As provided in Law 1819 of 2016, a new taxable event for VAT purposes was established in Colombia, to tax the provision of services, the acquisition and licensing of intangibles from abroad by certain Colombian residents (mainly individuals), that do nor belong to the common VAT Regime.
Although formal VAT duties for Foreign Service Suppliers were initially regulated through Decree 1415 of 2018, further regulation was required. Thus, Resolution 051 of October of 2018 provides a detailed regulation of the simplified procedure to comply with substantial and formal VAT obligations.
WHO SHALL APPLY THE SIMPLIFIED VAT PROCEDURE
Service suppliers, sellers and licensors of intangibles without residence or domicile in Colombia, rendering services from abroad to certain Colombian customers that do not belong to the Common VAT Regime (mainly individuals in a B2C transaction).
REGISTRATION DUTY BEFORE
THE TAX AUTHORITY
Foreign Service Suppliers shall register before the Tax Authority and obtain a Tax ID (RUT), through the web page of the Tax Authority (DIAN).
The following information shall be filed to obtain the Tax Registration:
- Manifestation of the will of the legal representative or the proxy to (i) obtain the Tax Registration, (ii) comply with the simplified VAT procedure, and (iii) obtain the electronic signature mechanism.
- Name and ID documentation of the legal representative and name and ID of the Foreign Service Supplier.
- Type of service provided from abroad.
- Country from where the service is provided.
- Address of the Foreign Service Supplier.
- Web pages that are used to provide the service.
- Email and phone number.
Likewise, it is required to file documentation that proves the existence and legal representation of the Foreign Service Supplier.
Foreign Service Suppliers obliged to this procedure will include within the Tax ID the obligation “46” – called “VAT for Foreign Services Suppliers from abroad”.
Further, Foreign Service Suppliers shall request the Electronic Signature mechanism that will be assigned to the legal representative or proxy.
FILING AND PAYMENT OF THE VAT RETURN BY FOREIGN SERVICE SUPPLIERS
For VAT return filing purposes, the Tax Authority will issue a specific form in Spanish and English versions.
The VAT return must be filed and signed by the legal representative or the proxy of the Foreign Service Supplier, to whom the electronic signature instrument was issued.
Tax returns shall be filed on a bimonthly basis.
The Colombian legal time shall be used to determine the filing deadlines.
For invoices issued in a currency different from Colombian peso, the applicable exchange rate is the rate of the VAT return filing day.
VAT payment can be made through an authorized online payment system or authorized Colombian banks.
For fiscal year 2018, the filing and payment periods are the following: July – August; September – October and November – December.
FURTHER TAX OBLIGATIONS
Foreign Service Suppliers are entitled to keep the invoicing systems and documents currently used to support their transactions, until the Colombian Government provides otherwise. Documents shall be preserved for a minimum period of 5 years.
Foreign Service Suppliers shall inform to their clients that VAT is charged when offering the service or confirming the payment order.
Furthermore, for accounting and tax purposes, Foreign Service Suppliers shall keep at least an auxiliary accounting registry and a control account as provided in Article 509 of the E.T.
A Foreign Service Supplier shall demand the payments with Colombian credit or debit cards or from a Colombian bank account, when: (i) the internet protocol address of the device used by the customer, places the customer in Colombia or (ii) the SIM card used by the customer locates the costumer in Colombia.
For purposes of the above, Foreign Service Suppliers have a term of 6 months to inform and require their users to pay the consideration through Colombian means of payment.
Foreign Service Suppliers shall fulfill with the VAT duties provided in Resolution 051 of 2018 until a withholding agent is designated to obtain the payment or consideration (Credit or Debit Cards issuers or Colombian Banks).
The latter allows Foreign Service Suppliers to file and pay VAT directly in Colombia, but such suppliers may opt to use a withholding agent to obtain the consideration for services rendered in Colombia.
We have been informed that further regulation will be issued by the Government to regulate the procedure to be used by Foreign Service Suppliers to opt for a payment system that involves a VAT withholding agent in Colombia to avoid the simplified VAT procedure regulated in Resolution 051 of 2018.
If further information is required please do not hesitate to contact us.