Last opportunity to normalize omitted assets

Next September 25, 2020, is the deadline to file the complementary tax return for tax normalization. This is the last opportunity (after five years of having had it) that taxpayers of the income tax or simple regime, who have omitted assets (not included in their returns when they should have done so) or non-existent liabilities (those reported without valid support) as of January 1, 2020, will have to opt for this "amnesty".

This tax turns out to be very interesting, since by paying a 15% rate on the historical fiscal cost of the omitted assets or the fiscal value of the non-existent liabilities, these can be "legalized". The structures that have been created to "optimize" this tax will not be known, unless the taxpayer has taken advantage of a previous normalization tax and has declared such omitted assets. In case the structure is not known, the taxable base will be calculated based on the tax cost of the underlying assets.

The rule establishes that private interest foundations, foreign trusts, insurance with a material savings component, investment funds or any other foreign trust business (even if their beneficiaries are conditioned or do not have control or disposal of assets, and without regard to the discretion of their directors or protectors) are assimilated to trust rights held in Colombia, therefore they are subject to this tax and the principle of transparency is applied to them in reference to their underlying assets.

Now, the taxpayer may access to 50% of additional savings (the mentioned rate would be applied to 50% of the taxable base) if he/she effectively repatriates, before December 31, 2020, the omitted resources from abroad to Colombia and invests them with the intention of permanence in the country (this permanence being understood as two years as from December 31, 2020). The increase in net worth that may be generated by declaring these assets will not give rise to the determination of taxable income by the equity comparison system, nor will it generate taxable net income for omitted assets, nor penalties in the year in which they are declared, nor in previous years.

Opting for normalization is a personal decision to be made by each taxpayer. In order to do so, the effects of taking one or the other decision must be known. Not opting for the normalization implies that the Dian may include as taxable net income the value of the omitted assets and of the nonexistent liabilities, thus liquidating a penalty for inaccuracy of 200% of the higher value of the tax payable or lower balance in favor determined. Likewise, if the value of the omitted assets or non-existent liabilities is higher than 5,000 smlmv, the taxpayer may incur a prison sentence of 48 to 108 months, for the crime of omission of assets or inclusion of non-existent liabilities. This action will be extinguished when the taxpayer makes the payment of the tax with its penalties and will not start if the taxpayer accepts the normalization.

Since this return does not allow for correction or extemporaneous filing, it is essential that this situation be analyzed before said expiration date. Due to the existence of multiple information exchange treaties (including the United States and Panama), the well-founded fear of banks not to open or keep accounts with undeclared resources and the seriousness of the penalties, this option is the right one.