In 2018, Colombia`s economy recovered from the petroleum-price-related weakness of the previous years. The acceptance of the country into the OECD and NATO in May as well as the peace agreement with the FARC guerilla sent additional positive signals to foreign investors. However, due to the presidential elections in June which were won by Iván Duque it remains unclear which path Colombia will take. Given his pro-business approach there will likely be tax reductions to incentivize foreign investors. Due to stable economic climate and a continuously sinking inflation rate the population`s consumption rate is likely to increase which (German) companies can profit from. However, ranking only 96 out of 180 countries on Transparency International`s Transparency Perception Index in 2017 Colombia still has a significant need to catch up in terms of fighting corruption. This is supposed to be achieved through new Compliance regulations.
Starting January 1st of 2019, all companies that pay VAT or Consumption Tax (Impoconsumo) have to use the e-Invoicing system. This change affects approximately 800.000 companies and will be monitored by the Colombia tax authority DIAN. The reform`s goal is to decrease tax evasion, increase Compliance as well as reduce costs in the private and public sector.
In the introductory year 2018, already 50.000 companies were requested to use the system and throughout the year the DIAN will publish further lists with companies that it deems high-risk. This affects mostly big producing businesses as well as those that are engaging in the financial or tax sector. After receiving the DIAN`s request a company has three month to implement the new e-Invoicing system. With a voluntary adaption, a company gains three more month as a testing phase wherefore this option can be recommended in order to grant a smooth implementation.
Companies have to complete their invoices with an authentication number CUFE (Código Unico de la Facture Electrónica) as well as signing it with a digital certificate (UUID). The invoice has to be formatted as a XML file.
The following additional information have been published:
- e-Invoices will be validated or rejected in real time
- the printed version of the invoice has to include a two-dimensional barcode
- documents have to be saved for at least five years
The DIAN provides two e-Invoicing „options“. Micro and small companies can use a free IT webservice with which they can issue and download an invoice manually. Medium size and big companies can use a DIAN-certified provider who automates the entire invoicing process.
In order to comply with the DIAN`s regulations and to protect against audits an additional mechanism needs to be developed that hinders the manipulation of a company`s accounting system as well as verifies the reliability of the entered data. Additionally, transaction protocols should be generated and archived. This can be done through the IT-provider. Furthermore, the company`s e-Invoicing system itself should be certified through an accredited third party supplier. However, this option is not recommended for big business due to the security risk of making a big volume of sensitive data available to a third party.
Similar to the regulations of other LATAM-countries, the introduction of an effective Compliance program can lead to reduced sanctions in case of infringements of the Anti-corruption law. The implementation is mandatory for the following companies:
- Companies that are internationally active through intermediaries, contract partners or subsidiaries
- Companies that exceed the thresholds in the table below
|Sectors||Gross Income||Net Worth||Employees|
(ca.18 Million USD)
|Infrastructure and Construction||≥150.000 SMMW
(ca.36 Million USD)
(ca.36 Million USD)
|Mining and Energy||≥150.000 SMMW
(ca.36 Million USD)
*1 SMMW equals ca. USD 245, for more Details see here.
The Compliance program needs to fulfill the following criteria:
- Detailed description of specific corruption risks as well as creation of a prevention and combat plan
- Create definition of duties of employees, partners and senior management regarding the implementation of the Compliance program
- Transcription of internal audit regulations
Despite these concrete request the following guiding principles have to be implemented:
- Zero-tolerance politics of the senior management regarding transnational bribes – internal sanctions in case of breaches
- Individual transnational bribery risk analysis
- Appointment of a Compliance Officers who implements a structured, modifiable Compliance program whose obeying is controlled by him
- Due Diligence: identification and reduction of bribery risks
- Monitoring: audits, anonymous communication channels for whistleblowers
- Transparency: training of staff regarding new rules and procedures
Companies that infringe upon the new regulations can face penalties of up to 200.000 SMMW (ca. 49 Mio USD).
|Legal basis||Law 1778 (2016)|
|Compliance program duty?||Yes, with certain organizational structures, sectors and income thresholds|
|Standards||· Framework in line with the Colombian penal code, Anti-Brivbery Statute, Public porcurement Statute, Health law, Disciplinary Statue, OECD Convention against Corruption
· Compliance program in line with the criteria outlined above
|Compliance program as mitigating factor?||unclear|
|Sanctions||Up to 200.000 SMMW (ca. 49 Million USD)|
Tax Law & Taxes
In Colombia, national companies (those that have been founded in Colombia or according to Colombian law) are being taxed on their world income. Foreign, non-resident companies as well as their local subsidiaries are only being taxed on their income generated in Colombia.
|Tax type||Tax base||Rate|
(Impuesto sobre la Renta)
|Goods and service||33%, in free trade zones 20%
|Income Equalization Tax
(Impuesto sobre la Renta para la Equidad, CREE)
|Net income for companies earning more than 800 Million COP||4%, cancelled from 2019 on|
|Withholding Taxes||· Technical services
· Licenses for software
· Interests and dividends
|Capital Gains tax||Capital gains||10%|
(Impuesto al Valor Agregado, IVA)
|Goods and services||0%, 5%, 19%|
(Impuesto al Consumo)
|Transport, Telecommunication, Foods and Beverages||4%, 8%, 16%|
|Financial Transaction Tax||Financial transactions||0,4% of the value|
(Impuesto a la Riqueza)
|Real estate||Depends on value and location|
(Impuesto de Industria y Comercio
|Profit from industrial, trade or service activities||0,2-1,4%|
(Impuesto de Registro)
|Registration of a company||0,7% of the capital stock|
In January of 2017 a far-reaching tax reform has been implemented in Colombia which entails changes tot he CIT and VAT. These are most significant for companies residing in Colombia:
- VAT increase from 16% to 19%
- Improved rules against tax evasion
- Cancellation of the CREE-Tax starting in 2019
- Introduction of Foreign Transaction Tax
- Introduction of „green“ Tax on oil-based energy product and fuels
- Introduction of Withholding Tax for non-resident tax payers as well as on dividends
The goal of the tax reform is the restructuring of the Colombian tax system to improve the tax load distribution between resident companies and natural persons without introducing new or raising old taxes. This goal is partially achieved by increasing the tax load for non-resident companies in terms of a Foreign Transaction Tax. Another reason for the reform is Colombia`s adaptation to the OECD`s Base Erosion and Profit Shifting (BEPS) agreement that was developed in 2014.
An explanation of all relevant technical and tax terms is available here.