Ministry of Finance issued Decree 1652 of 2021

On December 6^th, Ministry of Finance issued Decree 1652, which regulates the conditions for accessing the special income tax rate of 9% that apply to hotels.

The contents of the Decree include the following:

- Income must be derived from hotel services provided in new hotels or remodeled or expanded hotels that operates in municipalities with populations up to 200.000 as of December 31, 2016.

- Hotels must be incorporated within 10 years from the effective date of Law 2068 of 2020.

- Income tax rate will be 9% for a term of 20 years from the taxable year in which the services are rendered and the requirements of paragraph 5 of Section 240 of Colombian Tax Code (CTC) are complied.

- For this purpose, only hotels built or remodeled between December 31^st, 2020 and December 31^st, 2030 are considered new, remodeled or expanded hotels.

- If the service is provided in municipalities with a population equal to or greater than 200.000 people, within the 6 years following the effective date of Law 2068 of 2020, the income obtained by hotel service providers in new, remodeled or expanded hotels will be taxed at the rate of 9% for 10 years from the taxable year in which the provision of services begins and the requirements of paragraph 5 of Article 240 of the E.T. are complied.

- For this purpose, only hotels built or remodeled between December 31^st, 2020 and December 31^st, 2026 are considered new, remodeled or expanded hotels.

- Additional requirements to qualify for the special 9% rate:

• Being active in the National Tourism Registry for each of the taxable years in which the special rate is applied.
• Be up to date in the payment of the parafiscal contribution for the promotion of tourism for each of the taxable years in which the special rate is applied.
• having a construction license issued by the competent authority, in which is approved the construction project of the new hotel.
• Having a certification of the legal representative and public accountant or statutory auditor, as the case may be, where it is stated:
  • That the value of the income requested at a rate of 9% in the respective taxable year, corresponds to hotel services rendered in new hotels duly authorized and constructed.
  • That the accounting and financial information of the taxpayer allows to separately identify the income, costs and expenses associated to the rendering of hotel services.
  • The date of commencement and completion of construction of the new hotel.
  • The date of commencement of the provision of the hotel service subject to the 9% differential rate.

• Having the hotel service operation contract when the new hotel is not operated directly by the owner.

- The 9% income tax rate may be applied by hotel service operators as long as the owner of the new, expanded or remodeled hotel has delivered it for the development of the hotel operation activity and the income comes directly from the rendering of hotel services.

- Income taxpayers who choose to apply a special tax regime will not be able to apply the 9% rate, except for mega-investment projects.

- Ministry of Commerce will certify the effective provision of hotel services and compliance with Decree´s requirements.

Colombian Tax Authority issued Official Ruling 151 of 2021

On December 10th, 2021 Colombian Tax Authority issued Official Ruling 151 of 2021, whereby a special term is established to implement the electronic payroll support document by employers with one to ten employees. The Official Ruling estates:

- Employers with 1 to 10 employees will be able to carry out the first generation and transmission of electronic payroll corresponding to December 2021 and January to February 2022 in March. }

- The three documents must be submitted independently.

- The documents must be generated within the first 10 days of March 2022.

- This benefit does not prevent the early implementation of electronic payroll.

- The Official Ruling will not apply to employers that have carried out the early implementation of electronic payroll.

Status of project of law that wants to eliminate GMF and establish a tax on high incomes

In previous opportunities, we shown the content of project of Law 205C of 2021, in which measures are applied to rationalize and strengthen the balance of the Colombian tax system.

This project seeks to eliminate the Tax on Financial Movements (GMF) gradually:

• To 3x1000 in 2023
• To 2x1000 in 2024
• To 1x1000 in 2025

In previous opportunities, we shown the content of project of Law 205C of 2021, in which measures are applied to rationalize and strengthen the balance of the Colombian tax system.

This project seeks to eliminate the Tax on Financial Movements (GMF) gradually:

In the same way, this project seeks to establish a tax to high incomes in according to the amount of monthly income received by taxpayers. The rates will be:

Although this bill was approved in its first debate on November 2nd, 2021 at Cámara de Representantes, it still needs to be debated in the Senate before it will be approved.