On 3 May 2017, the Colombian Tax Authority (DIAN) clarified the fiscal years for which the new transfer pricing obligations established in Article 108 of Law 1819 of 2016 will apply. According to Law 1819, taxpayers have to file a local file, master file and country-by-country (CbC) report.
Local file must be filed between 11 July and 25 July for tax year 2016, based on the last number of the taxpayer’s ID, as established in Decree 1625 of 2016.
Master file must be filed for tax year 2017 in 2018 according to dates to be determined by the Government. Tax year 2016 is not subject to the master file requirement.
CbC report must be filed for tax year 2016, as included in Article 108 of Law 1819 of 2016. The Government has not established the filing dates, but they cannot be earlier than 31 December 2017.
Colombian transfer pricing regulations require some taxpayers to file a transfer pricing return on the same date as the local file.
On 16 March 2017, the Colombian National Tax Authority (DIAN) published a Ruling 5797-2017 stating on the validity of the fairness tax (CREE) and the CREE surcharge. In accordance with this ruling, under Law 1819 of 2016 (the tax reform), as from 1 January 2017, the CREE tax and the CREE surcharge are no longer applicable.
Law 1819-2016 introduced a correct explanation on the changes, DIAN published several guidelines on the validity of the CREE tax and surcharge as the tax reform unifies the income tax and CREE tax as from tax year 2017, the CREE tax was still applicable for tax year 2016.
The National Tax Authority (DIAN) pronounced on the following issues related to tax penalties, in particular the application of the principles of proportionality, harmfulness, gradualness and favorability, on 17 March 2017. Article 640 of the Tax Code (TC), as amended by Law 1819 of 2016 (the tax reform), provides rules for the application of the principles of harmfulness, proportionality, gradualness and favorability when applying and assessing tax penalties.
Taxpayers may benefit from a reduction of the penalty for late submission of tax returns, provided that (i) the taxpayer has not incurred any penalties due to late submission of other tax returns in the preceding 2 years; and (ii) DIAN has not issued an administrative decision on the late submission of the tax return. If conditions (i) and (ii) are met, the taxpayer is required to pay only 50% of the tax penalty resulting from the application of the formula provided under article 641 of the TC.
Taxpayers may only apply the reduction of the penalty for late submission corresponding to tax year 2014. However, the tax penalty for tax year 2015 must be paid in full, as none of the requirements provided under article 640 of the TC would be met.
According to the decision 20960 of 2017, the Tax Court pronounced on the rules that must be followed by the National Tax Authority (DIAN) when analyzing taxpayers’ requests for amending tax returns.
Taxpayers may apply for amendment to a tax return that previously filed in order to either decrease the tax amount assessed or increase the amount subject to tax refund. For this purpose, the taxpayer must file a request before DIAN within the year following the deadline to file the tax return or the date of submission of the tax return, and enclose a proposal for amending the tax return.
If DIAN finds significant discrepancies in the tax return previously filed, for instance related to tax deductions, tax credits, tax expenses and withholding taxes, these issues must be analyzed in a separate tax audit. In the Tax Court’s opinion, DIAN may reject the taxpayer’s request for purely formal reasons.
The Tax Court considered that if the taxpayer complies with the requirements for amending the tax return but DIAN identifies significant discrepancies in the tax return previously filed, DIAN must issue an administrative decision amending the inconsistency found within the 6 months following the submission of the taxpayer’s request for amendment.
According to a ruling 2140 of 2017, the Colombian National Tax Authority (DIAN) pronounced on the cases where pensions are subject to withholding tax.
Article 17 of Law 1819 of 2016 amended article 383 of the Tax Code that provides the withholding tax rates applicable on employment and pension income. Paragraph 4 of article 383 of the Tax Code, regarding pension income, as amended by the tax reform, provides that tax-exempt income determined according to article 206 of the Tax Code cannot be subject to withholding tax.
According to article 206 of the Tax Code, withholding tax may apply on the amount of the pension payment that exceeds 1,000 Tax Value Units.
Hence, DIAN considered that in the case of pension payments, the tax-exempt income as provided by article 206 of the TC must be decreased from the income tax withholding base. The resulting amount will be subject to the corresponding income tax withholding rate according to the table included in article 383 of the Tax Code.
On 1 March 2017, the Colombian National Tax Authority (DIAN) issued Ruling 900479 of 2017 providing guidelines on the new rules on tax benefits applicable to small enterprises as from 1 January 2017.
Article 4 of Law 1429 of 2010 provided that new small enterprises could benefit from a reduced income tax rate that increased progressively during a 5-year period along with eligible to apply the reduced income tax rate were not subject to withholding income tax nor presumptive income tax. Article 376 of Law 1819 of 2016 eliminated article 4 of Law 1429 of 2010 removing the tax benefits for new small enterprises.
The key changes introduced by Law 1819 of 2016
As from 1 January 2017, Small enterprises, whether companies or individuals, benefiting from Law 1429 of 2010 will be subject to withholding income tax and presumptive income. Before 1 January 2017, article 240 of the TC provides a transitional regime for companies that qualified as small enterprises and applied the tax benefits provided by Law 1429 of 2010.
As of tax year 2017, qualified small enterprises must determine their income tax applying the adjusted rates provided by article 240 of the TC, as amended by Law 1819 of 2016, until the completion of the 5-year period and losses since their incorporation year can start to apply the new tax brackets provided by article 240 of the TC, as of the tax year when the qualified small enterprise obtains taxable income.
Under the recently published Administrative Regulation 16 of 2016, the National Council of Tax Benefits in Science, Technology and Innovation (CNBT) has set out the maximum amounts deductible for investments made in science, technology and innovation projects for tax year 2017.
The maximum annual amount of investments made by a taxpayer that can be eligible for the tax benefit provided for under article 158-1 of the Tax Code (TC) is COP 600 billion and the maximum annual amount that can be deducted by taxpayers when investing in qualified projects under article 158-1 of the TC is COP 75 billion per project.