The Colombian tax authorities (DIAN) have proposed regulations concerning rules for value added tax (VAT) registration and compliance by non-resident service providers—including providers of digital services.
DIAN published Resolution 000000 08-06-2018 (8 June 2018) as a proposal to provide registration and compliance requirements for administering VAT with respect to non-residents providing cross-border services in Colombia. The resolution proposes additional guidance on VAT withholding mechanisms established in the 2016 Colombian tax reform law as well as guidance on how the new “simplified registration and compliance system” would apply to non-resident cross-border service providers.
Although currently in a draft or proposal form, the new rules are scheduled to be effective 1 July 2018. Taxpayers can provide comments about the draft rules through 24 June 2018.
The resolution primarily addresses a new simplified registration and compliance system under which a non-resident service provider must register as a VAT-payer and must also comply with other information requirements.
The resolution also provides guidance on how the VAT withholding mechanisms would apply to non-resident service providers. The resolution, however, does not provide guidance to identify whether a service is provided within Colombia (and subject to VAT) or not provided within Colombia (and thus not subject to VAT). Rather, the resolution simply reiterates the “recipient’s location rule” as provided by law, under which a provided service is subject to VAT if the recipient or user has its tax residence, domicile, permanent establishment or site of economic activity in Colombia.
The 2016 tax reform law in Colombia included two VAT withholding mechanisms.
The resolution proposes to create a simplified registration and compliance system for non-resident service providers that are not subject to the withholding mechanisms (described above). The new system would apply to all non-residents providing services in Colombia, regardless of the value of such services.
Under the simplified registration and compliance system, non-resident service providers would register online with the DIAN and would receive a taxpayer identification number (TIN). Once registered, non-resident service providers would submit bi-monthly tax returns if they conduct any transactions subject to VAT during a two-month period. The first bi-monthly period is July-August 2018.
Taxpayers would have access to VAT forms online, and the DIAN will provide filing numbers and dates for purposes of submitting the return. VAT payments are to be submitted to an international bank account of the Colombian Treasury; however, the resolution does not provide specific guidance on how to execute or register payments.
Additionally, non-resident VAT-payers are required to provide customers with supporting documentation that includes, inter alia, the following information:
In addition, services provided to Colombian customers must include VAT (generally, the VAT rate is 19%).
For more information, contact a tax professional with KPMG’s Latin America Markets practice or with the KPMG member firm in Colombia:
Devon M. Bodoh | +1 (202) 533-5681 | firstname.lastname@example.org
Alfonso A-Pallete | +1 (305) 913-2789 | email@example.com
Eric Thompson | + (571) 618-8100/ Ext. 1322 | firstname.lastname@example.org
Maria Consuelo Torres | + (571) 618-8100/ Ext. 1271 | email@example.com
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.