New benefits for the payment of tax obligations

The National Government through Decrees L. 678, 682 and 688 of 2020 adopted several measures in tax matters to activate the economy and mitigate the effects of Covid-19. Considering the importance of these new measures, we present the most relevant benefits addressed in the mentioned norms:

1. Decree 678 of 2020.

This Legislative Decree granted powers to governors and mayors to: (i) redirect revenues for specific purposes and modify the budget; and (ii) defer payment of tax obligations, among others.

Of these measures, it is worth highlighting the one related to the recovery of the portfolio in favor of the territorial entities, by means of which the following benefits are granted in the payment of taxes, fees, contributions and fines pending payment as of May 20:

It is worth mentioning that these benefits:

• They apply for obligations that are under discussion in administrative and judicial venues and will result in the termination of the respective processes.
• For their application, electronic means of payment must be enabled.

1. Decree 682 of 2020.

 Sales tax exemption.

Goods disposed of during June 19, July 3 and July 19, 2020, will be exempt from VAT provided that the following conditions are met:

1. They belong to any of the covered goods, whose value does not exceed the value indicated in the following table:

b. The person responsible for VAT delivers the good directly to the final consumer.

c. The obligation to issue the invoice or its equivalent document is complied with.

d. The purchase has been made by means of debit or credit cards or other electronic payment mechanism.

e. Only a maximum of 3 units of the same good per final consumer have been delivered.

f. The applicable VAT has been reduced from the sales value.

Important: Failure by VAT payers to comply with any of these requirements will result in the loss of the right to treat the covered goods as VAT exempt 

With respect to tax control measures, the law provides as follows:

• The information required by the DIAN must be sent no later than August 31, 2020, in accordance with the resolution to be issued for such purpose. Failure to comply with this obligation will give rise to the penalty for failure to send information (Art. 651 of the ET).
• The DIAN will apply the rules of tax abuse and joint and several liability.
• The DIAN will develop inspection programs and actions.

1.1.  Reduction to 0% of the national consumption tax rate on the sale of food and beverages until December 31, 2020.

1.2.  Exclusion of VAT on leasing of commercial premises.

From May 21 until July 31, 2020, the following will be excluded from VAT: (i) monthly rental fees caused and invoiced after the Legislative Decree came into force; and (ii) monthly payments for space concession caused and invoiced after the same date. For this purpose, they must comply with the following requirements:

• That they are leasing or concession of commercial premises or spaces.
• That before the emergency they were open to the public.
• That the activities they carry out are associated with the concurrence of the public.
• That they have had to be totally or partially closed to the public for a period of more than 2 weeks.

2. Decree 688 of 2020.

2.1.  Modification of the moratorium interest rate.

• From May 22 and until November 30, 2020, the default interest rate referred to in Article 635 of the ET will be as follows:
• The Current Banking Interest rate, under the modality of consumption and ordinary credit (19.19% EA for May), for Tax Obligations and of the General System of Social Protection (verified by the UGPP) and payment facilities or agreements subscribed after May 22.
• 50% of the Current Banking Interest rate, under the modality of consumption and ordinary credit (9.10% EA for May), for the Tax Obligations of the taxpayers especially affected by the sanitary emergency* and the facilities or payment agreements subscribed by them after May 22.

*Important: Taxpayers rendering services of: (i) commercial air transportation of passengers; (ii) hotels; (iii) theatrical activities; (iv) live music show activities; and (v) other live show activities will be considered as such.

3.2. Abbreviated payment facilities

Taxpayers who file their tax returns with the DIAN from April 01 to July 01, 2020, and are in arrears in payment, may request payment facilities or agreements through an abbreviated process until August 06, 2020, which shall be governed by the following conditions:

• The DIAN must resolve the request within 15 days following its presentation.
• The interest rate of the agreement shall correspond to that indicated in numeral 3.1. of this circular, depending on the type of taxpayer.
• The maximum term of the payment facility or agreement shall be 12 months.
• The constitution of any type of collateral will not be required.

Failure to comply with the payment agreement will cause the re-settlement of interest at the usury rate minus 2 points (art. 635 ET). The same situation will occur with the non-compliance of the payment agreements of the obligations of the Social Protection System verified by the UGPP.

3.3. Deadlines for contentious-administrative conciliation, termination by mutual agreement and tax favorability.

Taxpayers may file before the DIAN requests for contentious-administrative conciliation, termination by mutual agreement and tax favorability until November 30, 2020. Likewise, the conciliation or termination act must be signed no later than December 31, 2020.

It should be noted that, as regards the deadline for filing the request for termination by mutual agreement before the UGPP for the obligations of the General System of Social Protection, Decree L. does not expressly refer to its modification, so that up to now it continues to be June 30, 2020.

Finally, and regarding the request for termination by mutual agreement before the UGPP, it should be noted that Decree 690 of 2020 corrected an error present in paragraph 2 of Article 244 of Law 1955 of 2019, clarifying that the decisions resulting from the application of the presumption of costs scheme will be subject to the provisions of Article 119 of the Economic Growth Law, and not Article 110 as mistakenly stated previously.

In this regard, we invite you to read our article published in ”Actualícese” on the presumption of costs scheme for self-employed workers.