On June 8, 2018, the Colombian tax authority (Dirección de Impuestos y Aduanas Nacionales or DIAN) issued draft regulations (Resolution No. 000000 08-06-2018) on VAT registration and withholding requirements for foreign digital business platforms (e.g., Uber, Netflix, Airbnb) that will apply from July 1, 2018. The draft regulations are discussed below.
Public comments are due by June 24, 2018.
On December 29, 2016, Colombia published Law No. 1819 of 2016 in the official gazette, which amended the VAT rules (impuesto sobre las ventas or IVA) in Book III of the Colombian Tax Code, to subject supplies of goods and services through digital platforms to VAT at the new 17% rate. The amendments apply from June 1, 2018 (i.e., 18 months following their entry into force).
Article 180 of Law No. 1819 of 2016 added Article 437-2(8) to the Tax Code, which requires credit and debit card issuers, prepaid card vendors, third-party cash collectors, and others designated by DIAN, to act as VAT withholding agents for the following purchases of goods and services:
- The provision of audiovisual services (including music, videos, films, and games of any type, as well as the broadcasting of any type of event).
- Mobile application digital distribution platform services.
- The provision of online advertising services.
- The provision of distance education or training.
Article 187 of Law No. 1819 of 2016 amended Article 476 of the Tax Code to exempt the following goods and services supplied through digital platforms from Colombian VAT:
- Virtual education services for the development of digital content, in accordance with the regulations issued by the TIC (Information and Communication Technology) Ministry, provided in Colombia or abroad.
- The provision of websites, servers (hosting), cloud computing, and the remote maintenance of programs and equipment.
- The acquisition of software licenses for the commercial development of digital content, in accordance with the regulations issued by the TIC Ministry.
The June 8th regulations propose VAT withholding mechanisms, and provide a new “simplified registration and compliance system” that would apply to non-resident cross-border service providers.
According to the June 8th regulations, business-to-business (B2B) and business-to-consumer (B2C) supplies of digital services will be subject to VAT withholding, regardless of the size of the payment by Colombian consumers. However, for B2B transactions, the Colombian business, as opposed to the non-resident service provider, would withhold the VAT through the reserve-charge mechanism.
Under the draft regulations, non-resident service providers must provide VAT information to DIAN bi-monthly on Form 320 (Declaration of sales tax for service providers from abroad), with the initial deadline in September 2018.
Article 4 of the June 8th regulations would require non-resident service providers to provide the following information to DIAN as part of their VAT registration in DIAN’s Unique Tax Registry (RUT):
- Manifestation of applicant’s willingness to register in the RUT system to comply with the VAT simplified single procedure.
- Class or type of service(s) provided by applicant.
- Country from where the service(s) are provided.
- Website(s) or application(s) from which the services are provided.
- Email address of the VAT applicant.
- Telephone number of the VAT applicant.
- Business name of the VAT applicant.
With respect to B2B digital sales, Article 24 of the June 8th regulations would require non-resident service providers to provide the following information to Colombian-resident businesses, among other:
- Name of the service provider, and their tax identification number in their country of residence.
- Name and identification of the user or recipient of the service provided.
- Specific description of the service provided.
- Total value of the transaction(s), in Colombian pesos.
- Amount of VAT paid, in Colombian pesos.