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Colombia: Update on economic stimulus legislation and tax proposals

Colombia: Update on economic stimulus legislation

A bill (no. 278 of 2019) that aims to promote economic growth and that includes tax measures has advanced during the legislative phase.


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The bill (Proyecto de Ley No. 278 de 2019) was introduced earlier this fall to promote economic growth, and also to mitigate the effects of a decision by the Constitutional Court concerning the constitutionality of Law 1943 of 2018. Read TaxNewsFlash

During the legislative process, changes were made to the bill—including changes to tax-related proposals concerning:

  • Taxation of dividends distributed to individuals (natural persons) from profits that have already been subject to income tax at the company level would be subject to a special rate of 10% for dividends exceeding 300 UVT (thus a reduction of the previously established 15% rate).
  • Withholding tax on dividends distributed to foreign companies or entities or non-resident natural persons would be imposed at a rate of 10% (increased from the 7.5% rate established by Law 1943 of 2018).
  • The presumptive corporate income tax rate for the 2020 tax year would be reduced to 0.5% (from the previously established rate of 1.5%).
  • A special deduction equal to 120% of the salary paid to persons under 28 years of age who were not previously employed.
  • There would be an extension of an exemption for certain income from investments made for the development of the Colombian countryside.
  • Concerning the “mega-investment regime,” the requirement for new jobs would be increased to 300 persons, and these would have to be directly associated with the development of the investment.
  • Rules for a “rent surcharge” imposed on financial institutions.
  • Concerning value added tax (VAT), refund procedures would be available for “vulnerable populations” and a VAT “holiday” would be available for three days each year for sales of clothing, household appliances, sports equipment, toys and games, and school supplies, until 2022. Also, a VAT exclusion would be established for certain sales of bicycles, electric bicycles, electric motorcycles, skateboards, and skateboards that do not exceed a certain value.
  • The tax base for VAT on imports of finished products (either produced abroad or in free trade zones with exported national components) would be clarified.
  • A VAT exemption would apply with regard to public transportation vehicles or for cargo transport, including the chassis and bodywork.
  • The consumption tax on sales of real estate would be eliminated, and the exclusion from VAT would be clarified.
  • Measures concerning the wealth tax (impuesto al patrimonio) would be amended.

Read a December 2019 report (Spanish) prepared by the KPMG member firm in Colombia

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