Colombia's plans for taxing foreign-supplied digital services

Colombia has revealed details of a draft VAT law that requires foreign digital service suppliers to register for VAT, as well as collect and remit the tax due to the authorities.

Jul 23, 2018

A draft law in Colombia has been published confirming the liability for foreign suppliers to register, collect, and remit VAT at 19% in Colombia from July 1, 2018, for sales to individuals.

Many foreign suppliers of digital services may benefit from an exemption provision for digital content. In-country tax advice is needed to understand if a particular service can avail of the exemption. Foreign suppliers of digital services also need to consider possible implications of income tax obligations which may also apply.

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While the decree regulation has not yet been finalised, the approach, we believe, is going to be similar to Turkey in that the tax should still be collected from July 1, 2018. An update is expected soon from Colombia.

Colombia VAT questions to be answered

An important point to note is that if a foreign supplier does not register, collect, and remit VAT to the Colombian tax authority (DIAN), the government can instruct the Colombian bank card issuers to withhold the tax that is due.

There are still questions about the consequences should a foreign supplier not register. Our understanding is that despite the Colombian authorities having the option to go to the card issuer to withhold future taxes, the foreign supplier will still be liable for the unpaid taxes and interest penalties.

We will, of course, update this blog as we receive more information. 

Taxamo content is created for guidance only, please consult your local tax advisor.

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