The Colombian tax authority (DIAN) has released new guidance on how companies should interpret the concept of Significant Economic Presence (SEP) under the country’s corporate income tax rules. In Ruling 713, issued on 28 August 2024, DIAN addressed key aspects of SEP as defined in Law 2277 of 2022, particularly for non-resident companies operating in the digital economy.
The ruling provides clarity on two important conditions: Displaying prices in Colombian pesos and determining if certain thresholds are met “in an aggregate manner.”
According to the ruling, the condition of “displaying prices in Colombian pesos” refers to showing the value of goods or services in the local currency on digital platforms. This practice indicates a systematic interaction with the Colombian market, which can establish taxable SEP. By displaying prices in pesos, non-resident companies signal their intention to engage with Colombian customers, thereby triggering potential tax obligations.
To determine if SEP is established, the ruling sets two thresholds:
- Customer Interaction: SEP is presumed if a non-resident interacts with 300,000 or more Colombian customers or users during the current or previous tax year.
- Income Threshold: SEP also applies if the non-resident generates gross income of at least COP 31,300 UVT (tax value units) from transactions involving goods or services provided to Colombian customers.
The ruling clarifies that these thresholds can be met “in an aggregate manner.” This means that if multiple related entities are involved in selling goods or services to Colombian users, they may be taxed as having SEP if their combined activities meet the thresholds, even if each entity individually falls short.
Implications for Multinational Companies
The new guidance highlights DIAN’s focus on taxing digital and non-resident businesses that generate significant economic activity in Colombia without a physical presence. For multinational corporations with related entities, the aggregate threshold interpretation could lead to broader tax obligations, as companies must now consider combined revenues and customer interactions across their corporate structure.
As Colombia continues to modernise its tax regime, non-resident companies should closely monitor these SEP developments to ensure compliance and avoid potential tax liabilities.
