We share our Tax Bulletin No. 6 for November 2018 with the latest decisions and opinions released by the Administrative Tribunal of Cundinamarca and the Tax Authority, in connection with national and local taxes, and tax procedure.
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.
1. Tax Rulings
1.1 Tax Ruling No. 21647 issued by Colombian Tax Authority on August 16th, 2018
- In accordance with Tax Ruling No. 21647, investors who make inversions under law 1715 of 2014 (which regulates the integration of non-conventional renewable energy), will have access to the benefits set forth by this law, even if the inversions are made through a trust. The foregoing, based on the transparency principle expressly established in article 102 of Tax Statute.
1.2 Tax Ruling No. 021287 issued by Colombian Tax Authority on August 13th, 2018
- By means of Tax Ruling No. 021287, the Colombian Tax Authority pointed out that in accordance with article 1.7.2 of Regulatory Decree 1625 of 2016, Chambers of Commerce are not obliged to present tax reconciling report. In this sense, entities which are not taxpayers of income tax and that are not taxed in any of their activities by this tax, does not need to fulfil this report.
1.3 Tax ruling No. 023990 issued by Colombian Tax Authority on August 31st, 2018
- The Colombian Tax Authority explained, trough Tax Ruling No. 023990, that non-residents are subject to withholding tax at a rate of 10% in the sale of shares or participations in national companies. The aforementioned rule applies, when the shares have remained in the fixed asset of the taxpayer for a term of not less than two years; otherwise, if these requirements are not fulfilled and the income does not classify as a capital gain, withholding tax rate will be 15%.
1.4 Tax ruling No. 19951 issued by Colombian Tax Authority on July 31st, 2018
- In accordance with Tax Ruling No. 19.551, business groups registered in the mercantile registry of the Chamber of Commerce, must submit to the Tax Authority their financial statements on magnetic media. Article 631 – 1 of Tax Statute only applies to business groups, therefore, companies which only reported a control situation are not obliged to comply with this request.
1.5 Tax ruling No. 20588 issued by Colombian Tax Authority on August 8th, 2018
- Through Tax Ruling No. 20588, the Colombian Tax Authority gave its opinion regarding withholding tax for dividends decreed to shareholders of preferred shares. According with article 33 – 3 Tax Statute, for tax purposes preferred shares will have for the issuer the same treatment of financial liabilities, therefore, dividends will be subject to the same withholding tax rate applicable to interest.
1.6 Tax ruling No. 021409 issued by Colombian Tax Authority on August 14th, 2018
- By means of Tax Ruling No. 021409, the Colombian Tax Authority clarified the term of firmness of a tax return which initially threw a loss and after its correction generates a liquid income and a tax in charge of the taxpayer. According to the Tax Authority, once the correction of the tax return which initially threw a loss has been made, the new tax return replaces for all purposes the initial declaration, in consequence, the term of firmness shall not be the one established in article 147 of Tax Statute, which is 6 years; rather, it would be applicable the general term of three years firmness provided in article 714.
1.7 Tax ruling No. 021581 issued by Colombian Tax Authority on August 15th, 2018
- In accordance with Tax Ruling No. 21581, VAT (Value Added Tax) deduction for the acquisition or import of capital goods does not apply when the good its remove from the inventory to be part of the fixed assets of the taxpayer. The Tax Authority considers, that for the deduction of VAT is necessary the existence of a payment for the acquisition or import of the capital good, condition that is not meet when such good is remove from the inventory to be part of the fixed assets, given that the good was already property of the taxpayer.
2.1 The Administrative Tribunal of Cundinamarca indicated through judgment 01354 issued on October 31st, 2018, that the special deduction that was once set forth in article 158 – 3 of Tax Statute demanded: (i) the investment must be made in the acquisition of tangible assets; (ii) that such assets must be fixed assets; (iii) once acquired, the goods should form part of the equity of the taxpayer; (iv) they must participate directly and permanent in the income producing activity and; (v) that the assets may be depreciated or amortized for tax purposes.
In this sense, the Administrative Tribunal pointed out that investments in the construction of real estate projects were only deductible in accordance with the provisions of article 158 – 3 of Tax Statute, when they were part of the taxpayer's equity who requested the deduction and were incorporated into the income producing activity. Therefore, the deduction was not applicable for the taxpayers during the execution of the construction project, but it could be taken once the project was finished.
2.2 The Administrative Tribunal of Cundinamarca indicated through judgment 01560 issued on October 10th, that habitual and professional intervention as an associate in the incorporation of companies constitutes an activity taxed with the Industry and Commerce Tax (ICA). In this sense, the taxable basis of the tax will be made up of the income that is received for dividends, because it is the way in which the profit obtained by the execution of the mercantile activity materializes. Only the income for the sale of fixed assets is exempted of this tax.