With the issuance of Law 2277 of 2022, the Colombian Government incorporated into the tax legislation the concept of significant economic presence (SEP), where certain foreign suppliers of goods and services that carry out activities in Colombia are the new obligated to pay Income Tax in this jurisdiction.
In this regard, the regulation establishes that non-resident persons or entities not domiciled in the country with a SEP in Colombia are subject to income tax and complementary taxes on income from the sale of goods and/or provision of services in favor of customers and/or users located in the national territory.
The regulation establishes some strict rules to determine if a non-resident person or non-domiciled entity has a significant presence in Colombia, which are:
- For the marketing of goods and/or services
1.1 Deliberate and systematic interaction(s) are maintained in the Colombian market, i.e., with customer(s) and/or user(s) located in the national territory. And
1.2 During the previous taxable year or in the current taxable year, have obtained or obtain gross income of (31,300) UVT “Unit Value Tax”, (USD 331,000 Approx) or more from transactions involving the sale of goods with customer(s) and/or user(s) located in the national territory.
- For the provision of digital services from abroad
2.1 Online advertising services.
2.2 Digital content services, whether online or downloadable, including mobile apps, e-books, music and movies.
2.3 Over-the-air streaming services, including TV shows, movies, streaming, music, streaming media – podcasts and any form of digital content.
2.4 Any form of monetization of information and/or data of users located in the national territory and that have been generated by the activity of such users in digital markets.
2.5 Online services of intermediation platforms.
2.6 Digital subscriptions to audiovisual media including, but not limited to, news, magazines, newspapers, music, video, games of any kind.
2.7 The management, administration, or handling of electronic data including web storage, online data storage, file sharing services, or cloud storage.
2.8 The services or licensing of standardized, or automated online search engines, including custom software.
2.9 The provision of the right to use or exploit intangibles.
2.10 Other electronic or digital services intended for users located in the national territory.
2.11 Any other service provided through a digital marketplace for users located in the national territory.
In the case of numeral 1.1 mentioned above, the regulation presumes that there is a deliberate and systematic interaction(s) in the Colombian market, that is, with customer(s) and/or user(s) located in the national territory when:
- The non-resident person or entity not domiciled in the country maintains an interaction or marketing deployment with three hundred thousand (300,000) or more customers and/or users located in Colombian territory during the previous taxable year or the current taxable year; or
- The non-resident person or entity not domiciled in the country maintains or establishes the possibility of displaying prices in Colombian pesos (COP) or allowing payment in Colombian pesos (COP).
The non-resident person or entity not domiciled in Colombia that incurs this obligation, may choose to declare and pay in the income tax of three percent (3%) on the total gross income derived from the sale of goods and/or provision of digital services, from abroad, sold or lent to users located in the national territory.
When the non-resident person or entity not domiciled in Colombia opts for this mechanism, may request the non-application of withholding tax in Colombia for payments abroad, which is established at 10% for these cases.
This standard is regulated by Decree 2039 issued by the Colombian Government on November 27, 2023, which also establishes the procedures and formal obligations that must be followed to strictly comply with this regulation.
It is important to mention that, although the Law was issued in 2022, it will come into force as of January 1, 2024, which is why Companies that are subject to this obligation must prepare themselves fiscally to comply with the formal and substantial obligations, in order to avoid penalties or questions by the tax authorities in Colombia.
If you require more information, please do not hesitate to contact one of our specialists in Colombia, who will be able to guide you through the entire legal and tax compliance process.
