to be paid is equal to or less than 10 UVT (COP $424.212), regardless of the total amount to be paid settled in the tax return. The DIAN clarified that with the previous regulation, the lack of payment of the total amount of the tax caused its ineffectiveness therefore, a new return had to be filed adding the penalty for late-payment or late-filing. For this reason, with the new regulation, the DIAN proposed that the tax return does not turn ineffective, if the amount not paid doesn’t exceed 10 UVT. 

Additionally, it was clarified that, to access to this benefit, it is necessary to pay the total amount owed plus interests on arrears by June 30,2023. This amount due will included: i) for returns filed on time without full payment: the withholding tax not fully or partially paid and ii) for the late-filling tax return without full payment: the withholding tax, late-filling sanction and interests on arrears not paid in fully or partially, considering the regulations disposed in article 804 of the Tax Code. It is important to mention that to the total amount owed, the taxpayer must add the interests on arrears caused from the filing of the tax return until the cancellation mentioned in the transitory paragraph 2, which are not considered under the limit of 10 UVT.

Finally, the DIAN explained that the principle of favorability can be applied to the sanctions’ regime, in those cases when taxpayers incurred in any of the penalties mentioned in article 651 of the Tax Code before the coming into force of the Tax Reform. However, this principle can not be applied when there is a consolidated legal situation. 

Case Law of the Council of State

It is not necessary to individualize in the invoice each of the goods sold for its fiscal recognition. 

The Council of State ruled on the necessary requirements for the recognition of sales invoices for tax purposes in the context of an administrative action where the claimant of the action requested a refund and/or compensation for the balance in favor originated in the Value-Added Tax- VAT.

In this regard, the Court analyzed the requirement set forth in paragraph f) of Article 617 of the Tax Code which states that the invoice must contain the specific or generic description of the items sold or services rendered. 

Thus, the Court noted that the regulation has provided two possibilities to include the description of the goods sold in the invoice: i) a specific form or ii) a generic form, leaving to the taxpayers’ choice which of the two ways to opt for. Considering the above, the Court concluded that if the law gives the possibility of choosing the second option, that is to say, a generic form, it is not possible to demand any other requirement for the recognition of the invoice (such as the individualization of each of the good sold), but only that from such description, the destination of the good can be inferred. 

Projects of Decrees and Resolutions 

Form 110 used for the filing of the Income Tax Return will be replaced. 

Under Draft Resolution, the DIAN intents to modify Form 110 (Income Tax Return usually file by non-resident entities and individuals) to incorporate in such form, the changes introduce by the Tax Reform – Law 2277 of 2022 -. 

Consequently, meanwhile taxpayers will have to file the Income Tax return and Wealth Tax return through the technological services disposed by the DIAN, using the Electronic Signature authorized by the tax authority.