Members of the Senate and House of Representatives Finance and Budget Committees presented today the new version of the Financing Bill. The new bill contains several modifications to the original one, and will be the version that the committees will vote on in the coming days. The intention of Congress is that both chamber floors discuss and approve the initiative in December.

Main modifications and new features of the initiative:

• For lack of government support, the bill does not contain the proposal by Senator David Barguil (Partido Conservador-ally of the ruling party) to impose a 5% income tax surcharge on the financial sector. The original proposal to gradually reduce the income tax for all companies is thus maintained. It will go from the current 33% to 32% in 2020, down to 31% in 2021 and then 30% as of 2022.
• A gradual reduction in sales tax (VAT) and the application of this to the household basket has also been ruled out. The VAT rate thus stays at the current 19%.
• A new tax on financial services and foreign exchange transactions is introduced. In financial services, the tax will be determined by applying the tariff to the taxable base, integrated in each operation, for the total value of the commissions and other remunerations received by the person responsible for the services rendered, regardless of their denomination. In exchange operations, the tax shall be determined by the intermediaries of the exchange market and by those who buy and sell.
• Presumptive income will be gradually eliminated from the current 3.5% to 2.5% in 2019, to 1.5% in 2020 and then 0% as of 2021. Previously, the bill stipulated a tariff of 3% by 2019.
• The income tax rate for dividends received by foreign companies with no principal office for business in the country increases from 5% to 7.5%.
• A 50% discount (2019-2020) and a 100% discount (from 2022) is stipulated against income tax for the Industry and Commerce Tax (ICA) which will become effective when paying income tax. The ICA depends on the local governments and, in the case of commercial activities and services, stipulates a monthly levy of between 0.2 and 0.10% to the monthly average gross income obtained in the previous year,
• Instead of a 50% discount against income tax, there will be a 50% deduction on the Financial Movement Tax (GMF), regardless of whether or not it is causally related to the income-generating activity. The GMF establishes a tariff of approximately US$ 0.0014 for each US$ 0.35 spent in any transaction.

Proposals maintained from the original bill:

• The bill maintains a gradual reduction in income tax for businesses from the current 33% to 32% in 2020, 31% in 2021 and 30% from 2022.  
• The bill paves the way, as of January 1 2019, for a unified tax system under the new SIMPLE regime. It will be an optional taxation model that will replace income and complementary taxes, consumption taxes, industry and commerce taxes, in order to streamline the tax system and encourage the generation of employment. SIMPLE will be optional for natural and legal persons, but foreign legal persons (or their permanent establishments), entities that are affiliates, subsidiaries, agencies, branches of national or foreign juridical persons and companies that are not financial entities, among others, will be excluded.
• The initiative stipulates that for SIMPLE taxpayers, revenues resulting from sales of goods or services made through credit and/or debit card systems and other electronic payment mechanisms will generate a tax credit (or discount) equivalent to 0.5% of the income received through this means, according to certification issued by the acquiring financial institution. However, this discount may not exceed the total tax burden payable by the SIMPLE taxpayer.
• The initiative also proposes modifications in the withholding of sales tax.  Current credit and debit card issuers must withhold payment for the provision of audiovisual services (including, but not limited to, music, videos, films and games of any kind, as well as the broadcasting of any type of event), the digital distribution platform service for mobile applications, the provision of online advertising services, and the provision of distance learning or training. This bill expands this list to include all services provided through digital platforms (not just mobile applications), as well as the provision of rights of use or exploitation of intangibles and other electronic or digital services to users located in Colombia.

The government introduces a change in tax-exempt imports. At present, only the importation of goods subject to urgent shipments or quick delivery shipments with a value equal to or less than U$ 200 are exempted from tax. The initiative seeks to incorporate the importation of goods subject to postal traffic (also with a value equal to or less than U$ 200).