The tax reform established an important precedent that concerns the creation of strategies for taxing activities related to the digital economy at the national level, such as pending regulations in article 180 from law 1819 from 2016. With this, an income tax mechanism related to the IVA is forecasted. This would relate to audiovisual services like music, videos, movies, and videogames that are provided to Colombian users by companies located outside of Colombia. One example are services that applications for mobile devices provide.

In 2017, the city council in Medellin transferred tax audits to the city level when they passed a new tax law. This established the causation of the Industry and Commerce Tax ICA  regarding activities involved in the digital economy in article 44 from Accord 066 from 2017. This topic opened a discussion, still not resolved, about the breadth, measures, and ways of regulating digital businesses.

This law establishes that commercial, industrial and other services developed through the use of new technologies will be taxed by the ICA  (Industry and Commerce Tax). In particular, the following will be taxed: services related to processing and storing huge amounts of data; collaborative economy platforms; services that entail downloading and online consumption of digital content; provision of services for email platforms; and the sale of goods and services through digital commerce platforms.

The debate is focused on two situations:

The first is how to deal with the limits on the principle of legality and the tax power of territorial institutions of popular representation. Apparently, in a ruling like that of Medellin, factual situations are described that were not initially considered in law 14 from 1983 for the causation of the ICA. 

The second is about the legislative lag of several tax regulations of other municipalities. An example was the expedition of a new tax law like the one in Medellin. What this means is that in other cities, they have still not assimilated the jurisprudence of the State Council and the rulings of the tax reform related to the ICA.

Legal problems associated with the tax authority of each municipality become evident. For this reason, they enter into a territorial and causation of taxes conflict related to the nature of the activities that they aim to tax.

From the aforementioned debate, the following questions arise:

•How can the causation that gives rise to the forecasted ICA for commercial activities through systems that involve downloading and digital content be determined if the transaction occurs simultaneously in two different places?

•What would be the precise situation that gives rise to this?

•Should the users of a commerce platform pay income tax for the purpose of the ICA for commissions received if the company in question resides in Medellin? 

•Should the seller of the platform be registered as an ICA taxpayer in the municipality?

For this reason, it is important that the territorial tax regimens offer incentives to invest through different taxation mechanisms.
Author: Brandon Espinel