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The Constitutional Court annulled the rule related to the Simple Taxation Regime introduced by Law 2277 of 2022 which established a lower income threshold and a higher rate for certain taxpayers that provide science and technology services.
Law 2277 of 2022 ("Tax Reform") amended, among others, two articles of the Colombian Tax Code related to the Simple Taxation Regime ("STR"). The modifications introduced by the Tax Reform expressly referred to the ceilings and applicable rates to taxpayers under the STR that provides consulting and scientific services, including liberal professions.
Through Ruling C-540 of 2023, the Constitutional Court declared unenforceable the subsection 2 of number 2 of article 905 of the E.T. and, numbers 4 and 5 of article 908 of the E.T., and numbers 4 and 5 of paragraph 4 of the Tax Code.
Subsection 2 of numeral 2 of article 905 of the E.T., established a limit of 12,000 Tax Value Units (UVT) of gross income obtained by the taxpayers of the STR that renders professional consulting and scientific services.
Subparagraphs 4 and 5 of Article 908 of the Tax Code refer to the consolidated rate applicable to (i) education and human health care and social assistance activities and, (ii) professional consulting and scientific services, including the services of liberal professions.
Paragraphs 4 and 5 of paragraph 4 of article 908 of the Tax Code refer to the tax base and applicable rate related to the bimonthly advance payment for the previously mentioned activities.
The Constitutional Court's arguments were based on an analysis related to the violation of the equality right and the principle of horizontal equity in tax matters, specifically concerning the rate and income ceiling established in the STR for individuals who provide professional consulting and scientific services, including the services of liberal professionals, since such rate and ceiling are more demanding compared to those established for those who provide health services and are engaged in human health care and social assistance activities.
The Court concluded that the threshold and rates established for these groups of STR taxpayers were an arbitrary decision. In conclusion, the Constitutional Court concluded that (i) the threshold of 12,000 UVT applicable to STR taxpayers providing professional consulting and scientific services and, (ii) the rates established for taxpayers providing human health care services and professional consulting and scientific services were unenforceable. In this order of ideas, numeral 3 of article 42 of Law 2155 of 2021, which modified article 908 of the Tax Code, revives.
Finally, the decision issued by the Constitutional Court did not rule on VAT issues. Consequently, and per the provisions outlined in articles 903 and 907 of the Tax Code, VAT is not included within the taxes that integrate the unified tax under the simple taxation regime. Therefore, taxpayers of the unified tax under the simple taxation regime who are liable for VAT, shall file a consolidated annual return by the rules of the Tax Code.
