According to law 1819 of 2016, adopting the structural tax reform bill approved on 23 December 2016. It introduces the following major changes to the corporate income tax regime:
Income tax rates
As from tax year 2019, a single income tax rate of 33% applies to national and overseas entities that are obliged to file income tax returns in Colombia and for tax year 2017, taxpayers will be subject to 34% general income tax rate and for state-owned commercial and industrial entities 9% income tax rate applies. The taxpayers whose taxable base is at least COP 800 million for income tax purposes is subject to a temporary income tax surcharge, 6% for 2017 and 4% for 2018.
Tax loss carry-forward
The carry-forward of tax losses may be allowed up to 12 tax years and to carry out tax audits of income tax returns where tax losses were carried forward is 6 years following the date of filing of the income tax return.
Taxpayers are obliged to keep accounting and financial records must determine tax values according to IFRS.
Certain foreign expenses are allowed to deduct from the income tax base limited to 15%, as payments made to commissioners relating to the sale or purchase of goods or raw materials, interest on short-term loans taken out for the importation or exportation of goods, or bank overdrafts and capital expenses subject to amortization.
Based on the type of asset the maximum depreciation rates will be between 2.22% and 33% yearly and accelerated depreciation rate of assets may be increased up to 25%.
The tax reform introduces detailed definitions of behaviors that could be deemed to be an abuse of tax law and it simplifies and regulates the procedure for applying the anti-avoidance provision.
A controlled foreign companies (CFCs) regime applicable to entities complying with the following two requirements: (i) being controlled by one Colombian resident or more and (ii) qualifying as a non-resident.
CFC rules apply to companies, trusts, collective investment funds, private interest foundations, fiduciary businesses and any other investment vehicle, regardless of qualifying or not as transparent or as legal entities. Passive income, as defined by the law, as well as related costs and expenses, must be included in the income tax return of the controlling resident in the same tax year in which they were derived or incurred by the CFC.
Income tax withholding on foreign payments
A 15% income tax withholding applies to foreign payments of interest, commission, fees, royalties, technical services and advisory services.
The amortization base for the amortization of an intangible asset is the cost of the asset upon compliance with certain rules and annual amortization rate may not exceed 20% of the cost basis.