TAX REFORM LAW 1739 OF DECEMBER 23, 2014

Transcription

1 TAX REFORM LAW 1739 OF DECEMBER 23, The following are the significant changes WEALTH TAX: The equity tax is retained, but under a different name: Wealth tax. This new tax will be in force for a term of 4 years ( ) for natural persons and until 2017 for legal persons, for which the taxable base for calculation is equivalent to the total gross net worth of the taxpayer on the same date, minus debts payable on that date by the same, liability to which will commence at the beginning of each year and will be consist of the following elements: Persons Liable: 1. Natural persons, illiquid succession, legal persons and de facto corporations, taxpayers liable to income and complementary taxes. 2. Natural persons, on their wealth held directly within this country, as well on their wealth held indirectly through permanent establishments within this country. 3. Foreign companies and entities on their wealth held directly within Colombia and through branches or permanent establishments in Colombia 4. Illiquid Successions of deceased persons not resident in Colombia at the time of their death on their wealth held in this country. Causal Fact: Wealth tax is levied on the possession of same on January 01 of the year 2015, whose value is COL$1,000,000,000 pesos. For the purposes of this tax, the concept of wealth is equivalent to the total gross net worth of the taxpayer held on the same date minus debts payable by same in

2 force on that date. However, the causation of the tax occurs every January 1 st, that is why the base will change for every validity. Rate: A maximum rate of 1.15% for Legal Persons, which will be reduced to 1% in 2016 and 0.4% in 2017, as of 2018, the Wealth Tax for such Persons will be abolished. However, it will remain in force for natural persons in that last year at the same rate for all the years from 0.125% to 1.50%. This rate is marginal and would be applied as follows: Details of Wealth Tax of Legal Persons As of: Less than COL$2,000,000,000 From COL $2,000,000,000 to COL$3,000,000,000 From COL$3,001,000,000 and 1 to COL$5,000,000,000 Over $5,000,000,000 Less than COL$2,000,000,000 From COL $2,000,000,000 to COL$3,000,000,000 From COL$3,001,000,000 to COL$5,000,000,000 Over $5,000,000,000 Less than COL$2,000,000,000 From COL$2,000,000,000 to COL$3,001,000,000 De COL $3,000,000,000 and one to $5,000,000,000 Over COL$5,000,000,000 COL$1billion Taxable Base 0.20% 0.35% 0.75% 1.15% 0.15% 0.25% 0.50% 1.00% 0.10% 0.20% 0.35% 0.4% 2018 Abolished for legal persons Exclusions: The following are taken into consideration, among others: Value of net worth of shares and corporate contributions made by the associates and even through autonomous capitals and funds For foreign companies or entities, the amount of international leasing operations, as well as financial yields resulting from them, whose purposes are assets located in national territory Net worth value of real property for public use of mass transit public companies Net worth value land banks The following table shows the important changes which take into account what used to be the Net Worth Tax and what would be the Wealth Tax as of 2015: 1. WEALTH TAX

3 Taxable fact Taxable base Rate Exclusions Net Worth Tax Wealth held at January 1, 2011, of a value of COL$5,000,000,000 or more Amount of liquid net worth held on January 01, % for amounts of net worth between COL$3,000,000,000 and COL$5,000,000, % for amounts of net worth above COL$5,000,000,000 Value of net worth in corporate contributions, real estate for environmental improvement of water supply and assets of public mass transit companies and land banks. Taxable facts January 01, 2011 Effect on accounts records Wealth Tax Liquid net worth exceeding COL$1,000,000,000 at January 01, 2015 Amount of gross net worth held at January 01, 2015, minus taxpayer s debts 1.5% for natural persons Between 75% and 1.15% for legal persons, depending on the taxable base The first UVT of the net worth value of residential house or apartment of Natural Persons. Net worth value of shares and corporate contributions of public mass transit companies and land banks. January 01, 2015 January 01, 2016 January 01, 2017 January 01, 2018, abolished for legal persons This new tax is neither deductible nor discountable from income tax or CREE. Neither can it be set off. For accounting purposes, it is stated that the aforesaid taxable moments will be applied for these purposes and this tax may also be imposed against reserves of capital without affecting profits in the fiscal year, on separate or individual, as well as consolidated balances. TAX ON FISCAL NORMALIZATION For persons who possess omitted assets, a fiscal normalization tax is created for the years 2015 to 2017 as a tax complementary to the Wealth Tax, as follows: Taxable fact: Possession of omitted assets or no-existing liabilities.

4 Taxable base: Net worth value of omitted assets, in accordance with heading II of Book I of the Tax Statute. This amount will be considered a price of acquisition for the purposes of determining its fiscal cost. Rate: 10% in 2015, from 11.5% in 2016 and 13% in This figure is not comparable with net worth nor is it a tax sanction and it allows extemporaneous registration of investment abroad, free from exchange sanction. An annual return is also established as an aggregate of assets abroad, with details of these assets when in excess of a value of UVT. INCOME TAX ON CREE EQUITY: Certain additions are made to the present articles regulating this tax, which may be summarized as follows: Rate, base and clean-up. The 9% rate remains permanent. It clarifies some aspects of income to be included, of admissible deductions and applicable exemptions. This tax and its surtax may not be set off by other taxes. Fiscal loss set off. Fiscal losses incurred by persons liable to Equity-CREE income tax as of tax year 2015 may be set off in this tax in accordance with the provisions of article 147 of the National Tax Statute. Minimum base excess set off. It also permits minimum base excess set off for -CREE- equity income tax (inset 2 of article 22 of the law) on the taxable base (inset 1 of the same article), which arises as of the 2015 tax year, fiscally readjusted, within the following five (5) years. With reference to income tax regulations. For the purposes of income tax on -CREE- equity, the provisions of Chapter XI of Heading I of Book I (Transfer Prices), of article of the National Tax Statute (Sub-capitalization) and the other provisions on Income Tax, will be applicable providing they are compatible with the nature of the said tax. Deduction for taxes paid abroad. National companies and entities which are liable to income tax for equity CREE and its surtax, when appropriate, and which receive income from a foreign source which

5 is liable to income tax in the country of origin, have the right to deduct from the amount of such taxes income tax paid in the country of origin and regardless of their denomination, when applicable. Compensation of credit balances. It is not accepted that credit balances are compensated with or for other taxes. INCO TAX SURTAX FOR EQUITY CREE: A surtax on the Equity CREE Tax is established for tax years 2015 to 2018 with the following components: Person Liable: Persons liable to income tax for equity CREE which produce profits exceeding COL800,000,000. Rate: 5% in 2015, 6% in 2016, 8% in 2017 and 9% in This will be added to the present CREE rate. An advance payment of the 100% is established for this surtax. In addition, we must remember that the CREE rate will be nine per cent (9%). CHANGES IN INCOME TAX: Non-residents. Nationals who comply with any of the points under numeral 3 of article 10 ETN (certain resident family members, income from assets or goods in Colombia), but who fulfill any of the following conditions, will not be fiscal residents: 1. That the source of fifty per cent (50%) or more of their annual income is in the jurisdiction of their domicile. 2. That fifty per cent (50%) or more of their assets are within the jurisdiction in which their domicile is located. Rate of withholding on income. The general withholding of 33% from income obtained by foreign companies and entities that is not attributable to their permanent local branch or establishment will be increased by 39%, 40%, 42% and 43% for the years 2015 to 2018, respectively.

6 Fiscal discount. In the case of natural persons resident in Colombia and national companies and entities which receive income from foreign sources liable to income tax in their country of origin, and which have the right to deduct the income tax paid in that country from the applicable amount of Colombian income and complementary taxes, the respective calculation is modified regardless of their denomination. Deduction from payments in cash. Application of this restriction on the recognition of costs, deductions, liabilities or deductible taxes is postponed until G.M.F.: The 4 x 1000 rate will be maintained for the years 2015 to 2018 and, as of 2019 and would be reduced progressively as follows: 3 x 1,000 for the year 2019; 2 x 1,000 for the year 2020, 1 x 1,000 for the year It will be abolished as of the year REFUND OF VAT: The two VAT points refund on purchases with debit and credit cards are eliminated. In addition, it is established the right to deduct from income two (2) points of the VAT paid on the acquisition or importation of capital goods taxable at the general VAT rate, including those acquired through the leasing system, is modified. This is effected in the year of their acquisition or importation. OTHER PROVISIONS: It is postponed the application of article of the Tax Code regarding the payment means for acceptance of costs, deductions, liabilities and deductible taxes, limiting cash payments, which entry into force passes from to Mutual agreement termination of administrative, procedures in tax, customs and exchange matters, is established again; and the administrative conciliation in tax, customs and exchange matters, will apply

7 since the entry into force of the Law until September 30 th and October 2015, as it corresponds. Several percentages to the reduction of penalties and interests are established. The new regulation points out that those individuals whose have not been notified from the special request or claim to present tax returns, and voluntarily correct or present the corresponding tax return and pay the 100% of the tax, until February 27 t, 2015 will be beneficiary of transaction of the total value of penalties, interests and upgrade, as it corresponds. Moreover, the new regulation establishes special conditions for tax, rates and contributions payment as well as for customs taxes and penalties; in those conditions, deadlines and percentages of reduction on interests payment, as well as extinction of criminal actions are established. These regulations applies for national and municipal taxes. It includes the clearing of withholding tax returns considered as ineffective. Yours sincerely, Jose Florez Anibal Blanco