On 14 September 2021, Colombia has approved the new Tax Reform Bill 2021 (Law No. 2155 of 2021) which modifies corporate income tax (CIT), value-added tax (VAT), and tax incentives. The main tax measures of the Tax Reform Bill are as follows:
Corporate Income Tax (CIT)
The Bill increases the CIT rate to 35% from 2022. Currently, the corporate income tax rate is 31% for 2021 and would have decreased to 30% for 2022 in line with the progressive reduction. The bill proposes to impose a 3% surtax on income from 2022 to 2025 (for a total income tax rate of 38%) for financial institutions with taxable income of more than 120,000 tax units.
The taxpayers can claim 50% as a corporate income tax credit for the municipal industry and commerce tax, and 100% in income tax from 2022.
Normalization tax
The Bill has introduced a new normalization tax at a rate of 17% from 1 January 2021.
Value-added tax (VAT)
The Bill has introduced three days per year which includes a VAT exemption on certain goods (e.g., clothing and accessories, appliances, toys, computers, sports goods, and for the agricultural sector as well). The exemption applies when the value does not exceed certain amounts (cash-paid purchase will also qualify for the VAT exemption).
The Bill also extended the temporary exemption for tourism and hotel services until 31 December 2022 due to the Covid-19 pandemic.
Simplified tax regime
The Bill has introduced simplified tax regime for resident individuals or companies whose shareholders are Colombian individuals or tax residents. This regime would help small industries and entrepreneurs to facilitate their formalization and payment of taxes as well.