Post on 02-Jun-2018
8/11/2019 Colombian Government Proposes Tax Reform
1/5
EY Americas Tax Center
The EY Americas Tax
Center brings together
the experience and
perspectives of over
10,000 tax professionals
across the region to
help clients address
administrative,
legislative and regulatory
opportunities and
challenges in the 33countries that comprise
the Americas region of the
global EY organization.
Copy into your web
browser:
http://www.ey.com/US/en/
Services/Tax/Americas-Tax-
Center---borderless-client-
service
Global Tax AlertNews from Americas Tax Center
7 October 2014
Colombian Governmentproposes tax reformOn 3 October 2014, Colombias Ministry of Treasury led bill No. 134/14 before theHouse of Representatives. The bill proposes changes to the Tax Statute (Law 1607
of 2012) and creates new mechanisms to combat tax evasion.
The Government projects that it will collect $12.5 billion Colombian pesos (approx.
US$6,164,0001) during 2015, which will help it meet its goal under the structural
decit provision contained in the Law of Fiscal Rule. If that amount is not collected,
the Government will have to reduce its level of public investment for 2015 through
2018.
Proposed tax changes
New wealth tax
The tax reform would create a new wealth tax that would be charged to income
taxpayers that are individuals and legal entities.
Nonresidents, domestic or foreign individuals, foreign companies and foreign entities
also would be subject to the new wealth tax. The tax would be applied to equity held
directly in Colombia and equity held indirectly through permanent establishments
(PEs) or branches.
The tax reform would exempt from the tax foreign portfolio investors, companies in
liquidation or under a restructuring agreement and individuals under the insolvency
regime provided by Law 1564 of 2012.
The reform would consider certain insolvency strategies as acts to which anti-abuse
measures would apply and those measures would hold partners and shareholders
jointly liable.
Under the reform, the tax base would be the taxpayers wealth, determined as
taxpayers gross assets minus debts as of 1 January 2015, equal to or greater than
COP 1,000,000,000 (approx. US$493,000).
http://www.ey.com/US/en/Services/Tax/Americas-Tax-Center---borderless-client-servicehttp://www.ey.com/US/en/Services/Tax/Americas-Tax-Center---borderless-client-servicehttp://www.ey.com/US/en/Services/Tax/Americas-Tax-Center---borderless-client-servicehttp://www.ey.com/US/en/Services/Tax/Americas-Tax-Center---borderless-client-servicehttp://www.ey.com/US/en/Services/Tax/Americas-Tax-Center---borderless-client-servicehttp://www.ey.com/US/en/Services/Tax/Americas-Tax-Center---borderless-client-servicehttp://www.ey.com/US/en/Services/Tax/Americas-Tax-Center---borderless-client-servicehttp://www.ey.com/US/en/Services/Tax/Americas-Tax-Center---borderless-client-service8/11/2019 Colombian Government Proposes Tax Reform
2/5
Global Tax Alert Americas Tax Center2
From the tax base, the net value of the following assets could be deducted: The rst $12,200 UVT (Tax Value Unit for its acronym in Spanish) (for 2014, COP 335,000,000, approx.
US$165,000) of the fair market value of a residential home
Shares in domestic companies, even if held through a trust or collective investment fund
Contributions of cooperative entities described in Paragraph 4 of Section 19 of the Tax Statute
Real estate used and benecial to mass transit public companies
Land banks owned by territorial public companies, with land intended for priority housing
Even though the tax base is static, the accrual of this tax would be annually on 1 January 2015, 2016, 2017 and
2018. Note that for PEs and branches, the tax reform has not clearly established how the equity attribution ruleswould operate.
The tax would be progressive depending on the level of equity, as follows:
Ranges (Colombian pesos COP)Applicable
tax(*)
0 to $2,000,000,000 (**) (approx. US$986,000) 0.20%
$2,000,000,000 to $3,000,000,000 million (approx. US$986,000 to 1,479,000) 0.35%
$3,000,000,000 million to $5,000,000,000 million (approx. US$1,479,000 to 2,465,000) 0.75%
$5,000,000,000 million and above (approx. US$2,465,000) 1.50%
(*) The outcome indicates the obligation to add a xed portion in Colombian pesos to the indicated range.
(**) Taxpayers are lers provided wealth is beyond COP 1,000 million.
The wealth tax would not be deductible or discountable from the income tax or CREE tax (income tax for equality).
It also may not be offset with other taxes.
CREE surtax
For tax years 2015 through 2018, a CREE surtax of 3% would be imposed on taxpayers subject to that tax if their
taxable base is equal to or greater than COP1,000,000,000 (approx. US$ 493,000). Additionally, the reform
would require taxpayers to calculate the surtax on the tax base for the previous year (as an advance) and pay it
in two annual installments.
Increase in CREE tax rate
The tax reform would permanently increase the CREE tax rate to 9% beginning in 2016 and, thus, the lower tax
rate would no longer apply, which was expected to be 8% as of 2016.
Additional anti-evasion rules
In addition to the current anti-evasion rules and transfer pricing regulations, the reform would create a new
normalization tax, which would be imposed from 2015 through 2017 as surtax to the wealth tax. This tax would
be imposed on taxpayers subject to the wealth tax and those taxpayers that want to voluntarily le to report
omitted assets when they were legally required to report those assets. Conversely, taxpayers subject to thewealth tax that do not have omitted assets would not be subject to the new surtax.
The tax base for the new surtax would be the asset value as determined under the income tax rules.
8/11/2019 Colombian Government Proposes Tax Reform
3/5
3Global Tax Alert Americas Tax Center
The tax reform also would createmeasures regarding equity held
through private foundations and
trusts under which the rights in
those structures and contracts
would be presumed to be held
in Colombia and the asset rules
applicable to duciary rights
would be applicable.
The inclusion of the omitted
assets would not result in taxable
income due to assessment made
when comparing equities of the
taxpayer under special provisions
provided by law or special taxable
income due to asset omission.
The normalization surtax rate
would increase incrementally
(10% for 2015, 15% for 2016,
20% for 2017), which is intended
to make taxpayers comply with the
normalization as soon as possible.
Additionally, the tax reform
would establish a new statement
for information on assets that
Colombian residents own abroad.
On the statement, the type andnature of the assets would have to
be reported if the assets are greater
than a certain amount (3,580 UVT,
Tax Value Unit for its acronym in
Spanish, which for FY2014 ascends
to COP $98 million approx.
US$48,000). The jurisdiction where
the assets are located also must be
disclosed.
Another anti-evasion measure
would be the creation of a criminal
offense for the omission of assets or
the inclusion of nonexistent assets
with a value equal to or greater than
12,966 Current Monthly Minimum
Legally Wages (for FY2014, approx.
US$3,938,000), which would
affect the income tax, CREE tax
and corresponding balance in favor.
The penalty will stop accruing once
an amended return is led and thetax, penalties and interest are paid.
Taxpayers that are subject to the
normalization tax will not be subject
to the penalty for tax years 2015
through 2017.
The tax reform also would requirea committee of experts to be
formed to propose reforms aimed
at preventing tax evasion by entities
in the special tax regime, which
includes nonprot entities.
Levy to financial transactions
(GMF for acronym in Spanish)
The tax reform also would modify
the gradual elimination of the GMF
and maintain the 0.4% tax rate from2015 to 2018. It would be reduced
to 0.3% in 2019, 0.2% in 2020 and
0.1% in 2021. The tax would be
repealed in 2022.
VAT changes
The tax reform would eliminate the
two point VAT reduction for the
purchase of goods and services
made by credit or debit cards or
through a mobile banking service,
which are generally taxed at a 16%
general rate or a 5% rate depending
on the type of transaction.
Endnote
1. Exchange rate: US$1: Colombian Pesos (COP) 2,208.
8/11/2019 Colombian Government Proposes Tax Reform
4/5
4 Global Tax Alert Americas Tax Center
For additional information with respect to this Alert, please contact the following:
Ernst & Young Ltda., Bogot, Colombia
Diego Casas +57 1 484 7050 diego.e.casas@co.ey.com
Ricardo Ruiz +57 1 484 7537 ricardo.ruiz@co.ey.com
Carlos Parra +57 1 484 7931 carlos.parra@co.ey.com
8/11/2019 Colombian Government Proposes Tax Reform
5/5
EY| Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction and advisory
services. The insights and quality services we deliver help build trust and
confidence in the capital markets and in economies the world over. We
develop outstanding leaders who team to deliver on our promises to all
of our stakeholders. In so doing, we play a critical role in building a better
working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of
the member firms of Ernst & Young Global Limited, each of which is aseparate legal entity. Ernst & Young Global Limited, a UK company limited
by guarantee, does not provide services to clients. For more information
about our organization, please visit ey.com.
Americas Tax Center
2014 EYGM Limited.
All Rights Reserved.
EYG No. CM4777
This material has been prepared for general informational purposes only and is not intended to
be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for
specific advice.
ey.com