On October 25, 2018, Colombia’s Directorate of National Taxes and Customs (“DIAN”) issued a newsletter on VAT requirements for foreign service providers.
On October 19, 2018, DIAN issued Resolution No. 51, reinforcing sales tax obligations for non-resident service providers. To comply with the duty to pay the tax, Colombia will enable a collection mechanism, and foreign service providers can pay the tax levied for services rendered from abroad to direct users or recipients, which have their fiscal residence, domicile, permanent establishment (PE), or seat of economic activity in Colombia.
The non-resident service providers must register with the Unique Tax Registry (RUT). To initiate registration, the service provider may make a request online with DIAN, and include the following information regarding foreign entities or companies that do not have a domicile in Colombia:
- Manifestation of the will of the legal representative or agent to register in the Unique Tax Registry (RUT).
- Manifestation of the will of the legal representative or agent to obtain the electronic signature instrument (IFE) and to register in the Unique Tax Registry (RUT).
- Full name of the legal representative and the person he represents.
- Identification document of the legal representative.
- Service provided from abroad.
- Country from where the service is provided.
- Web page(s) where the services are provided.
- Address, email, and telephone number of the service provider.
The operators must present the VAT declaration and pay tax on a bi-monthly basis, using the form that DIAN will prescribe. The form will be available in Spanish and English.
When foreign service providers invoice their services in dollars or other currencies other than the Colombian peso, they must consolidate the income generated by the service, as well as the invoiced VAT, and convert them to Colombian currency. The exchange rate of the market on the day of presentation of the declaration, certified by the Financial Superintendence of Colombia, will be considered. Lenders can make the payment in dollars by transfer to an international account of the National Treasury. In addition, the payment may be made, in Colombian pesos, at banks authorized to collect within the national territory.
Foreign service providers must charge VAT when the direct users or recipients of their services are Colombian. Lenders must establish controls to demand that payment be made with a credit or debit card, or from a Colombian bank account in the following cases: (1) when the IP address of the device used by the client is located in Colombia and (2) when the SIM card of the subscriber of the mobile service is Colombian.
In addition to the declaration and payment mechanism, foreign providers of electronic or digital services may voluntarily avail themselves of a Source Retention System that must be carried out by banking entities. The service providers must state their intention to the DIAN to submit to this mechanism. The application of this withholding at source will not exempt providers from compliance with VAT payments that was established as of July 1, 2018.
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