The Council of State established that the Industry and Commerce Tax adopted by departmental capital cities may not exceed the rates in the Capital District of Bogota

 On July 4, 2024, the Fourth Section of the Contentious Administrative Chamber of the Council of State issued ruling number 85001-23-33-000-2022-00138-02 (28171), in which it analyzed the scope of Article 14 of Law 2082 of 2021. This article authorized departmental capital cities to adopt the regulations governing Property Tax and Industry and Commerce tax applicable in the District Capital of Bogotá.

 In this regard, the Chamber clarified that, although municipalities have taxing powers, they cannot disregard the law for the exercise such faculties. Accordingly, it established that the capital city may adopt the tax regulations of the District Capital, as long as it is done at the initiative of the mayor through a municipal agreement, the decision aligns with the tax reality of the capital city, and the adopted regulations have indeed been established within Bogotá’s jurisdiction. Consistently, the Chamber concluded that capital cities may not set Industry and Commerce tax rates higher than those provided for the District Capital of Bogotá, and any increase must be duly justified by the municipality’s tax realities. 

In this context, it declared the nullity of Article 18 of Agreement 22 of 2021 issued by the Municipal Council of Yopal, which set an Industry and Commerce tax rate of 20 per thousand for financial activities due to the lack of normative basis or alignment with the municipality’s realities and because it exceeded the rate in force in Bogota of 14 per thousand.

Author: Aura Salamanca