Colombia heads the unfortunate list, being the second country in the American continent and the sixth worldwide in the ranking of countries with high level of complexity for compliance with tax and accounting standards, an aspect to be considered by multinationals and foreign investors, and a situation that can certainly become an access barrier for new investors.
The study published by TMF Group, analyzed legislation from 95 countries in Europe, Asia-Pacific, Africa, the Middle East and America.
Regulatory instability in Colombia is one of the factors that contributed it to win second place in the classification, being that in less than three (3) years there has been two (2) tax reforms in Colombia, with complex texts that are subject to different interpretations.
In Colombia, the tax reform approved by Law 1819 of 2016 set new percentages of penalties and fines for both individuals and corporations. Including a fine for omitting to file the income tax return and supplementary documents of 20% of the value of the bank deposits or the percentage of gross income reported in the last tax filing. Fines are also imposed by omissions in the VAT and Consumption Tax reports of 10% of the gross income or deposits, there are also penalties for inaccuracy in the returns with a fine of 100% of the difference between the payment due and the balance in favor that generated the omission. In addition, presenting a statement with errors, for example, exposes the taxpayer to a penalty of 15,000 tax units (UVT) which for 2017 represents $477 million pesos (approximately USD$160,000).
The tax reform also included prison sentence for tax evaders, who omit assets for more than 5,000 million pesos and include non-existent liabilities.
In addition to the above fines and penalties, there’s also the strict labor and pension regulations, the Colombian Social Security Administration (Unidad de Gestión Pensional y de Parafiscales -UGPP) in collaboration with the National Tax and Customs Department (Dirección de Impuestos y Aduanas Nacionales – DIAN), are currently carrying out audits to companies and imposing severe sanctions in cases of non-compliance.
Although the real impact of the tax reform is still to be seen, the fact is that Colombia is already at a disadvantage compared to other Latin American countries such as Chile or Peru, as issues such as regulatory instability, taxation of dividends at 5% on profits to be distributed, and the elimination of tax benefits, are some of the reasons why Colombia has its foreign investors walking on a tightrope.
For more information on how the Tax Reform can affect your business in Colombia, contact our members Espinosa & Asociados
- “Colombia entre los países más complejos en contabilidad y tributación” http://www.portafolio.co/economia/finanzas/colombia-en-top-10-de-paises-complejos-en-areas-contable-y-fiscal-506509
- “Reforma fiscal hace de Colombia el tercer país más complejo del mundo para cumplimiento corporativo” https://www.tmf-group.com/es-co/news-insights/press-releases/2016/february/colombia-complexity-press-release/
- “Las “invitaciones” a pagar de la UGPP” http://www.dinero.com/opinion/columnistas/articulo/las-invitaciones-a-pagar-de-la-ugpp-por-carolina-porras/245494