Crypto Tax Legislation & Law in Colombia

There is no special regulation for crypto-assets, therefore different authorities have tried to establish rules per general national tax law principles. However, three current bills are being drafted. Initial sketches have been published which focus on:

1. setting the main rules for data protection and granting the user knowledge of the consequences derived from these types of transactions
2. regulating crypto-asset platforms for the granting of services executed by intermediaries in the acquisition of goods and services
3. establishing the basis for invoicing crypto-assets sales and related services. 

In the meantime, different ruling opinions have been enacted by different authorities on the matter from commercial, accounting, foreign exchange and tax perspectives.

Regarding tax, such opinions have taken into consideration the other opinions in which the consensus is that crypto-currency cannot be deemed as any type of legal currency as it is not backed by a governmental authority. Therefore, tax opinions have briefly tried to tackle the taxation of crypto-assets from an intangible perspective, although such opinions have not recognised the different types of crypto-currencies in the market, meaning such opinions are narrow if trying to apply to another sort of crypto-asset existent in the market. The tax authority’s recent uniform opinion on the matter briefly concluded that:

1. crypto-assets are net worth as an asset that may generate income tax
2. sales of intangible assets must comply with the general invoicing and withholding tax obligations (as these not only apply to payments made in legal currency)
3. the sale of crypto-assets is not subject to VAT as it is not classified as industrial property; however VAT will be triggered when there is the intermediation of services for crypto-assets and their different uses
4. crypto-assets can be registered in accounting records as fixed assets (for individuals) or as inventory (for companies who sell these virtual products on a regular basis)
5. whenever the value of crypto-assets increases due to market fluctuations it could trigger income tax, but it will only be recognised at the time of sale or liquidation.  

It must be clarified that these tax opinions are not mandatory for taxpayers, as they must determine their actions according to the law. However, these tax opinions allow us to understand the view of the tax authorities on a subject matter as the opinions are mandatory for them.

Crypto-assets are not considered legal currency in Colombia. However in order to determine the tax consequences these assets may have, their value must be converted to the equivalent in Colombian pesos (COP), as COP is the only currency accepted to comply with the tax obligations before the Tax and Customs Authority (DIAN) in Colombia.

There is no specific regulation, but it cannot be assumed it will be the same as for conventional FIAT currency considering crypto-assets are not viewed as regular currency. Therefore specific tax rules for paying with assets (i.e. intangible assets) should be applied in a general manner when exchanging for goods or services or any other form of crypto-assets.

Individuals are taxed with a progressive income tax rate according to their level of income. Therefore whether they invest in crypto-assets professionally or sporadically, these incomes will be taxed as long as they constitute income capable of increasing the individual’s net worth. This income could be considered as regular income or as capital gains depending on whether the activity is performed regularly or sporadically, and on the term of possession of the crypto-assets: 

• when crypto-asset transactions are carried out on a regular (or professional) basis, they will trigger regular income tax for the individual taxpayer (0%-39% depending on the amount of income)
• when crypto-assets operations are carried out sporadically because they are not part of the taxpayer’s usual course of business, capital gains could be triggered (at 15%) if the crypto-assets are treated as fixed assets and held for a term longer than 2 years. (If held for a period of less than 2 years, income tax will be triggered.)

In either case, specific rules should apply to allocate deductible costs and expenses of the income-generating activity.

Finally, it should be noted that to determine if an individual is performing a professional activity, one must verify if the taxpayer is considered a merchant rendering services that are related to their ordinary course of business.

This means that when an individual executes activities that constitute their usual business, he/she may be classified as a professional without the requirement for registration or to prove a certain number of operations. The level of income resulting from such operations will have incidence if it has to comply with other formal tax obligations. In the case of corporations, the income tax rate is 35%.

According to Article 147 of the Colombian Tax Code, companies may offset tax losses against ordinary net income obtained in the following 12 taxable periods. It must be noted that this procedure can only be applied if, during the year when the offset is going to be applied, the taxpayer has a net income (without including amounts obtained as capital gains) that is equal to or higher than the loss to be compensated. 

Therefore, if operations made with crypto-assets are the income-generating activity of the taxpayer, then the general rules for tax loss compensation could apply.   However, losses arising from income that does not constitute the taxpayer’s regular net income (such losses derived from costs and deductions that have no causal relationship with the income-generating activity) cannot be offset, as per general rules. This means that the taxpayer must keep their accounting records updated in order to be able to identify the type of income, capital gains, costs and deductions, and in that sense, be capable of determining which type of losses it may offset.

As mentioned before, losses can be offset during the following 12 taxable years.

As we do not have internal regulation on the matter, there is no legal answer in this regard. However, as per tax rulings indicated above, such rulings have been very basic: it has not been recognised that in the crypto-asset world, there are various types of crypto-assets that cannot necessarily be treated in the same manner or trigger the same tax consequences. Bearing in mind the deficiencies of current tax opinions, at this stage the common answer is to treat all crypto-assets as a form of intangible assets.

There is no special regulation in this matter. However, this activity has been analysed in tax opinion No. 2847 of 2022, which establishes that whoever executes mining activities, and therefore obtains virtual currencies as payment for these services, actually obtains a commission that constitutes an income in kind. In that sense, as virtual currencies (and crypto-assets) are considered an intangible asset susceptible to be valued and becoming part of the taxpayer’s net worth, individuals and companies must comply with the payment of the income tax applicable to these kinds of assets.

There is no special regulation in this matter.

There are no other specific models regulated by Colombian Law. However, according to Article 24 of the Tax Code, income from the development of intangible assets within the country is considered a domestic source of income, therefore all income obtained from the investment or sale of intangibles will be taxed as income from Colombian sources. Likewise, if the exercise of investment of crypto-assets is not executed in Colombia but is carried out by a Colombian tax resident, it will also be taxed in Colombia (tax residents must include global and local income in their tax returns).

There is no special regulation in this regard. However, the sale of crypto-assets may generate the obligation of issuing electronic invoices, as the Tax Code establishes that this requirement applies to any sales or services rendered within the national territory. Recent tax opinions have also clarified that the individual who carries out economic activities related to crypto-assets must invoice services rendered in the same way as sales or services derived from other intangible assets are invoiced. In all cases, the general tax rules must be followed, especially those regarding the obligation to keep documentation and attachments for tax and accounting matters.

It is important to clarify that in Colombia, as established by the Central Bank, crypto-assets are not a legal currency, therefore they are not considered money for legal purposes and there is no corporate obligation to receive them as a cash equivalent, nor they are considered financial assets or investment property. There are also developments in the field of accounting opinions on how to register crypto-assets which are relevant from a tax perspective and which should also be considered when addressing this topic from a tax perspective.