Climate change tax reforms and incentives in Colombia

1. Has your country ratified the Paris Agreement? 

Yes, Colombia has ratified the Paris Agreement. The ratification of the agreement took place on July 12th, 2018, when the Colombian ambassador deposited before the United Nations, the document that ratifies the Paris Agreement.  

2. Has your country introduced environmental taxes?

Over the last couple of years, Colombia has introduced several environmental taxes, especially after the ratification of the Paris Agreement. In this sense, with the issuance of Law 1819 of 2016 (“Tax Reform”), the Colombian government introduced two environmental taxes: (i) carbon tax and; (ii) consumption of plastic bags tax.  

2.1 Energy taxes

N/A

2.2 Transport Taxes

Yes. There is a crude oil transport tax only for O&G industry that uses a pipeline. Also, even though it is not properly a transport tax, Colombia has adopted a tax that levies the property of automobiles and motorcycles that meet several requirements. The tax is accrued on January 1st of each year or upon its registration in the automobile record. The tax rates might vary depending of the commercial value of the vehicle, but generally the go from 0.5% to 3.5%.

2.3 Pollution taxes

N/A

2.4 Resources taxes

Yes. Royalties on the exploitation of non-renewable natural resources (such as sand, gravel, rocks, oil and gas and minerals) are charged to those that develop extractive activities.

3. Has your country introduced a carbon tax?

Yes. By means of Law 1819 of 2016, the Colombian government introduced in our legal system a carbon tax, aimed to tax the sale, withdrawal and import of fossil fuels in the Colombian territory. The tax basis and tax rate of the carbon tax will depend of the amount of carbon dioxide generated by fossil fuel combustion, adjusted by inflation each year, as explained in the following chart:

Tariffs per unit of fossil fuels
Fossil fuelUnitTariff/unit COPTariff/unit USD

Natural gas

Cubic meter

27

0.0087

Liquefied petroleum gas

Gallon

95

0.028

Gasoline

Gallon

135

0.040

Kerosene and jet fuel

Gallon

148

0.044

ACPM

Gallon

152

0.046

Fuel oil

Gallon

177

0.053

Furthermore, the carbon tax must be paid by the purchaser of fossil fuels; nevertheless, the responsible of collecting and paying this tax before the Colombian Tax Authority are the seller and importers of the fossil fuels.

Finally, the revenues obtained with this tax are aimed at conservation actions and ecosystem preservation. Taxpayers interested in demonstrating reductions in the amount of greenhouse gas emissions may benefit totally or partially with non-taxation of the carbon tax.

4. Does your country offer sustainability incentives (tax credits, subsidies or other business incentives) to encourage taxpayers to engage in behaviours and develop technologies that can impact positively the environment? 

Yes. In order to encourage taxpayers in the development of certain activities, Colombian tax rules provide several tax benefits regarding the development of technologies and behaviours that can positively impact the environment. For example, section 255 of the Colombian Tax Code sets forth a tax credit equivalent to 25% of the corporate income tax, for legal entities that performed investments in the control, conservation and improvement of the environment. 

In respect to VAT, Colombian tax rules set forth that, the import of equipment intended for the construction, installation and operation of control and monitoring systems, aimed for the fulfilment of environmental standards, are excluded from the value added tax,. 

In addition, to incentivize the use of alternative transport methods, Law 2010 of 2019 (“Tax Reform”) has established an exclusion of VAT in the purchase of bicycles, electric bicycles, electric motorcycles and electric skateboards, among others.  

Finally, Colombian tax rules also offer a tax credit for the investments made in the generation of electric energy with nonconventional renewable energy sources. The tax credit can be up to 50% of the investment made and, in addition, machinery and equipment intended to these investments are exempted from custom duties. 

5. Has your country recently announced tax reforms connected to climate change? 

No, unfortunately, in the last tax reform that was enacted on December 27th, 2019, none additional environmental taxes were introduced in our legal system. 

6. Other comments

N/A

Natalia Guerrero
Natalia Guerrero
Partner
Bogotá