COLOMBIA

This is the draft of the Tax Reform Bill (known as the “Sustainable Solidarity Law”), which is expected to be submitted to Congress in the short term by the Executive Branch. The proposal consists of a series of tax, economic and financial measures to increase the government’s tax revenues and boost economic development.

The main points of the draft are:

• Exempts from VAT payment: 

1. Interest and financial yields on credit operations, provided they are not part of the taxable base indicated in Article 447 of the Tax Statute, and financial leasing.
2. Foreign exchange operations for the purchase and sale of foreign currency, as well as foreign exchange operations on financial derivative instruments.
3. Intermediation services for the payment of incentives or conditioned or unconditioned monetary transfers within the framework of social programs of the National Government.
4. The VAT exemption applicable to other services must be supported with an electronic sales invoice and be made through credit and/or debit cards and other electronic payment mechanisms.

• VAT refund. As from January 1, 2022, the compensation will correspond to the transfer of a fixed amount in pesos, equivalent to a monthly amount of 50,000 Colombian pesos, which will be made in advance. The periodicity of the transfer, corresponding to the frequency of the transfers, will be defined by the National Government. The beneficiaries of the compensation will be households living in poverty.

• Income Tax (IR) for legal entities. The general income tax rate applicable to national companies and their assimilated, and foreign legal entities or without residence in the country, obliged to file the annual income and complementary tax return, will have a surtax of 3% for the taxable periods of 2022 and 2023.

• Income Tax Exemption. As from January 1, 2023, legal entities obliged to pay income tax that make donations of money for the construction, endowment or maintenance of public libraries will have deductions of 25% in the income tax and complementary taxes.

• The President of the Republic is granted extraordinary powers for 6 months to redefine the withholding tax rates for legal entities. 

• Temporary and solidarity wealth tax. It is complementary to the IR and will be in force between 2022 and 2023. It applies to foreign companies or entities that are not income tax filers in the country, and that own assets located in Colombia such as real estate, yachts, aircrafts or mining or oil rights. Companies that are not income tax filers in the country, and whose assets are only in shares, accounts receivable and/or portfolio investments and/or financial leasing contracts with entities or persons that are residents in Colombia will not be subject to this tax.

• Tax on the normalization of contributions. It is complementary to the IR and the temporary and solidarity wealth tax and applies to taxpayers who have omitted assets or nonexistent liabilities. The latter are understood as those assets that were not included in the national tax returns when there was a legal obligation to do so. It will be applied in 2022 and its rate will be 17% of the value of the assets.

• Temporary and solidarity tax on high income. Applies to monthly salaries of individuals exceeding 10 million Colombian pesos per month. It will be in force between July 1 and December 31 of this year.

• Autonomous Committee of the Fiscal Rule. It is created as a technical, permanent and independent body, attached to the Ministry of Finance and Public Credit, whose purpose will be to contribute to the management of the country’s fiscal policy. It will be integrated by five expert members, appointed by the Minister of Finance and Public Credit, elected for a term of 4 years.

• Tax deduction for individuals. All purchases of goods and/or services, supported with electronic invoices and paid with credit and/or debit cards, may be deducted by some individuals during the taxable periods 2022 and 2023.